A PBI round table on
challenges to the UK private banking industry held in London
brought together members of the wealth management community from a
variety of perspectives. This special section kicks off with
forecasts for 2011 before highlighting the future for offshore and
the changes needed in client advice.
Go deeper with GlobalData
The dramatic
challenges to private banking business models in developed markets
may not be as acute in 2011 as in the past few years but the
industry remains in fundamental transition. Here we ask the
attendees at our London roundtable to give their predictions for
the next 12 months.
Nick Hammond, Branch Manager, Hoare & Co:
My 2011 industry prediction would be for fragmentation in banking
and the consolidation of firms in wealth management.
If you are talking about [investments] next year, it will be
quite low return across all developed asset classes and markets. I
think investors will continue to distrust advisers, so hopefully
that should filter through to increased transparency.
Josh Matthews, managing partner, Maseco
Financial: Over the next few years I think fees will
continue to come down and I think passive investing will continue
to rise across the globe. Passive will become more popular.
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By GlobalDataAbout 75% of active portfolio managers underperform their index,
in emerging markets it is as high as 90% who underperform. I think
the trends are sweeping from the West to the East. And transparency
will go up.
Ian
Woodhouse, private banking and wealth management practice director,
PwC: I think we are into a new era for private banking and
wealth managers, with changes to people’s business models and the
advice they provide.
Markets will be getting tougher, focus will be more important.
Gone are the days where banks can be all things to all people. I
think it’ll be focused on client segments, markets and investment
style. Revenue will be much tougher, so the rewards will go to
those firms that can go to clients with ideas for these kinds of
market situations. I think cost will be continually under pressure,
from fee erosion as clients move out of the high margin, high price
products. I think managing the cost will be key. Part of that will
be around more efficient operations. Systems platforms,
partnerships and outsourcing could also drive more cost
efficiency.
David Stearn, head of private banking, Fairbairn Private
Bank: The consolidation will continue to occur up until
and post-Retail Distribution Review. Fees will come down in my
opinion and many of the independent financial adviser firms will be
bought out.
I think you will see some [consolidation] at the medium-large
sized banks, and huge brands will dominate. Smaller, niche private
banks will have to go back to being private banks again and leave
their premium clients behind. Due to the costs of employing
knowledgeable advisers, private bankers will return to looking
after people with a level of wealth appropriate for a niche private
bank model likely to be at a higher level than it currently is.
Peter Tarn, partner, Harneys: I think one
factor that will come into play in the industry is what inherited
Asian wealth, as opposed to created Asian wealth, is looking for
from service providers.
The other interesting element is an expectation of a
quantitative leap in longevity and whether that increase comes or
not. Everything else seems set to become irrelevant if people begin
to have the expectation that they will have active lives that will
exceed 100 years, then what they’re looking for from their private
banks in terms of wealth management and inheritance planning is
rather different.
Alex McBarnet, managing director, United Trust:
There has to be a shift in focus to increased transparency, to
changing the model and putting the client first.
I think that has started to happen,
but I do not think the cycle will fully turn next year. You hear
about small borrowers not being able to get funds from banks, but
what we do not hear about is that the very wealthy actually do not
have the access to the finance they want either.
There is talk that to get out of
recession we need to do a certain amount of spending. But the very
wealthy, the people with the greatest ability to spend, are not
spending on high value items because they cannot finance them and
these are the people that have it easiest.
I do not see that changing soon, possibly by 2012, but not next
year. That is something that the banks are going to have to
reorganise at some point.
See also:
Offshore banking: the transparent age
‘Down your game’ and back to basics
