The need to adjust is like trying to rewire a fully loaded Boeing 747 mid-flight.”
“A confluence of factors has converged to create some of the most profound pressures and changes on the industry for a generation. “The business model of yesterday is no longer fit for purpose,” says Gregson. That is in addition to all the other stuff banks must do: modernize core systems, roll out new products and navigate a pandemic.Īdd in punitive actions (in 2017, Boston Consulting Group put the fines paid by banks since the global financial crisis at $321 billion) and the result is sheer exhaustion.Īcross the industry there is “a huge degree of change fatigue,” says Oliver Gregson, head of private bank, UK and Ireland at JPMorgan Private Bank.Īllied to this is a sense that the financial industry isn’t ready for the radical change set to sweep across the sector. Europe’s Markets in Financial Instruments Directives the revised Payment Services Directive the packaged retail investment and insurance products regulations and the coming replacement of Libor are all well-intentioned but costly to implement. “We always say we have seen more than 40 crises, and they all bring their own challenges and situations.”īut change is clearly in the air and, like most revolutions, its seeds were sown long ago.įor more than a decade, banks have been harried by rule-happy regulators. “It is a bit difficult for a firm that’s 225 years old to say it is a seismic moment in private banking,” says Patrick Odier, senior managing partner and chairman of the board of directors at Bank Lombard Odier. Lombard Odier, Swiss and still proudly independent, has been delivering progressive private banking products since 1796. Hamburg-based Berenberg Bank has been offering wealth services since 1590. Plenty of European private banks would of course contend that managing money was always what they did best. In 2011, the incoming chief executive of UBS, Sergio Ermotti, exited poor-performing services and placed private banking once more at the heart of the world’s largest wealth manager.
Unsurprisingly, one of the first institutions to put it front and centre was Swiss. The push to put wealth at the heart of the banking model did not happen overnight. “Piyush is telling us: ‘You guys should do more,’” says Joseph Poon, group head of DBS Private Bank in Singapore, referring to his chief executive.
Now it is not just expected to pull its weight but to be a main driver of a financial business, a message that echoes out loud and clear from the chief executive’s office. Not long ago, it was a supplementary income stream for banks – important but hardly a valuation driver. Once a handy add-on to the financial model, private banking will increasingly drive income and activity in investment banking, not the other way round.Īs competition intensifies, falling barriers to entry will pit universal lenders against private banks and a host of new players, from boutique environmental, social and governance (ESG) advisers and big tech, to global asset managers and private equity firms keen to drive consolidation. Providers will fight for the right to serve a prized client, driven by a raft of factors, from the industry’s capital un-intensive model to its elevated valuations, higher fees and better return on equity. Wealth will narrow at the top end, as it settles into the hands of a select group of the super-rich.įurther down the pyramid, it will broaden to serve more high net-worth (HNW) families, super-affluents and mass-affluents – in multiple markets.
The next decade will be one of great change for the private banking industry. The next step will be the biggest of all, as it begins a concerted push into the US. An internal merger helped, as did work integrating Europe and Latin America. The Spanish group’s rise to private banking prominence didn’t happen overnight.