Merrill breaks mould with new integration strategy

With Merrill Lynch on the cusp of launching its private investment banking group, one of its bankers makes a unique internal move.
Cornell-educated Pat Chen, a US passport holder of Taiwanese extraction, has made an internal move within Merrill Lynch, shifting from the global markets and investments group (GMI) to the global private client (GPC) side of the business.

ItÆs reportedly the first time such a move has taken place.

Chen is 27 and has been at Merrill for four years. He has worked as an analyst in technology, media and telecom, as well as on several IPOs. He is an associate and is currently based in Hong Kong after a stint in Taiwan.

The move is considered a reflection of the bankÆs efforts to integrate what were two notoriously æsilo-izedÆ cultures: private banking and investment banking. The move comes just ahead of MerrillÆs announcement of the creation of a new unit, the private investment banking group (PIBG), reportedly to be made later this week.

According to specialists, PIBG represents the culmination of the bankÆs efforts to increase integration between the private banking side and the investment banking side in Asia.

ôPIBG is going to be offering institutional investor-quality investment banking services to ultra-high-net-worth individuals, the very richest of their private banking clients. It will provide a level of service to private banking clients never seen before,ö says one specialist.

Clients being offered these services will be US dollar billionaires by assets, he adds, and often comprised of entrepreneurs who have brought their companies to listings in Hong Kong or the US.

They will be offered the same prime brokerage platform as institutional investors, as well as access to Merrill Lynch research, and tax and legal advisers. They will also get lots of financial leverage and preferential access to desirable trades, such as private equity investments. Clients will have more direct access to every service the investment bank can offer than ever before.

ôBasically, these clients will not just be benefiting from traditional private banking services such as investments in mutual funds, establishing offshore trusts and charity foundations, but from a much wider and sexier range of services.ö

ItÆs the heightened level of integration promised by PIBG that makes the hire of a former investment banker like Chen so desirable, say sources.

ôPrivate bankers know their clients inside out, but Chen also knows Merrill inside out. So he will be able to act as an internal coordinator to get the best possible service for the private banking clients.ö

PIBG will apparently be set up as an elite private banking unit at Merrill, comprising one other private banking team, lead by ex-Goldman banker Joseph Lam. ChenÆs team, lead by Vincent Shen and including Sam Yang, will focus on China and Taiwan. The other team will focus on Hong KongÆs super rich.

PIBG will answer directly to Damian Chunilal, COO of ML Pacific Rim, who answers to Jason Brand, president of ML Pacific Rim, at least on corporate matters. (On investment banking matters, Chunilal has full responsibility.)

Previously, ShenÆs team answered to a regional manager. Those regional managers will stay in place dealing with conventional private banking clients.

The integration effort underway at Merrill is reflected in the fact that Brand is responsible for the firm's GMI as well as for GPC in the region, which includes Japan, Asia and Australia. This is the first time both responsibilities have fallen under the same person.

ChenÆs move to private banking will surprise some, given that itÆs traditionally less well-paid than investment banking. ôHowever, as private banking gets more integrated with the investment bank, private bankers can offer far more services, such as exotic derivatives and structured notes. That means the private bankers can generate more revenue,ö says a specialist.

It also means that private bankers will need excellent financial skills, which is another reason for recruiting from the investment bank.

ShenÆs team is already making a name for itself amongst the world of super-rich Chinese entrepreneurs. Assets under management reportedly grew by $700 million in 2005 and $1.2 billion in 2006, to an estimated $2 billion in 2007, for a total of almost $4 billion. By traditional private banking standards, the assets run by the team are huge.

As well as making private bankers very happy, the integration should please investment bankers by deepening the relationship between entrepreneurs and Merrill.

ôIncreasingly, private bankers are co-pitching alongside the investment bankers for deals to the ever-more wealthy private entrepreneurs out of China and Taiwan. While the investment bankers handle the companyÆs business, the private bankers can look after everything from the entrepreneurÆs educational needs for his children, estate and tax planning and so on,ö says a banker.

With personal and corporate wealth so intertwined itÆs clear that the investment bank that can offer superior personal banking services will be more likely to get the entrepreneurÆs business than an investment bank that doesnÆt. And of course, it raises total revenues for the bank.
¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media