INTERVIEW - Rich seek cover as 'elephants' stomp wealth world

By Pascal Fletcher

MIAMI (Reuters) - High-profile fraud scandals and heavy-footed government tax crackdowns have "changed the DNA" of wealthy investors who now demand lucid, protective long-term counsel from advisers and bankers, an industry expert said.

Steven Crosby, head of Americas Wealth Management with PricewaterhouseCoopers LLP, said transparency had become the top requisite sought by investors in a global wealth management industry that was being invaded by intrusive governments seeking to tighten regulation and chase down tax cheats.

"We think that transparency has actually eclipsed brand and performance as the essence of wealth management and private banking," he told Reuters in Miami after addressing the Florida International Bankers Association (FIBA) on Tuesday.

Crosby said the global wealth industry had experienced multiple shocks, both from notorious fraud scandals involving Wall Street financier Bernard Madoff and Texas billionaire Allen Stanford, and from increased government intervention into "what has historically been a very private business."

Madoff is serving a life sentence after pleading guilty to running a $65 billion Ponzi scheme, while Stanford denies committing fraud and is awaiting trial in jail.

"With Madoff, Stanford, and the aftermath of the financial crisis, the DNA of the investing public changed and now government action has cooked these changes into place with varying decrees and regulation," Crosby said.

PricewaterhouseCoopers (PwC) this summer published its 2009 Global Private Banking and Wealth Management Survey which presented increased government intervention in the sector as the new "Elephant in the Tent," placing increasing political, fiscal, tax and regulatory pressure on wealth managers.

"There are herds of elephants out there facing the industry globally," said Crosby, who noted European Commission proposals to regulate alternative investment fund managers and anticipated tighter U.S. regulation of hedge funds. "Now it's just a question of how much and how soon," he said.