London’s private banks, HNW specialists and others are brushing up on their Italian, as wealthy expats from the land of Michelangelo, Valentino and Fellini are increasingly braving Britain’s notoriously gloomy climate, in search of its more agreeable attractions
Last December, Italy’s Banco Intesa Sanpaolo quietly announced it was opening its first private banking outpost in London, under the Fideuram – Intesa Sanpaolo name. “This is the first [Intesa Sanapaolo] branch in the UK entirely dedicated to private clients,” the bank said in a statement.
By the end of 2016, it added, it expects to have a team of 15 looking after what it hopes will be a significant percentage of the estimated 500,000 Italians who currently live in the UK’s capital city. The operation will be based at the company’s City of London offices (pictured).
The news of Banco Intesa Sanpaolo’s interest in Italian expats living in Britain may have surprised some, but few, it would seem, in Italian banking or expat circles. They have been watching for a while as a steady stream of Italians, especially those under the age of 30, have crossed the English Channel in search of a new, if less sun-drenched and rather rainier, life.
Others have simply been moving assets to London from other places, such as Swiss or Italian banks.
Italian emigration to the UK isn’t new, of course. Italian nationals are already the third-largest group of foreigners living in London, after Romanians and Poles. But what is attracting attention at the moment, as the example of Banco Intesa Sanpaolo suggests, is the wealth that many of the current crop of Italian immigrants are thought to be bringing with them.
That Italy is home to some extremely wealthy individuals is hardly surprising, even in the wake of the 2008 economic crisis. The country still boasts the eurozone’s third-largest economy, and it ranks tenth in the world’s 25 top countries by high net worth population, according to the latest Capgemini/RBC Wealth Management World Wealth Report 2015, ahead of Saudi Arabia, Brazil and Hong Kong.
What’s more, according to the Capegemini/RBC data, Italy saw the number of high net worth individuals living within its borders rise by 8% between 2013 and 2014.
Of course, what these particular statistics don’t show is that things have not been all that upbeat in Italy for some time.
The country only exited its longest post-war recession last year, and an estimated 130,000 people lost investments in the four Italian banks that failed during the recent downturn, one of which was the subject of a government rescue deal announced only as recently as November.
Whatever the reason, an estimated 60,000 Italians arrived in London in the 12 months to the end of June 2015 alone, according to the UK’s National Insurance office.
And many of them, experts say, weren’t coming to study economics, or work as waiters or pizza chefs, but rather, were wealthy individuals attracted by the city’s lifestyle, economic vibrancy and international reputation.
‘Security, sophistication’ cited
One attraction of London to Italians, according to Gianluca Serra, head of wealth advisory at Kairos Partners, is the apparent security of the UK’s financial institutions, compared with Italy’s and those of many other European countries.
Having seen four Italian banks go under during the financial crisis, and watched from across the Mediterranean as the banking system of East Mediterranean neighbour Greece collapsed, such individuals “are now aware of geopolitical risk,” which, like many nationalities, they weren’t before, Serra says.
“They recognise that even with a diversified portfolio, it is not advisable to keep all their liquid assets invested in a single country, and that asset protection can be better achieved by having some of their wealth in Luxembourg or London,” Serra adds.
He suggests that local institutions back home in Italy are also often either not as sophisticated as international private banks or boutiques in London when it comes to offering private banking services, or are not perceived to be.
“Local banks are increasingly realising that these services may be profitable with the right model, but [they] still tend to have a product-driven approach,” he says.
Another factor believed to be contributing to the migration of wealthy Italians to the UK has been a voluntary tax disclosure programme, which, it’s said has flushed hidden money out of secret accounts in Switzerland and elsewhere, and made it available for spending – on, for example, such things as investments, or even investment properties, in London.
Then too, moving assets abroad is nothing new for Italy’s richest. Citi Private Bank Italy managing director Francesco Lombardo says wealthy Italians have always chosen to have a portion of their wealth managed outside the country, partly because private banks in Switzerland or the US had more sophisticated offerings and access to global investment opportunities than their domestic counterparts, as noted above, and partly because of security.
Maintaining liquid assets outside the country was especially favoured during the volatile years of the 1970s and 1980s, when the country was forced to accept externally-imposed economic conditions, he notes.
However, Lombardo also reports the existence of a renewed flow of Italian assets from Swiss private banks to those based in London and New York in recent years, and says that younger, entrepreneurial Italians in particular have a preference for dealing with international banks.
Kairos Partners’ Serra notes that another change in the approach wealthy Italians are taking to their finances, post-crisis, is that they want more help, of the kind they know top private banks provide.
Pre-crisis, he says, they were more willing to manage as least a portion of their assets on their own.
“These clients are now willing to pay for advice, and are more interested in how financial intermediaries act on their behalf,” he says.
“They want more information on their portfolios, and our investment ideas, and how we see markets developing in the future.
“Clients are also aware that there are different banking models, and they are better placed to select the best option for their assets.”
Lombardo agrees that there has been a shift in investment preferences.
“Until the middle of the last decade, wealthy Italians would invest almost exclusively in Italian bonds, because they generated healthy yields,” he notes. “[But] over the last few years, I have noticed a significant shift, [also] to single securities rather than funds among the very wealthiest clients.”
Lombardo also refers to increased interest in hedge funds, not as a speculative asset class, but rather as an alternative to cash.
“In addition, clients are asking about private equity, because they want access to co-investment opportunities, while recognition of the value of diversification has led to renewed interest in real estate, especially in markets such as the UK and US.”
‘More help with wealth management’
The Milan-based Italian Private Banking Association (l’Associazione Italiana Private Banking, or AIPB) reports its members, too, have also seen a trend among their clients in favour of more advice.
General secretary Bruno Zanaboni says his organisation’s research points to a shift in emphasis among the approximately 600,000 Italian families with assets of at least half a million euros.
“In 2015, they increased their focus on the provision of customised solutions (a priority for 27% of those surveyed last year, compared with 24% in 2014),” says Zanaboni.
“There is also increased desire to work with one, rather than multiple advisers, and we see a shift towards [greater use of] advisory services.”
This final observation reflects the experiences of Domenico Del Borrello, head of Banca Generali Private Banking, who says his bank is recording an increase in demand for advisory mandates to, as he puts it, “address the difficulties of facing greater volatility and political interference by the central banks.”
Professionalism in the analysis of portfolios has become an essential requirement as well, and demand for non-financial advisory is rising, adds Del Borrello.
The AIPB, meanwhile, says its research shows that wealthy Italians are increasingly asking their private bank for help with such non-investment services as succession and wealth transfer planning.
Almost one third (32%) of private bank clients in Italy are entrepreneurs, and as such, they can face significant issues with succession and wealth transfer problems, Zanaboni explains.
“In 2014 we asked private clients to rank the services they were looking for from their bank,” he concludes.
“The most important service was the provision of financial and insurance instruments to cover different kind of risks, but that was closely followed by administrative services, services for companies in start-up phase, guidance on positioning their company in the market, and assistance with obtaining funds for financing commercial activities.”