How One Man Takes on the German Wealth Management Industry
Quirin bank is headquartered in Berlin. But you cannot find its offices in the posh new centre of Berlin-Mitte or in the fashionable quarters of Charlottenburg. Quirin is located at the very end of Ku’damm, a part of the city that seems slightly seedy or even shabby. Once inside the building you feel more like you have entered the office of an IT startup rather than that of a formal German private bank. But the wealth managers of Quirin bank have reached the figure of € 1 billion (about US$ 1.3 billion US$) assets under management just about 6 months ago. This is impressive stuff for a banking upstart, who got serious with private banking at the end of 2006, only months before the global financial crisis started. The bank employs 89 advisors in 13 offices across Germany. It claims to have 3000 clients.
The recipe of Quirin bank is quite simple: Give all hidden commissions, kick-backs or retrocessions back to your clients, who are only charged for advise or for performance. Starting from € 50,000 (about US$ 65.000) clients can choose between two models:
Full-fledged wealth management mandate: Clients pay € 75 per month plus 20% of the portfolio’s performance. All kickbacks are refunded to the client.
Advisory model: Clients pay € 75 per month and between 0.6% and 1.2% of assets under management per year. All kickbacks are also refunded to the client.
Both models come with no transaction fees. The bank makes the case that because of their “we-take-no-commissions-policy” they are completely objective in their advice.
The brain behind this new private banking paradigm is Karl-Matthäus Schmidt, who founded Consors, one of Germany’s most successful discount brokerages in 1994, at the age of 25, (which was acquired by BNP Paribas in 2002). Back then, Schmidt was so annoyed with sky-high brokerage fees that he came up with the idea of the discount broker. A concept that did not take long to revolutionise trading for private clients in Germany.
Now Schmidt has taken on the Private Banking industry. And Schmidt – despite his slightly geekish appearance – takes an aggressive approach. For instance, on the website of Quirin bank you find a list of total costs other banks charge openly and also the hidden costs. According to Quirin those total costs range from 2.44% per year (Berenberg Bank) to 5% (Dresdner Bank). However, critics of Quirin bank point out that the 20% cut of the client’s performance Quirin takes, reminds them of the hedge fund industry and can get very expensive during bull markets.
Schmidt has cut out quite a bit of work for himself. So far, the European private banking industry has staunchly defended their traditional fee models, including kickbacks, hidden commissions and in many cases not-so-objective advice. But it seems that Schmidt is on to something and the winds of change are blowing in his direction. Regulators, courts and many clients across Germany and the whole of Europe think it is time for a transparent wealth management based on objective advice. Quirin bank with Schmidt at its helm will definitely play a role in this transformation.