Private banking: proximity will be key
It is well-known today that as a consequence of the financial crisis, the international private banking world is rapidly changing. The offshore-onshore move is a main driver of change in the Luxembourg private banking sector, experts said at a round table discussion organised by Avaloq Luxembourg. And this change is fast and profound.
Since a couple of years, the client profile is evolving. Luxembourg’s private banks are experiencing an outflow of affluent clients with assets below 500,000 euros and, on the other hand, a strong inflow of fully tax compliant high networth individuals – mainly entrepreneurs – bringing in assets of more than 5 million euros. These clients appreciate the country’s political, social and legal stability, Luc Rodesch, member of the Executive Board of Banque de Luxembourg and president of ABBL’s Private Banking Group, explained.
Further to this, the geographical diversification of the client base is progressing, and Luxembourg is attracting a growing number of clients from outside the European Union. However, opinions diverged during the discussion regarding which target markets to address. Roger Hartmann, CEO of VP Bank Group, believes that in order to capture growth, private bankers have to look beyond the European Union, especially to Asia with its large potential of entrepreneurial clients, and to Eastern Europe, that is a slightly more difficult market.
Avaloq Group’s CEO Francisco Fernandez stated that the potential for business development is much higher in developed countries than on emerging markets, which was in line with the view of Claude Marx, former Deputy CEO of HSBC Private Bank (Luxembourg), who is convinced that wealth is still around us. However, the erosion of the clients’ capital basis and declining returns on their assets have lead to a loss of client confidence, with the consequence that they became more demanding and less loyal to their bank.
ATOS partner Paul Chambers confirms that private bankers have to adapt to a new type of clients. The older client generation in search of a secure environment to put money aside for difficult times is dying out. The younger clients have different priorities, they want to access and spend their money whenever they like to.
Proximity will therefore be key in the future private banking environment, Francisco Fernandez said. But proximity is not a matter of a bank’s geographical location, it’s a matter of easy and fast accessibility of the bank’s products and services and of the client’s assets. As long as the clients’ assets are kept safe in a secure environment, this accessibility could well be achieved via the Internet.
Beside new types of clients, the private banking sector also experiences the emergence of new players, family offices for instance. But since these are believed to be a kind of assembler of banking products and services, they are considered to constitute potential clients rather than a threat for traditional private banks. JJP