UPDATE 3-In split from SocGen, TCW's fortunes seen set to rise
By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
ZURICH Jan 22 How do you impress someone who can afford almost anything?
Last March, about 20 wealthy guests gathered at Au Jardin Les Amis, an award-winning French restaurant in Singapore's Botanic Gardens to meet Baron Eric de Rothschild and representatives of the Zurich-based private bank that bears his name.
Over a five-course dinner of smoked lobster and Wagyu striploin steak accompanied by fine wines from Rothschild's vineyards in Bordeaux, potential clients discussed investment strategies.
In the battle for private banking clients, the Rothschild family brand is a powerful weapon.
"The whole thing is very personal. We want to spend time with our clients, otherwise there's no point for us in doing it," says Veit de Maddalena, Chief Executive of Rothschild's private banking arm.
Under pressure over tax evasion in the United States and Europe, Switzerland's private banks are wooing clients in Asia, where the appetite for luxury brands is strong.
Tapping in to that culture, Rothschild's private bank organised a series of fine dining events in Shanghai, Hong Kong, Jakarta and Kuala Lumpur last year.
"In emerging markets, the opportunity to put a face to the name of the family behind one of the most prestigious brands in winemaking means something to many of the very wealthy," said Sebastian Dovey, managing partner of London-based wealth consultancy Scorpio Partnership.
"The Rothschilds are clearly one of the few families today with the very rare combination of significant specialist businesses in finance and fine wine, which they leverage."
SMALL IS BEAUTIFUL
Switzerland has been rocked by several painful and high-profile probes since 2008, when UBS settled a U.S. tax evasion investigation by turning over the names of 4,450 clients and embroiled a dozen of its rivals.
The country is eager to remove the taint from its financial industry with a clean-money strategy and is at pains to play up other strengths besides offshore accounts, including political stability and its own currency, the Swiss franc.
"Private banking is in a phase of fundamental repositioning and is at the same time struggling with declining income and rising costs," Ernst & Young partner Patrick Schwaller said at a Zurich press conference earlier this month.
"For this reason, the effect on competitive pressure is increasing."
While Credit Suisse and a host of other banks remain mired in the tax dispute with the United States, small private banks are focusing on their niche appeal.
In Rothschild's case, that niche is built around exclusive access to descendants of the bank's famous founding family.
Among them are Baron Eric, who was instrumental in bringing the Rothschild family bank back to France after some assets were nationalised under Francois Mitterand, and Charlotte Rothschild, a lyric soprano who specialises in oratorio such as chanson, folk, and kakyoku, or Japanese classical Western-style songs.
"Bringing the full breadth of the family interests to a private banking relationship appears to make a clear difference with their network of clients and prospects," says Scorpio's Dovey.
"It is difficult to tell how much of this actually helps to translate into new business in the wealth management, but it is unlikely to be a negative factor."
Rothschild made 19.6 million Swiss francs in full-year net profit for the financial year ending in March 2012 and manages assets of 18.5 billion francs compared to 1.823 trillion francs for UBS and 803.3 billion francs for Credit Suisse.
Rothschild's de Maddalena is at pains to distance himself from the image of a private banker as a professional bon viveur.
"We're trying to position ourselves with content, and giving our clients the opportunity to conduct a personal dialogue with their peers, and learn something they wouldn't elsewhere."
While winning new clients by word-of-mouth is one reason for Rothschild to stage lavish events, another is to keep existing, foot-loose clients happy.
"It's a huge risk," says Herbert Hensle, banking expert at Capgemini Consulting. "Roughly two-thirds of offspring who inherit wealth consider leaving their wealth manager."
In addition to giving clients access to their inner circle, private banks are also enlisting academics to beef up their research.
Rothschild's rival Sarasin sponsors W.I.R.E., a Swiss-based think tank on trade, industry, society and life sciences. UBS said last year it would spend 150 million francs to create five economics chairs at the University of Zurich.
INVESTING WITH THE ROTHSCHILDS
Rothschild is increasingly seeking to link up business between the larger group's other arms, which include a merchant bank and a corporate advisory.
Such cooperation is also being pursued by far larger rivals such as Credit Suisse, but are widely seen as tough to put in place due to potential cross-business conflicts as well as squabbling over fees generated by cooperating.
Rothschild family members outside the bank include Bumi Plc co-founder Nat Rothschild, who is currently battling the coalmining group's board members and chief executive.
Within the banking group, Alexandre de Rothschild is the most visible and is tipped to eventually take over heading the family holding, Paris Orleans, when his father David steps down.
Rothschild's merchant bank is the vehicle through which the wealthy can invest in private equity projects alongside the family, an irresistible proposition for many investors.
"When you go to a family office and say 'We're opening a private equity fund and 25 percent of the money's being put up by the Rothschilds,' people tend to listen," Baron Eric told Swiss newspaper Neue Zuercher Zeitung am Sonntag in December.
By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
* Defendant's federal conviction was overturned in February
* Alternatives to Libor to be found for some contracts