Six former JPMorgan executives have teamed up to launch a fintech platform that aims to attract wealth managers and private banks that are struggling to expand their businesses while also battling with rising costs and regulatory changes.
Vestrata will provide access to investment products, advice, portfolio analytics and risk management services aimed at helping advisers working at wealth managers and private banks to improve client engagement.
Mark Le Lievre, co-founder and chief executive of Vestrata, said wealth managers and private banks could no longer rely on rising markets to drive revenue growth but earnings could be boosted by better service standards.
“Revenue growth for private banks in Europe has been very slow over the past decade but this has been disguised by rising markets. The reality for most private banks is that 20 per cent of the clients are responsible for 80 per cent of their business. But that also means 80 per cent of the client book is underserviced,” said Mr Le Lievre.
Mr Le Lievre worked for almost two decades at JPMorgan, rising to global head of products and platforms in the private bank division.
Vestrata has raised $4m to fund its launch from its employees, their families and friends and undisclosed industry backers. It plans to raise more money from venture capital investors in 2021.
Vestrata has agreed partnerships with Federated Hermes, AllianceBernstein and Unigestion. Access to alternatives will be provided via iCapital Networks, an alternatives investment platform, and K2 Advisors, the hedge fund boutique owned by Franklin Templeton.
Vestrata has also signed partnerships with Prometeia, an Italian investment consultancy, Fortress Identity, a biometric security specialist, and Nanobi, a data analytics provider based in India.
“Our ambition is to fuse high-quality investment solutions with advanced technology,” said Kim Lennen, co-founder and chief technology officer, and a former CTO at JPMorgan’s private bank in Europe.
Doug Wurth, previously chief executive of JPMorgan Asset Management’s alternative investments group, has taken the position of Vestrata’s chairman.
Rebecca Gooch, director of research at Campden Wealth, a London-based data provider, said the challenges confronting private banks had intensified during the coronavirus pandemic.
“Private banks have had to rapidly adapt their operations to a virtual world while recalibrating their risk assessments and juggling changing regulatory burdens,” said Ms Gooch.
Profits across Europe’s private banking sector have dropped by 10 per cent since 2017 due to rising costs and lacklustre new business growth, according to McKinsey. The consultancy warned this year that more pressure on profits was likely as the pandemic has created more dissatisfaction among clients. One in five of the clients of Europe’s private banks has already moved money to another provider this year, while a third of the sector’s customers were dissatisfied with service standards, said McKinsey in an analysis covering 102 private banks in western Europe.
Mr Le Lievre said regulatory changes, such as Mifid II, had encouraged private banks to step back from providing advisory services in favour of a purely discretionary offering which had contributed to higher levels of client dissatisfaction.