SINGAPORE 21 June 2011 - The status quo in the private banking and wealth management industry is changing as the focus shifts to client service and value delivery, according to a new PwC report published today. The report -Anticipating a New Age in Wealth Management - includes findings from PwC’s 2011 Global Private Banking and Wealth Management Survey.
Dominic Nixon, Asia Pacific Financial Services Leader, PwC LLP Singapore, said:
“New competitors are challenging the dominance of established private banking players. The impact of new regulations and more demanding client expectations are forcing private banks and wealth managers to change their client service infrastructures and the way they operate. Those who can master change will be in a position to win increased market share and lead the industry."
In its 2011 biennial report, which surveyed a record 275 institutions from 67 countries, PwC found that wealth management continues to be a lucrative business with untapped potential for significant growth if institutions can be agile in adapting to meet changing demands.
Further to this release, an in-depth PwC Asia-Pacific private banking report is expected in September 2011.
PwC’s survey found that the industry faces multiple pressures in five key areas, as follows:
Performance and Change
Private banks by and large are facing challenges to achieve the desired performance, and there is wide divergence across the industry. Cost and regulations are the new drivers of change, but securing sustainable revenue growth especially from emerging markets will be the key to the future.
In our survey:
Justin Ong, the Asia Pacific Leader for PwC Global Private Banking and Wealth Management , said:
“We believe private banks need to transform the way they do business, and rethink their strategies for the future. Significant change across business and operating models are necessary, but historically this industry has struggled to deliver effective change. In Asia-Pacific, 44 per cent of private banks today say they are able to reduce costs by only five per cent or less, reflecting the amount of cost reduction undertaken already in previous years. The focus is therefore on growing revenues, where 53 per cent of private banks in Asia-Pacific believe they can grow revenues by more than 20 per cent over the next two years.”
Markets and Clients
Shifting patterns of world wealth between emerging and established markets, and tougher regulatory oversight present challenges for some wealth managers and opportunities for others. The DNA of the wealthy investor has also been transformed as a result of the global financial crisis and recent scandals. The result is higher expectations of service and value. Clients are more active in managing their affairs and they are paying increased attention to reputation, regulatory compliance and risk management. In our survey:
Justin Ong, Asia Pacific for PwC Global Private Banking and Wealth Management, pointed out:
“The dynamics of global change are significant. Centres, players, strategies and approaches are shifting and evolving. Agility and client focus will determine the market leader of the post -crisis landscape. Using technology intelligently will be key to staying relevant to clients.
Private clients have also traditionally been relatively easy to manage, but the financial crisis and recent scandals have awakened the sleeping giant. With clients taking a much more active interest, wealth managers now have to work harder to earn their long-term loyalty and trust. Delivering the clear value that clients want is contingent on understanding and anticipating their changing needs, circumstances and perceptions. This is particularly true in Asia where the difficult experiences of clients when dealing with their private banks during the financial crisis have been imprinted into their psyches, and private banks need to continue their focus on being truly client-centric.”
Client Relationship Managers and Human Capital
The shortage of talent is one of the biggest barriers to future growth. Top quality people are becoming more valuable, more difficult to source and more expensive to train. The industry is getting better at institutionalising client relationships with organisations. Links between performance and pay are becoming critical. New strategies, incentives and support are needed to attract and retain qualified professionals. In our survey:
Jeremy Jensen, EMEA Leader for PwC Global Private Banking and Wealth Management, said: “The traditional role of the CRM is being reshaped, requiring new skills and mindset change. The entire front-office infrastructure is changing to meet client demands and keep pace with regulation.We see our respondents preparing for significant change in order to grow and prosper. The alternative is not attractive.”
Operations and Technology
Respondents are at different stages of their operational evolution.Many continue to run legacy systems and manual processes. Technology budgets are being directed to better support client relationship managers and the front-end client experience. In our survey:
C. Steven Crosby, Americas Leader for PwC Global Private Banking and Wealth Management , said: “Transformation of the wealth manager business model is overdue, and this year’s report shows new urgency for change from an industry that has not needed, nor been able, to adapt swiftly in the past.We found nearly universal acceptance by senior wealth management executives that standing still is no longer an option and that there is a need for wholesale changes in the way their organisations deliver value. Those that are ahead are looking beyond the pressures of today to address operational, cultural and technology issues that are standing in the way of future growth.”
Risk Management and Regulation
Risk management systems and processes are being upgraded to provide integrated approaches to better align risk and value. The global wealth management industry is now at the forefront of regulatory change. Cross-border standards, customer protection and transparency are anticipated to impact the front-end client experience and increase costs. In our survey:
“Participants believe the centre of gravity for wealth management is moving, and established centres are under pressure from emerging markets. In response to increased regulatory pressures, our respondents see Switzerland, London and, to a lesser extent, New York, all being challenged by the rise of Singapore and Hong Kong in the coming two years. From an Asia-Pacific standpoint, Singapore remains the preferred international financial centre among the Asian private banks.”
About the PwC Global Private Banking and Wealth Management Survey
The PwC Global Private Banking and Wealth Management Survey was conducted between December 2010 and April 2011. Survey questionnaires were open to members of the private banking and wealth management community, and completed by 275 institutions in 67 countries, including 62 percent from Europe, 24 percent from the Americas and 14 percent from the Asia-Pacific region. The survey is not sponsored by any third party is part of PwC’s thought leadership to the financial services industry.