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Private banking as a shift to ideal personalization

It’s difficult to underestimate the importance of customers in the banking industry. Without clientele, both large traditional banks and disruptive FinTech startups would vanish. However, there’s one particular subsector that relies on personal relations even more – it’s private banking. Being focused on highly tailored services, it reflects the most exclusive part of general wealth management as opposed to basic mass banking.

In recent years, private banking faces new challenges. Customers become pickier because of broader access to financial services related to the rise of startups and personalized offers. People tend to change their financial behaviour, work with more institutions, find new partners, etc. In this case, banks should adapt their wealth management programs. Further, we will talk about private banking with the help of Deloitte, EY, and McKinsey studies. Let’s begin!

Essentials of Private Banking and Wealth Management

For the first part, we’ve prepared a short breakdown of private banking and wealth management ideas. These concepts emerged a few centuries ago when Venice banks proposed personalized services to rich families. Later, large European companies started working with wealthy individuals, too.

Today, we should distinguish two banking strategies even despite they are pretty similar:

  1. Private banking. A range of personalized financial products/services for high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients. The most common offerings include investment management, insurance, taxes, etc.
  2. Wealth management. On the contrary, it focuses on investments, mostly. Professional analysts and advisors study the client’s investment strategies and help to optimize them. The end goal is to improve the financial situation.

Thus, private banking services may include wealth management solutions or suggestions but not vice versa, as a rule. Exact options depend on the customer’s needs.

Evidently, private banking is for the chosen customers only. Some companies offer individual services to clients with at least $50,000 in assets, while others require a minimum of $1,000,000. Eligible personas get benefits, including discounts on services, special credit cards with lower interest or deposits with higher revenue, better exchange rates, and more.

The quick disruption of different industries affects the banking sector, too. New market players emerge while customers get a more extensive choice of services. Ubiquitous digitalization changes relations between providers and clients, making them faster and more transparent. People tend to choose self-service options, while companies have to deliver new values. In this case, private banking and wealth management face several significant trends emerging now. Let’s look at them.

0. A Global Industry Slowdown

On top of all industry changes, we see the most dangerous and disruptive trend. According to the European private banking study held by McKinsey, 2018 was the year that ended a long surge of the private banking market. Combined profits of European companies dropped from €14.7 billion to €13.5 billion in a year. Profit margins and the number of assets managed went down, as well. This tendency shows that something’s wrong with market players today.

Private banks and wealth management firms tend to implement short-term tactical changes to deal with this issue. They install new software, open digital interaction channels, deliver new investment products like EGS, and boost personalization even more. But the current trend requires more fundamental changes. McKinsey experts propose three strategies that may help the private banking industry to remain competitive:

  • Boost user experience substantially. When a wealthy client can switch his/her service provider in a few minutes online, banks should deliver only top-quality services with a seamless experience. Constant analysis of demands is required here.
  • Operate with a focus on scalability. A next-gen approach to operations can help to keep revenue stable. For this, banks should stay scalable, implement automated solutions, and ensure the perfect stability of the back office.
  • Use structural shifts for the benefit. Many startups and digital finance enterprises increase competition but also open new opportunities. Private banks can adapt by participating in shared projects, for instance.

Further, we will review other trends that correspond with the mentioned solutions partially or fully.

1. Cooperation Between Enterprises

Even if a bank focuses on private services, it can barely avoid dealing with other industries. Insurance or investment management requires a proper connection with underwriters or exchanges, for example. Seamless and private data flow is a must in this case. Driven by open banking requirements, cooperation will involve traditional banks, wealth management groups, and FinTech startups that will create integrated platforms for the sake of customer satisfaction.

2. Cross-Border Services

Another research bureau – Deloitte – insists that the essential trend in wealth management relies on cross-border work that is also affected by open banking ideas. In the report, analysts unveil several aspects of this tendency:

  • Focus on global clients.
  • Multi-channel interaction.
  • Regulatory compliance.
  • Tailored offers.
  • Updated pricing strategies.

Proper knowledge and skills in these fields are required to move from narrow domestic markets to a wider global ecosystem. Successful banks will be rewarded with new mobile-oriented customers who want to access private banking services without relation to their country of origin. Of course, such evolution requires detailed planning and significant investments.

3. Digital Solutions for Banks and Clients

A common trend for various industries is typical for private banking, too. Quick scientific progress allows companies to deploy advanced tech solutions for almost all wealth management needs. They include but aren’t limited to:

  • AI analytical platforms for better customer research and predictions.
  • Chatbots for automated interaction with clients and solutions to their issues.
  • Computer-generated portfolios that show the best results.
  • Internal databases with quick access to crucial information.
  • IoT devices for next-gen insurance management and healthcare.

Inevitably, each case is unique, and it’s important to research everything carefully before implementation. But a tailored banking software solution based on new technologies can boost wealth management programs significantly.

4. More Often Switches of Providers

As clients get more offers, they can switch between banks and other financial firms freely. In the constant run for top quality, providers deliver better and better services so users can choose between different partners. EY reports that almost 40% of UHNW customers have switched the main provider in the last three years, while nearly the same percentage plans to do this in the next three years. Today, it’s common for customers to have a deposit in one bank, make investments through another firm, and use credit cards from a third team.

5. Physical + Digital Interaction

Finally, don’t forget that millennials still have to reckon with previous generations. While a regular tech-savvy user would prefer an online platform, many clients still stick to traditional interaction options: bank branches, phone chats, etc. That’s why it’s essential to target all customers using a so-called phygital approach. It provides for the development of online and/or self-service interfaces with support for physical channels.


Private banking isn’t a new concept, but it faces new challenges today. With the growing number and complexity of customer requirements, it becomes more difficult to attract and retain clientele. The evolved industry can set new standards in personalized financial services, but representatives should be aware of current trends, e.g. demand for digital solutions or easier provider switches.

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