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Private Banking and Wealth Management
Nicola Romito
3rd
3kLD0237_screenshow_english.ppt
Siena
July 2007
Private Banking and Wealth Management Division: Main
Objectives and Guidelines
a.
PRODUCTS and ADVISORY SERVICES:
 Coordination of investment product offering in order to optimize product portfolio and ensure innovation, time to
market and consistence with different market service model.
 Open architecture catalogue: gradual opening to multi-brand approach with a selective assessment of third-party
factories.
 New advisory platform: MiFID-compliant and ready to provide fee-based advisory services.
 Asset mix improvement: increase in AUM vs AUC and Direct Funding; more efficient asset allocation processes.
b. DISTRIBUTION NETWORKS
 Private Banking: extension of PB service model to MPS customers, opening of Private Centers, asset mix
rebalancing.
 Banca Personale: Strengthening of FA network through Recruiting Plan and Axa Sim acquisition option.
c.
PRODUCT FACTORIES
 Bancassurance JV: preserving leadership through partnership with AXA
 MPS Asset Management: Strategic reorganization of the Asset Management business area
Private Banking
Wealth Management
Division
Private Banking
Wealth
Management
pag. 2
The GMPS Wealth Management Model Has Been
Carefully Designed …
Product Factories
GMPS Wealth Management Platform
Product Range
Asset Management
Discretionary Mandates
 Multiline, multibrand investment
platform differentiated by market ;
Centralized MPS Factory.
Advisory Services
 Unique advice engine
at Group level to
ensure use of same
financial algorithms
 Advanced (e.g. ALMbased) financial
Mutual Funds
Third party AM
 Multiple brands for Private Banking
(limited partners) and FAs (more
partners); in-house development for
core asset classes and special new
Str. Bonds and Certificates
 Innovative, broad offering of
Third party IB
Life Company
Retail
algorithms
types (e.g. guaranteed)
Investment Banks
Commercial
Unit
structured bonds and certificates
such as “
AUM-like”products
Life Insurance
 Unique front-end
application with
customized
functionalities and
different process flows
based on service
models
 MIFID-compliant
platform, ready to
provide fee-based
Private
FAs
advisory services
 Focus on multiline, multibrand
investment platform (unit-linked
products) with innovative insurance
features (e.g. variable annuities, multisector products, guaranteed
premiums, …)
pag. 3
 Tools that control
investment service
quality centrally
Corporate
… and Implementation is in Progress (1/2): 1H07 Main
Achievements
Organization
 Setting up of Wealth Management Central Unit - Headcount to be extended to ca.
40 employees by year end
 Talent Scouting - More than 20% is/will be external professionals
 Discretionary mandates (DM) –Design of new product range based on the M3 concept
Products
(multiline, multistrategy, multibrand) for all markets; opening to multibrand approach planned
for Retail DM; definition of restructuring plan for existing lines.
 Mutual funds - More than 4% market share including third-party products, which account for
23% of AUM (o/w about 40% are direct sales by PB and FAs); development and
implementation of new third-party selection methodology, to ensure quality of offering and
economically sustainable open architecture; re-launch of MPS Irish funds direct sale
(previously mainly used for wrapped products)
 Structured Bonds and Certificates –Review of structured bond offering based on
marketing and innovation; use of third-party IB; launch of dedicated Private Banking
products, including some innovative ones (Beta Hedge replication); launch of Retail
investment certificates product line ( e.g multibrand dynamic allocation certificates in
cooperation with Morgan Stanley)
 Life Products –Rearrangement of life product catalogue and integration of AxA know-how
and expertise
Advisory
 New platform design and implementation
pag. 4
… and Implementation is in Progress (2/2): Main Current
Projects and Deadlines
 Discretionary mandates
Products
•09.07 - Restructuring of existing lines: closure of some unprofitable existing
mandates (about 100 lines)
•11.07 - New M3 Discretionary Mandates for different markets
 Mutual Funds
•09.07 - Launch of target date MPS mutual funds (Fondi Orizzonte)
•11.07 - Launch of first MPS “
Formula”funds (i.e. guaranteed funds)
•By year end - Review of existing third-party AM agreements based on new
methodology and rebates roll-over
 Life Products
•
09.07 - Launch of first MPV-AXA product (Axa Accumulator)
•
01.08 - Launch of new JV product range
 09.07 - 1st platform release: new quantitative engine and Retail Banking user
Advisory
interface
 12.07 - 2nd platform release: new user interface for Private Banking and FAs; 1st
release of new client reporting system, new centralized client monitoring features
 03.08 - 3rd platform release: fully functional, ready for fee-based advisory services
pag. 5
New Products: Multibrand and Multistrategy
Discretionary Accounts with a single Group Factory
The new DM
Discretionary Accounts
 A common platform across all markets,
 Setting up of a single DM factory that can
manage mandates in all different markets (Retail,
Private, Corporate, FAs) in order to improve
with different levels of customization
 Customers can achieve efficient asset
allocation (based on investment
objectives) either by picking a single line
management efficiency and effectiveness
 Launch of new multiline-multibrand investment
mandates with varying levels of customization
or by combining several lines, resulting
in single-contract, tailor-made AA.
based on value propositions for different
segments. Opening of multibrand approach for
 A flexible “
platform”allows customers to
easily switch between lines and to
Retail and multimanager approach for Private.
Innovative and more effective management style
(e.g. quantitative allocation) to be achieved by
leveraging third-party investment banks
access all lines without changing their
mandates.
 Tax benefits: investors can match profits
and losses accrued in all investment
lines (not possible with different
Scheduled Launch Date:
November 2007 on all
markets (i.e. Retail, FAs,
Private)
mandates)
pag. 6
New Products: Mutual Funds
Mutual Funds
New In-House Products
 Setting-up of multilevel partnership system to
 Target Date (Orizzonte) : three
differentiate access by third-party Asset
initial funds with different expiry
Managers, thereby strengthening GMPS
distribution product range quality and optimizing
dates and equity/bond mix
profitability
 Implementation of a “
category management
changed automatically over time
to optimize end results. Ideal
product for fixed-date investment
system”to ensure third party offering quality and
consistence with different market value
objectives (e.g. pensions)
 Formula Fund: mutual fund
propositions over time (i.e. possible opening of new
relationships/closing of low-quality ones)
 Focus on MPS Irish funds (Bright OAK) (Retail)
payoff is determined in advance
based on a formula and a
structured note. Also, the
and product range improvement in order to
Formula fund is capital-
leverage economically sustainable trends: launch
guaranteed at maturity
of target date funds and “
Formula”fund
(September 07/ November 07, respectively)
Increase volume with innovative and
profitable products, in line with market
trends and customer needs
pag. 7
New Products: Structured Notes and Certificates
Structured Notes and Certificates
Examples of New Products
 Enhanced product innovation to create new
asset gathering opportunities and to better
 Morgan Stanley Flexible Europe
diversify customer portfolio
Certificate (Retail network) : a
 Use of third-party IB to pursue additional
very innovative product, fully
invested in two multibrand
opportunities
baskets of mutual funds
 Focus on new/alternative asset classes
 Use of certificates as a platform to create easily
accessible, multibrand asset management
products
(equities and bonds). The two
baskets are rebalanced monthly
based on the value of Morgan
Stanley’
s Index (CVI).
 Focus on specific “
hot topics”for Private
Banking to enhance portfolio diversification
 Goldman Sachs ART (Private
Banking Network): a certificate
 Strict control of structure payoff and
transparency to minimize image risks
that aims at replicating hedge
fund industry performance
through investments in different,
Innovation in product as an
effective element of
differentiation to improve
profitability
tradable risk factors.
pag. 8
A New GMPS Advisory Platform
Advisory Platform
 Development of a common platform at Group
level to support financial advisors of Retail,
Private and FA networks
 Launch of financial advisory services in
compliance with MiFID directive (gradual roll-off
starting Sept. 07, final release March 08)
Expected Benefits
 Enhanced advisory capabilities of networks,
resulting in offer of efficient portfolios to customers
 Improved product mix (managed products instead
of single securities)
 Improved customer satisfaction
 Creation of a new business line (advisory services)
to offset any reductions in AM product margins
pag. 9
GMPS Private Banking Service Model
Delivery Method
•Excellent, multi-manager, diversifed
and innovative product range
•Dedicated Asset Management
Factory
Synergies with
Corporate, SME
and Small
Business units
•Key role of Relationship
Manager
•PB centers with
dedicated layout
Marketing
Communication
Advisory Platform
PGA system
Distribution Network
Non-Fin. Advisory Platform
CUSTOMER
FOCUS
FULLY CUSTOMIZED ADVISORY MODEL
pag. 10
Teams of professionals
available to network
GMPS Private Banking Advisory Model
Advisory Platform
 PORTFOLIO OPTIMIZATION AND
MONITORING
 KNOWLEDGE OF CUSTOMER ASSETS
AND PECULIARITIES
Comprehensive evaluation of assets
Identification of optimal allocation of
(including positions with competitors), also
assets to asset classes (based on
for inclusion into peer groups
investment needs, time frame, risk profile,
expected return)
Cluster analysis (job, financial culture,
risk appetite, investment goals)
Identification of optimal product portfolio
Evaluation of risk level
Daily risk analysis of individual portfolios
and peer groups
Evaluation of non-financial needs
 Offer excellent advisory services to customers
 Manage, protect and leverage all customer assets
pag. 11
GMPS and AXA: A Long-Term Strategic Partneship
 Single platform for expansion of AXA and BMPS in the Italian bancassurance and pension markets
through all new distribution channels (except for AXA agent and broker networks)
 Development of non-captive business in the Italian insurance market
 Exclusive distribution of BMPS’
s banking products to AXA’
s 1.6 million customers in Italy
 Expansion of bancassurance partnership outside Italy
A new leader and a highly profitable bancassurer/pensions player in Italy
 Life: product innovation and increased yields following introduction of successful Axa products and
business mix rebalancing
 Non-life: improved penetration of bundled products to be achieved by leveraging AXA’
s expertise
 Pensions: partnership as a common, single platform to capture new market opportunities and potential
profitability
 Management of insurance and pension assets: Yield optimisation, resulting from better asset
diversification and Axa’
s asset management capabilities
pag. 12
AXA and GMPS: Life Bancassurance Strategy
2006 Product Mix
Penetration of Life Products
Italy: Significant Potential Growth
42%
Italian life market GWP
MPS Vita + Quadrifoglio Vita GWP
Traditional
41,9%
Unit
22,3%
Unit 6,9%
25%
Index
30,5%
Europe
Italy
Index
35,8%
(Life Technical reserve/GNP)
Capture potential growth and profitability opportunities
through offer innovation and increased focus on
high value-added Unit-Linked products
and Variable Annuities
Launch of first MPV- AXA Unit Linked products:
 Accumulator –September 07
 Double Engine –November 07
pag. 13
Traditional
62,6%
AXA and GMPS: New Products
New Products
 Accumulator : A capitalguaranteed Unit-Linked product,
it comes in two versions. The
former offers best Net Asset
Bancassurance
 JV cooperation already started
Value and 125% of notional
 Focus on Unit-Linked products to bridge MPS
gap using AXA expertise to increase market
(“
capital”
) upon expiry of the
10th year; the latter gives
investor the option to receive an
share
annuity based on best Net
 Launch of first MPV-AXA Unit-linked products
Asset Value and 113% of
in September 07/ November 07: Accumulator
(first Italian multibrand variable annuity), and
Double Engine (multibrand, multiline unit-linked
notional (“
plan”
) after 5 years.
 Double Engine: a Unit-Linked
product that allows investors to
switch freely between Internal
product)
Mulibrand Funds and a
Consolidate and further
strengthen GMPS
leadership in life and nonlife bancassurance
segregated (cash) traditional life
managed account.
pag. 14
GMPS Asset Gathering Business: Objectives and Guidelines
MPS Banca Personale:
Improving efficiency
Asset Gathering Business
 Strengthen distribution network: expand FA
network and AuM in a business in which scale
 Recruiting Plan
is crucial
 Asset mix rebalancing
 Improving cost efficiency
 Improve geographical coverage: increase
coverage in “
wealthy”areas that are currently
poorly covered (Northern Italy)
 Break-even expected by
Business Plan end (2009)
 Improve quality of FA network: increase FA
Average Portfolio and shift asset mix towards
more profitable products
 Offer excellence: enhance product range
through a multi-manager approach
 Improve efficiency of cost and commission
structure
AXA Sim Option
 Negotiations are in progress
to speed up GMPS Business
Asset Gathering enhancement
and restructuring plan
 Create synergies with traditional Corporate
and Retail network
pag. 15
MPS Banca Personale: Improving Efficiency
Total Customer Asset Mix
Financial Advisors: staff increase and quality improvement
FAsHeadcount
720
662
821
761
~850-900
FAs Portfolio
5.7
696
3.9
4.5 4.2
4.1 4.3
5.0
55.3%
61.9%
76.5%
28.4%
16.3%
2005
2006
2007
2008
2005
2009
2006
1Q2007
2007
23.8%
16.5%
14.3%
7.0%
1Q06 BP
1Q07 BP
1Q07 Market
Direct Funding AuC AuM
2008
Mln.€
Total Customer Assets & Net Flows vs. Market
MPS BP
3,052
Market
3,269
1Q07
6,4%
2006
14,3%
367
2006
230,808
224,720
2006
6,9%
194
1Q07
1,5%
14,134
1Q2007
2006
pag. 16
3,297
1Q2007
Asset Management - Industry Trends
Industry Trends
Growth opportunities can be found in:
Regulatory Trends
Independence of Products Factories from
 Commoditized products (Index-Based & ETF):
Distribution Networks:
inexpensive, low-margin, scale-driven business
 Specialized products (Alternative & Innovative
Funds): high fees, fast-growing segment, talentdriven business in which scale & volumes are
 MiFID Directive requirements: Inducements
and conflict-of-interest rules
 Constant demand for independence by Bank
of Italy
unimportant
Typical Positioning of Italian Banking Players
 General-purpose offering, with focus on
traditional products
 Captive factories: distribution occurs mostly
through own network
Risk
Lack of excellence in product supply and performance
Decline in Assets under Management
Reduction of profitability
pag. 17
Strategic Reorganization of GMPS Asset Management Area
From the existing, captive-only structure...
..to a mixed captive/non-captive configuration
GMPS
Financial
Partner
GMPS
SHAREHOLDERS
Business
Partner
Finance Area
100%
100%
~30%
~30%
~30%
MP AM Sgr
(Traditional Funds)
VEHICLES
100%
MPS AI
(Hedge Funds)
Captive Platform
(MPS AM Ireland)
100%
MPS AM Ireland
(Quantitative, lowtracking error
Sicavs)
New, non-captive
specialized unit
(MPS AM Sgr + MPS AI)
IPO
(3-5 year timeframe)
FOCUS
 Fully captive Asset Management platform
 New, independent organization specializing in alternative,
actively managed products, with a mandate to manage
BMPS proprietary trading volumes.
 Finance Area (35 team members): reports
directly to the General Manager and is
responsible for managing BMPS proprietary
trading volumes.
 Preservation of a Captive platform (in Ireland) with a focus
on quantitatively managed, low tracking-error products.
pag. 18
Strategic Reorganization of GMPS Asset Management Area
 New independent business project:
Financial Partner: guarantee of independence, no conflicts of interest, value creation monitoring
Business Partner: high international standing, distinctive expertise contribution in the alternative
product area
Specialized business model with focus on very active and alternative products: Hedge Funds,
FoF Hedge Funds, Real estate, Private Equity, shift of traditional product range (Ducato) towards very
active management approach
Focus on non-captive, high-end institutional and private customers
Management of GMPS proprietary trading volumes, with immediate leadership in the Italian
alternative product scenario (AuM: €6.4 bln)
IPO after 3-5 years
 Captive Factory (100% MPS): specializes in semi-passive products to support asset management and
advisory services
 Group Individual Portfolio Management: centralization of investment management skills to increase
quality of individual portfolio management and support allocation policies on advisory portfolios
“Anticipate and fully leverage current industry and regulatory trends, making the
most of our current competitive positioning”
pag. 19
PB-WM Division: 2006-1Q2007 vs. Business Plan Targets
Net Operating Profit
Main Revenues
Net Interest Income
CAGR 05-09
+14,9%
CAGR
+25,5%
78
Net Commissions
255
57
CAGR 05-09
+8,7
CAGR
+5,3%
CAGR 05-09
+26,2%
355
253
CAGR 05-06
+43,4%
268
45
143
100
16
2005
2006
1Q2007
62
2009
2005
2006
Cost/Income
1Q2007
36
2009
Mln.€
2005
2006
Total Assets Trend
CAGR
+16%
1Q2007
AuM Trend
CAGR
+18%
35,909
62.9%
54.6%
CAGR
+25,3%
CAGR
+3,8%
53.8%
41.9%
19,857 20,607
21,802
2006
1Q2007
2009
2005
Mln.€
2006
1Q2007
pag. 20
2009
2005
Mln.€
22,305
CAGR
+7,4%
CAGR
+4,0%
11,274
2005
2009
11,725
2006
11,937
1Q2007
2009
Private Banking Wealth Management Division
Appendix
pag. 21
Private Banking: 2006-1Q2007 vs. Business Plan Targets
Main Revenues
Net Interest Income
CAGR 05-09
+24,1%
CAGR
+26%
Net Operating Profit
Net Commissions
61
CAGR 05-09
+12,5%
CAGR
+6%
CAGR 05-09
+30%
147
101
95
32
25
27
2006
1Q2007
2009
2005
2006
Cost/Income
1Q2007
53.8%
18
2009 Mln.€
2005
Total Assets Trend
CAGR
+14,9%
58.3%
61
50
9
2005
143
CAGR 05-06
+21,8%
30.8%
17,408 17,686
1Q2007
2009
Profitability Trend
Tot Revenues/Tot Assets
30,289
0.77%
CAGR
+21,9%
CAGR
+1,6%
49.5%
2006
0.75%
18,582
0.70%
2005
2006
1Q2007
2009
2005
Mln.€
2006
1Q2007
pag. 22
2009
2005
2006
1Q2007
MPS Banca Personale: 2006-1Q2007 vs. Business Plan Targets
Net Operating Profit
Main Revenues
CAGR 05-06
-45,6%
Net Interest Income
10,6
CAGR 05-09
-2,2%
CAGR
+12,4%
1,6
Net Commissions
CAGR 05-09
+26,2%
CAGR
14%
34,7
19,2
17,1
15,6
13,6
-14
15,5
5,5
4,1
-26
2005
2006
1Q2007
2009
Mln.€
2005
Cost/Income
2006
1Q2007
2009
2005
Total Customers Assets Trend
1Q2007
2009
AuM Trend
CAGR
+21,5%
180,6%
2006
CAGR
+35%
5.620
CAGR
+31,7%
CAGR
+18,4%
130,2%
82,6%
78,7%
2.578
3.052
CAGR
61,2%
CAGR
37,5%
4.288
3.269
1.775
2.001
1.291
2005
2006
1Q2007
2009
2005
2006
1Q2007
2009
Mln.€2005
Mln.€
pag. 23
2006
1Q2007
2009
MP AM Sgr: 2006-1Q2007 vs. Business Plan Targets
Net Operating Profit
Net Commissions
CAGR 05-09
108
+8,7%
CAGR 05-06
+22%
95
78
CAGR 05-09
+6,9%
184
CAGR 05-06
+8%
152
141
75
132
122
59
17
Mln.€
2005
2006
Actual
31
1Q2007
2005
2009
Actual
Pro-forma (*)
Cost/Income
45.4%
1Q2007
2009
Pro-forma (*)
Asset Class OICR 1Q2007
48.5%
39.3%
2006
7%
4%
41.7%
5%
10%
14%
30%
39%
26%
3%
7%
30%
26%
MPAM Sgr 1Q2007
2005
2006
1Q2007
Equity
Monetary
2009
(*) Jan-07:commissions and rebates repricing, more favorable for BMPS network
pag. 24
Market 1Q2007
Balanced
Flexible
Bonds
Hedge