In private banking, client behaviour is rapidly changing. The industry on the whole is going through several changes as well. Jeroen Rijpkema, CEO of ABN AMRO Private Banking International, writes about how all these changes present ample growth opportunities for private banks and its wealthy clients
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In private banking, client behaviour is rapidly changing. More and more, our clients do business with us 24/7 via various channels. For instance, ABN AMRO’s Mobile Banking App in the Netherlands is now used 53 million times a month. A device which was only invented five years ago! This offers great opportunities.
We can be in touch with our clients all the time and through various channels. Digital banking will continue to develop and grow in the coming years. Leveraging and integrating the multiple interactions via various channels into personalized service offerings will be a major challenge, but offers great opportunities for the clients as well as for private banks.
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By GlobalDataAdded value
In the changing digital and regulatory environment, a key question for many private banks will be: how to remain meaningful to clients in a sustainable way. MiFID2 will require many private banks to adjust their current operating model, to distinguish their investment services more explicitly and to create transparency of total costs.
In view of these developments, digitally enabled investment solutions as well as the steady growth of passive alternatives, the need for real added value will become even more prominent. One way of turning this into opportunities will be clear client segmentation and well defined investment propositions. Socially responsible investment strategies, applying ESG criteria, are becoming an increasingly important component of these propositions, especially in North European countries.
Another trend we can expect to continue is the ongoing growth of discretionary portfolio management, with more and more clients entrusting the management of (part of) their wealth to professionals, and choosing clear investment strategies.
Client due diligence
For very good reasons, the requirements we ourselves, regulators and society at large, apply to knowing our customers, understanding their source of wealth and funds, their legal structures, their transactions and our own documentation of all this knowledge, have a profound impact on our industry. It requires serious investments in system capabilities, training of staff.
All tailored to select the right clients and countries, of which one can manage the associated integrity risks. In this respect the current trend of many private banks evaluating and refocussing their cross border services will continue, as well as the ongoing attention of regulators and bigger public for these reputation sensitive topics.
Focus
Given the aforementioned trends and the associated, required investments, the earnings model of various private banking operations will remain under pressure, especially if markets are not buoyant. This will continue to drive the pursuit for critical mass and on-going consolidation in the industry, i.e. the review of smaller, low growth operations.
At ABN AMRO we focus on a selective number of markets, primarily domestic, where we can leverage and grow our critical mass. In those markets we want to be a leading private bank, pursuing a multi-brand strategy in order to preserve local authenticity.
So only change?
Whilst it is tempting to think about new developments only, clearly many things do remain as important as always; one could argue that that’s also a trend, the basics of private banking remain relevant as ever.
Clients continue to value solidity, stability and reliability. Banks need to take care of the trust that is invested in them. Bankers should not over-reach. We can only be successful through the success of our clients. An adequate return on investments, wealth preservation, wealth transfer to the next generation, philanthropy, remain as relevant as ever. Capital requirements and regulatory pressure have increased, having an effect on clients as well, and we have to deal with it to the best of our capabilities, what’s new?
Private banks need to not only know who their clients are, but also have to evidence that they really do know their customers.
It’s all the basis of a private bank’s license to operate, and won’t change, despite all relevant trends.
