The main thing is complexity! This summarizes Deutsche Bank's new growth strategy in wealth management for ultra-high net worth individuals. Banks refer to these as Ultra High Net Worth Customers (UHNW). In other words, we are talking about the wealthiest individual clients in wealth management. Although there are relatively few customers in this segment, the business is very profitable.
According to BCG research, there will be 2,900 ultra-rich people in Germany in 2022, who together will own about one-fifth of the country's total financial assets. In its Global Wealth Report 2023, UBS predicted that the number of ultra-high net worth individuals around the world could rise to 372,000 by 2027. However, this number should be treated with caution as each bank defines this segment differently.
Deutsche Bank decentralizes regional responsibilities for ultra-high-net-worth clients
As part of its new growth efforts, Deutsche Bank recently repositioned itself within its ultra-high-net-worth business. “What is new above all is the direct and local responsibility on the ground,” Stephanie Rühl-Hofmann said in an interview with Börsen-Zeitung. She has been with Deutsche Bank for approximately five years, initially in Munich, then in the Midwest region, and most recently as Head of Wealth Management in the Mid-South region. In the future, she will be responsible for expanding business with the bank's existing customers and acquiring new ultra-high-net-worth clients in Germany.
Until now, we have been serving our particularly high-net-worth clients centrally from Frankfurt. This is currently scheduled to change. To achieve this objective, the Bank has established its own UHNW team, the so-called Client Service Team, in six existing wealth management locations in Frankfurt, Düsseldorf, Hamburg, Berlin, Munich and Stuttgart.
However, there will be no significant increase in adoption.
Stefanie Rühl Hoffmann, Deutsche Bank
Each of these teams consists of three people: a relationship manager responsible for customer relations, an investment manager as a capital markets expert, and a so-called client service executive. The latter are basically assistants responsible for administration and customer service. The team currently consists of approximately 50 employees, with plans to grow to approximately 60 in the future. “But there won't be a big wave of hiring,” Ruhl-Hoffmann said.
Deutsche Bank builds advisory team for ultra-high net worth individuals
Seven experts from the so-called financial engineering team are now also part of the UHNW team. This team has been in place since 2002 and already looks after wealthy private clients and families in his office. “They build the entire financial architecture for their customers,” says Ruhl Hoffmann. We also have a so-called “growth office,'' which is responsible for systematically implementing our growth strategy, and we are currently still recruiting for its head.
new management team
Regional relationship managers also need their own top management. Michael Kremzow will be responsible for the Northern and Western regions, and Ruhr-Hoffman will temporarily take over responsibility for the Southeast region, but this is not intended to be a permanent solution. Bjorn Gebhardt will also be appointed as investment manager. We are still recruiting for Service Executive Managers. In the final phase of the expansion, they will all report to Ruhr Hoffman, who in turn will report to Lars Stoy, who heads the German private client bank and, in turn, wealth management and private banking.
In particular, the number of wealthy customers is in the 3 digits.
The new organizational structure is more complex than the previous one. Ruhl Hoffmann expects that this will allow customer groups to be treated in a more organized way than before. The idea is to bring personal customer banks, corporate banks and investment banks closer together, thereby enabling them to identify more potential ultra-high net worth customers and offer a broader and better service. . “You can only exploit your potential if you focus on something, assign clear responsibilities and carry it out systematically,” says Rühl-Hofmann, hinting at the shortcomings of previous approaches. I did.
We operate at the upper end of the ultra-high-net-worth segment.
Stefanie Rühl Hoffmann, Deutsche Bank
The bank has remained silent about the exact number of customers. “It's not like there are thousands of people,” Ruhl Hoffman said. The number of customers is likely to be in the triple digits. If the customer falls under the jurisdiction of UHNW, there are no stoic asset limits. In most cases, these are assets that fall into his triple-digit million range. “We operate at the upper end of the ultra-high-net-worth segment,” says Ruhl Hoffmann. Germany's complex asset structure is a deciding factor.
Deutsche Bank seeks complex entrepreneurial assets
These are primarily entrepreneurial assets, with banks having direct access to the responsible person or intermediary family office. Customers also include families and church foundations. A typical example of when a UHNW team becomes active is a cash event, such as when an entrepreneur sells a company.
Deutsche Bank does not want to comment on this. However, it can be assumed that the UHNW team must have followed the sale of Wiesmann's air conditioning division for 12 billion euros with great interest. Especially since the billionaire family recently invested in wind farm operator Enkavis with financial investor KKR.
Alternative asset class open to ultra-high net worth individuals
The bank is keeping a low profile on specific growth targets. The company targets the most profitable segments of the private customer sector and aims for sustainable, efficient and profitable growth. In 2023, the bank reported a 4.5% after-tax return on tangible capital across its private client banks, which is only a fraction of the ultra-high-net-worth returns. Increasing market share and acquiring new customers are goals by which Ruhr Hoffman is measured.
This isn't a huge campaign, but it's a growing market.
Stefanie Rühl Hoffmann, Deutsche Bank
“This is not a huge campaign, but it is a growing market,” says Ruhl Hoffmann. Growth will be largely driven by the sale of companies and start-ups. The bank has not disclosed how much market share or assets it has in the ultra-high-net-worth sector to date, nor has it disclosed specific target numbers. However, this topic is highly relevant for banks as it is cross-functional.
So-called alternative asset classes, particularly venture capital, private equity and private debt, are becoming increasingly relevant to the ultra-high net worth. The asset class was initially limited to institutional investors, but the company hopes to open it up increasingly to wealthy individuals. Although Deutsche Bank is primarily focused on individual partnerships, it wants to expand its offering across all asset classes in the private market. Deutsche Bank already offers its ultra-high-net-worth clients access to venture capital providers and is working with private equity investors specializing in the consumer goods sector, Ruhlhoffmann said.
