Deutsche Bank may be the fifteenth largest bank in the world by assets, but its UK wealth business has punched so far below its weight it is effectively a start-up compared to its peers, says CEO Michael Morley.
The former Coutts boss was brought in July 2017 to turn around the bank’s private client division and it has been a busy first year as he put the foundations in place to position the company for growth.
‘I’ve really enjoyed it. Deutsche Bank has a large global business, but the UK business for various reasons has punched below its weight. The reason I was hired by [global head of wealth management] Fabrizio Campelli was to build a serious, larger footprint for Deutsche Bank in the UK,’ Morley says.
‘And so I’ve spent the first year going about that task. Whenever you take on any new senior job whatever preconceptions or discussions you may have had, inevitably, over the first few days or weeks, you change your mind about how you go about it. But I’ve run quite large businesses and so I have a clear idea of where I want to get to.’
Morley quickly set about a root and branch overhaul of the firm’s infrastructure, both in terms of the back office and executive team. And with the nuts and bolts now broadly in place, he is moving into the fourth phase of his strategy, which is to expand the ranks of private bankers on the ground.
He says the starting point was to position the licenced deposit-taking bank at the centre of the wealth offering. Then he set about putting in new back office systems to ensure the IT platform is both robust and scalable.
Avaloq was the system of choice and it was the fourth time that Morley has overseen its implementation, having previously been through the process before, first at Barclays in Geneva, then Adam & Company and Coutts.
‘That’s an extremely important step because these days private banking and wealth management is as much a technology business as it is a client advisory business, so it’s very important to have that in place,’ he says.
‘If you haven’t digitised the back office properly it’s very difficult then to start building all of the smart reachout and client experience applications which you need to take the business forward in our digital social media age.’
The third strand was to install the senior management team he wanted in place. Perhaps unsurprisingly, he recruited a couple of former colleagues he had worked with at Coutts.
Matthew Spencer, who was head of business development at the Queen’s bank, joined as UK head of intermediaries and family offices late last year, while John Saunders was hired as chief operating officer in January.
More recently, in September, Aditya Mishra from Credit Suisse was appointed head of its global South Asia team in London.
Morley has also just hired a soon to be announced head of financial planning.
‘Essentially the senior team is now in place. The next stage is hiring more client advisers, which will round out the business. So we now have a team in place to look after UK and European markets. We’ve also just hired a new head of our global South Asia business and as we get into next year we are planning to build out a Middle East team as well,’ he adds.
Now with the people in situ, given Deutsche Bank Wealth Management’s relatively low penetration of the core London market in the UK, Morley’s strategy is to initially focus purely on building its client bank in the capital.
He believes one of the reasons why the bank has arguably underperformed in the past was not having a focused strategy. He says the bank’s current leadership has been very clear about the segments of the market they want to participate in, targeting high net worth (HNW) and ultra-high net worth (UHNW) individuals and families with a minimum of £2 million of investable assets.
‘I think the reason that it was not successful before is partly because it didn’t have the right senior leadership for the UK, it partly didn’t have the right operational infrastructure to be successful and perhaps it hadn’t defined as clearly as it should’ve done which segments it wants to compete in,’ he says.
‘In the UK marketplace it is important to understand that there are a number of different segments that competitors can look to participate in. You clearly need to make sure we have got the right attributes, products, services and people if you are going to participate in those individual segments.’
The focus on the top end of the market is also why Morley does not yet feel the need to rebuild the regional network Deutsche lost when it sold the Tilney business to Permira in 2013.
He says: ‘We are starting from a small base in many ways. You might say that the operation today relative to other players is a start-up, so it makes sense for the start-up to start in London where there’s plenty of opportunity and potential clients to go for. I think that in a later phase we might well look to cover clients outside of the London area, but at this stage I certainly have no plans for offices outside London.’
It was not the cut and thrust of markets or the opportunity to run billions that drew Morley into financial services and ultimately Deutsche Bank, it was simply the lure of learning a new language.
He recalls spending most of his time at Cambridge University reading German poetry and when he graduated in French and German in 1980 he signed up with Lloyds Bank International when it offered to teach him a fourth language.
‘I was immediately posted abroad to learn Spanish and I went to South America, so that’s the honest reason. I thought it’d be interesting and fun and I’d learn something, and indeed I did,’ he says.
His first posting was in Rosario, Argentina and he went on to work in Buenos Aires and then Lima in Peru, starting out in commercial and retail banking. After eight years in South America he moved back to London, spending some time in its merchant banking operation before being sent to Geneva to work in capital markets.
He says the seeds for a mid-career switch to private banking were probably sown in his four years in Switzerland and it was also where he met his wife, who herself was a private banker.
Morley then had five years in investment banking at Enskilda Securities before moving to Merrill Lynch. After starting back on capital markets, he switched over to private client management in what he describes as ‘probably the pivotal moment in my career’.
He then had a spell as head of international private banking at Barclays, again in Switzerland, before having a brief interlude at Singer & Friedlander.
‘It looked interesting,' he recalls. 'It was set up as a bank for entrepreneurs, but the problem was it was run by entrepreneurs and that turned out not to be a great thing, so I actually left.'
His subsequent role as chief executive of Coutts is a period he looks back on fondly. He spent seven years in the position, the longest tenure of any chief executive who was not a Coutts family member.
‘When Coutts came calling for me to be chief executive I said “where do I sign?” They were seven extremely interesting years and it went by in a flash. It was a really interesting time and I was proud to be asked to do that job and very proud of what I did there,’ he says.
Morley oversaw a modernisation of the Queen’s bank, but also had to lead a suitability review in 2014. This required the reassessment of every investment made for clients, dating back to 1957. Coutts, as one of the market leaders, became the canary in the coalmine of what soon became a wider industry issue.
‘It was in the lead up to the retail distribution review and there was a lot of focus quite correctly on suitability and that records were properly kept. There were a couple of regulatory fines, which I had to deal with, there was quite a lot of regulatory risk. They occurred on my watch and the underlying issues were ones that I was dealing with, so there was a lot to do.’
He adds: ‘I was CEO at Coutts for seven years and the longest serving non-family member to be chief executive. After seven years as a CEO you’ve usually sang your song and it was time for a move.’