“Situations like this, while they pose risks and need to be very proactively managed, also provide opportunities, as we saw”
When markets slumped in March as the spread of coronavirus gathered pace, wealth managers' trading volumes soared as ultra rich clients reshuffled their portfolios.
It was this market frenzy that helped Swiss banks UBS and Credit Suisse – the world's biggest wealth managers – post bumper first-quarter profits while much of the global banking sector was scrambling to make provisions to withstand the economic fallout from the pandemic.
UBS received up to 4 million quote requests a day from private clients in the quarter - double the December level of such enquiries about potential transactions - while its advisers conducted tens of thousands of portfolio reviews each month.
While banks that are more focused on commercial lending set aside billions in provisions, the big wealth managers have found that banking for billionaires has swelled their own coffers with outsized transaction fees even as the global economy takes a battering from the coronavirus crisis.
"Situations like this, while they pose risks and need to be very proactively managed, also provide opportunities, as we saw," said Iqbal Khan, co-head of UBS's $2.3 trillion global wealth business, which recorded its best first quarter since the financial crisis.
While plunging markets dented the overall level of managed assets and falling interest rates hit interest income, UBS's net margins on managed money rose to 20 basis points, their highest in years.
Credit Suisse managed double-digit profit growth in the quarter despite bulking up on provisions for expected credit losses. US lenders Goldman Sachs, JPMorgan and Bank of America also recorded jumps in wealth management revenue while private banks Pictet and Vontobel plan to open new branches and expand their teams.
The resilience of wealth management also serves to validate the strategic changes Switzerland's biggest banks made over the past decade, placing greater emphasis on managing rich people's money and less on wholesale trading.
"It's a more profitable model than average peers in European banking," said Citi analyst Nicholas Herman.
"The losses that you see through the cycle are much lower. Compared with other major lenders, the provisions for expected credit losses we saw in wealth management in the first quarter were small."
The question now, however, is how to sustain profits as market volatility and trading volumes subside.
Many are focusing on finding clients' investment opportunities outside public markets - often involving distressed assets - as well as lending more to those whose businesses need extra cash to tide them through the crisis.
"If you're a large family office today, you're sitting on cash hopefully. You might loan that cash or provide it to a company you own, or you might deploy that cash to buy distressed assets that have long-term value," said Claudio de Sanctis, Deutsche Bank's global head of wealth management.
Private equity - particularly in areas related to distressed assets, healthcare or technology - has become a focal point, senior managers from four leading lenders told Reuters.
At UBS, clients are looking for opportunities to invest in the real economy as the cost of borrowing comes down.
"Our investor sentiment survey clearly showed that, around the world, wealthy investors still have liquidity available to commit to risk assets," said Tom Naratil, Khan's co-head of wealth at UBS.
The bank's survey found that 37% of wealthy investors wanted to increase their investments over the next six months.
And large banks are looking to help them do so through increased lending.
"We've been extending our balance sheet to clients across industries and sectors, to help them in their Covid management, and have been looking at opportunities with them to take advantage of locking in very low rates," said JPMorgan's head of private banking in Britain and Ireland, Oliver Gregson.
But as returns from standard strategies become squeezed, scale is becoming increasingly important, analysts and industry experts say, with entrepreneurs, heirs and multi-millionaires seeking complex financing and deals to preserve their families' wealth and businesses in the face of shrinking asset pools.
"Typically when we have our global investment strategy group calls, we have 1,000-2,000 clients on a call. Now it's 10,000 on average," one senior private banker said, adding that the group is bringing together experts and investors from across its divisions to provide complex advice that would prove difficult for smaller organisations.
Even so, the industry is not immune to the pandemic. As depressed markets reduce overall asset levels, wealth managers will suffer a drop in the fees generated by managing assets.
"We had a fantastic first quarter, but in Q1 you did not have a massive effect in terms of asset reduction," Deutsche Bank's de Sanctis said, adding that a further prolonged downturn would change the situation.
"Eventually ... you will see that translating into revenue contractions for any wealth manager. This is a universal law."