A report from independent market analyst Datamonitor reveals that the UK high net worth population grew by 12% in 2004, taking the number of wealthy individuals with more than 200,000 in liquid assets to over 916,000 and this number will continue to rise over the next few years.
Many private banking providers are reviewing their products and services in order to adapt to the changing needs and attitudes of high net worth individuals. Issues such as personalisation and ethical investment are two factors that private banks must consider.
Oksana Selezneva, financial analyst at Datamonitor, says: “Undeniably, the continuity and overall quality of private banking service is becoming more important, not in the least because fewer players seem to be delivering it.”
The issues of the environment and responsible investing are rising up the political and financial agenda and play an increasingly important part in what many private individuals wish to do with their money.
Ethical consideration in private banking has moved on from just cigarettes and low wages in Africa and today it is as much about positive investment as well as negative. One of the major differences is that today private fund investment managers hold quite meaningful amounts of key companies and the consolidation in the industry has made their corporate voting power even greater.
Consequently, a rising number of competitors in the UK private banking sector, and particularly those who look after the funds of charities and religious institutions, offer ethically compliant investment solutions.
Rathbones, for example, launched a specialized unit in 2004, Rathbone Greenbank, aimed at meeting the needs of clients looking for a dedicated ethical investment service. The service has been extremely successful since its establishment, earning the title of the Best Provider for Ethical Investment in the UK at the Euromoney Private Banking and Wealth Management Awards in 2005.
Similarly, Sarasin Chiswell introduced a sustainable investment research capability for their clients, drawing on the expertise of Bank Sarasins experienced Swiss team, which is dedicated solely to sustainable investment.
As UK HNW clients are becoming more demanding and interested in the outcome of their investment decisions, there is a feeling in the industry that it is failing to fulfil the promise of a highly personalised private banking experience. What should be seen as a high quality relationship management where the client does not feel pressure and loves coming to see his or her advisor, has arguably turned into the chase after the next business target.
Selezneva says: “Undeniably, the continuity and overall quality of private banking service is becoming more important, not in the least because fewer players seem to be delivering it.”
Clients continue to be attracted by great brands, but an increasing number of them are searching for a more personalized approach and, in doing so, are becoming more prepared to move from one advisor to the other.
Datamonitor predicts that the HNW population will reach 1.3 million in 2009. But will private banks be able satisfy both the growth in numbers as well as the growth in demands?
Selezneva says: “While the levels of customer defection are unlikely to match the current situation in the general retail banking market, successful customer retention will become an increasingly pressing issue for the UK private banking industry.