Julius Baer Pressures Smaller Clients to Boost Balances or Exit

Julius Baer Group Ltd. is reportedly pressuring clients with smaller accounts to either increase their investments or consider leaving the bank. The Swiss wealth manager is implementing this strategy across its global operations, using varying minimum thresholds depending on the region. A source familiar with the matter said the move aims to ensure that each client relationship is cost-effective and aligns with the bank's risk management goals.

The initiative is part of a broader strategy under CEO Stefan Bollinger to refocus Julius Baer on core wealth management. The shift comes after the bank faced significant losses from soured loans to former property mogul Rene Benko, which triggered a regulatory investigation and contributed to a sharp decline in profitability for 2023. These challenges have forced the bank to reassess its client portfolio.

Julius Baer is also navigating increased scrutiny from Swiss regulators, who are emphasizing stricter client risk assessments. The move mirrors similar actions by other financial institutions, such as HSBC's Swiss private bank, which recently cut ties with over 1,000 Middle Eastern clients. This trend highlights a growing industry-wide push to balance profitability with regulatory compliance and brand reputation.

A Shift in Client Strategy

Julius Baer's minimum account thresholds vary significantly by location. In Switzerland, clients are expected to maintain at least 1 million Swiss francs, while in Hong Kong, the threshold is as high as 5 million francs. These figures reflect the bank's effort to manage costs and compliance risks more effectively. Some sources suggest that the bank has also curtailed onboarding politically exposed individuals during this strategic realignment.

The move could lead to a more concentrated client base, with Julius Baer prioritizing relationships that offer higher returns and lower regulatory risks. The firm's recent strategy update included the removal of medium-term profitability targets, shifting focus instead to net new money - a key performance indicator in wealth management.

Broader Industry Context

The pressure on Julius Baer to restructure its client base is not isolated. Financial institutions globally are under greater regulatory and reputational scrutiny, especially in the wealth management sector. Recent reports show that HSBC's Swiss unit cut ties with over 1,000 clients in the Middle East, a move attributed to compliance concerns and risk management.

Regulatory bodies, including Switzerland's Financial Market Supervisory Authority (Finma), are also increasing oversight of financial institutions. Julius Baer is currently under investigation for its handling of the Benko loan debacle, a case that led to a nearly 50% drop in profit for 2023 and the resignation of its former CEO. These developments underscore the ongoing challenges wealth managers face in balancing profitability with regulatory expectations.

What This Means for Investors

Investors and clients affected by Julius Baer's new approach will need to reassess their positions. The bank's strategy may lead to a more selective client base, potentially increasing average account sizes and improving margins over time. However, it could also result in short-term client churn and reputational risks if the message is not carefully managed. For Julius Baer, the shift could be a long-term move to stabilize its operations and rebuild trust with regulators. The firm has already taken steps to strengthen its risk framework, including announcing a revised approach in November. The focus on net new money suggests a desire to attract and retain high-value clients who align with the bank's strategic and compliance goals.