Private Banking Industry – Looking Ahead

03/05/2021 By Mikhail Nassimov

Private Banking industry continues to be one of the most attractive segments of the financial services sector. This is true both at European level and at the global scale and is reflected in valuations of the private banking segment, vis-a-vis the other segments of the banking industry. Nevertheless, Private Banking, and by extension wider Wealth Management, faces continued challenges, leading to another year with shrinking revenue margins, increase in costs and as a result further increase of cost-income ratios. Thankfully, this dynamic is playing out on a backdrop of overall increase in Assets Under Management. The obvious risk scenario would manifest in case of shrinking AUM which will drive a much bigger challenge for the profitability of the industry.

COVID-19

Coming into the crisis there was already vast pressure on the industry, especially in terms of profitability. The changes brought by the pandemic, in context of Wealth Management, can be broadly summarised in 4 key areas.

Increased market volatility had two major effects:

  • Client trading activity increased significantly, ultimately protecting profits.
  • On the other hand, volatility has led to more cautious clients to reduce their investments and increasing the cash holding. Given low interest rate environment these cash holdings provide substantial profitability challenge for the banks.

The other two correlated effects of the pandemic were:

  • Supercharged adoption rates of digital tools by organisations and their clients, and;
  • New way of working that eventually will unlock changes to the operating model of private banks.

Transformation

As we know most industries aren’t really good at transforming themselves, especially in terms of digital transformation. At BRITech, we are completely convinced that this is an opportunity for the private banking industry to reimagine the way the business is run and to acknowledge a shift in client needs and behaviours.

What this means is a high level of personalisation, increasing the output through digital tools and the application of smart analytics. This of course needs to be based on a solid set of tools that allow automation while providing excellent client experience. The effective interaction between the bank and its client will be omni-channel and this is an area where companies will have to invest in technology to reimagine what the new end-to-end journey will look like. This includes using cloud-based platforms, automation and robotics in order to eliminate manual processes of today.

Conclusion

We are convinced that Wealth Management is one of the most attractive industries within the banking sector and we believe this is a call for action for the industry to solve the structural challenges that we have observed. More than ever, in times of uncertainty, clients are looking for help and guidance from their trusted advisors. This means that the stage is set for companies to turbocharge their transformation and provide best-in-class service to their clients. We welcome Wealth Managers of all sizes to get in touch with us to discuss their technology goals and how BRITech can facilitate growth in 2021 and beyond.

About the author:

Mikhail Nassimov

Mikhail is a seasoned executive with significant experience across investment and private banking businesses. Formerly, Mikhail held a position of Executive Director within JP Morgan’s Private Banking business in London where he headed teams of business and risk managers across EMEA region and in the prior year’s worked within Morgan Stanley’s investment banking and equity capital markets teams. Mikhail studied at Brunel University where he graduated with a First Class Honours degree in Economics and Business Finance. Mikhail is an advocate and champion for innovation and frequently advises start-ups in the Wealth Management sector. Currently Mikhail is responsible for driving BRITech client growth in the UK. He resides in London with his wife and children.

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