Private Banking and Wealth Management: industry strategic priorities
Every two years, the PwC’s Global Private Banking and Wealth Management Survey gathers insights and perspectives on the challenges confronting the global wealth management sector. The study that scans 200 financial institutions across 51 countries, among which participants in Luxembourg represent 40% of assets held by Luxembourg Private Banks, reveals that the industry in Luxembourg is reshaping as it moves towards an inflection point.
Prepare for automatic exchange of information
Banks established in Luxembourg must plan for automatic exchange of information, which is due to be applied as of 2015. The focus on transparency and consumer protection has pushed financial institutions to undertake measures aimed at improving their operational efficiency.
"Private banks must accept that compliance and risk management remain a high priority. In order to overcome tax transparency challenges and downward pressure on prices, private banks must invest massively in their systems in order to remain profitable, compliant and competitive in terms of service provision." says François Génaux, partner and Financial Consulting Leader at PwC Luxembourg.
Banks can leverage their technology investments and concentrate on how they can optimise their use of data by investing in their core systems such as back office, middle office and reporting.
Changing nature of markets and clients needs
Private banking and wealth management still register moderate growth in mature markets (+8% in 2013). This stands in stark contrast to the comparatively high growth in emerging markets such as Hong Kong and Singapore (+16% respectively in 2013). Luxembourg should benefit from a renewal of its client base. Although the share of inherited wealth clients has dropped (from 77% in 2007 to 52% in 2013), that of entrepreneurial clients has increased and is now comparable to that of Switzerland (44% and 48% respectively). Luxembourg's neighbours continue to constitute the main client base for private bankers, who have yet reiterated their ambition to set foot in new markets, notably by opening branches and subsidiaries in Eastern Europe, Russia and Asia.
In addition, banks must adapt to a new emerging client base, such as clients from the Y generation, keen on technology and who may have a different needs from their elders.
As a new business model evolves, the bar for CRM skills and performance is rising. Some banks have already begun recruiting professionals with knowledge of Luxembourg's structuring solutions as well as solid sales skills in the language of their target clients.
Achieving excellence in client experience through technology
The pace of change in the nature of clients is causing many wealth managers to revisit how their systems should evolve and adapt their services to the digital age. Online services present new opportunities for the interaction with clients but also the promise of a re-imagined experience for clients offering them numerous ways to access and research banking data. Although only half of the surveyed banks in Luxembourg currently offer their services via tablets and smartphones, 88% of respondents aim to offer such mobile services within the next two years.