Wealth Management and Private Banking

Connecting with clients and reinventing the value proposition

Deloitte has conducted a survey to assess how Wealth Managers and Private Banks in Europe and internationally are re-inventing their client value propositions. In this report, we present a perspective on how value can be created for clients through products and services, channel interaction and pricing.

In the past few years, the Wealth Management and Private Banking industries have changed significantly. The financial crisis has increased investors’ sensitivity to risk, and the current low yield environment has made it more challenging to meet investors’ expectations of returns while limiting risk.

In addition, the pressure for global tax transparency from governments around the world, and in Europe in particular, to crack down on tax evasion and tax fraud, has caused a significant shift from offshore to onshore wealth. The frontiers of demand are also being pushed beyond traditional borders, with emerging market players entering developed markets to follow their clients, and developed market players seeking growth outside of their home markets. This has resulted in either volume losses (e.g. wealth repatriation) and/or decreased revenue margins as fiscal arbitrages have become obsolete and competition for onshore assets has increased.

In parallel and also as a result of the financial crisis, regulatory complexity and the cost of compliance have continued to increase, requiring adjustments from companies in terms of compliance and administrative support as well as more structural changes in their business and operating models.

On the client side, a generational shift is under way and clients are now demanding easier and more convenient ways to manage their assets. As wealth management performance decreases across the industry (onshore shift, low yield environment), client expectations are also increasingly expressing themselves in terms of service quality, from the quality of the advice and the responsiveness of the service to the quality of the visible interfaces and wealth reporting. For the industry, this mainly translates into additional costs and investments in technology and digital infrastructure.

Wealth Management and Private Banking

In this context, many wealth managers and private banks have optimised their operating models, aiming to bring their operations and cost basis in line with the new market and regulatory realities. For example, we have seen banks reorganising their back-office and IT operations, establishing more centralised or mutualised service centres or outsourcing certain non-core activities, or their operating and servicing models, establishing EU hubs to service European clients onshore, and non-EU hubs to service the rest of their operations.

While many of these actions have been successful and have brought significant operational improvements and cost reductions, it is our view that the industry has yet to address the challenge of re-defining the complete spectrum of value propositions made to clients, and how value is delivered to clients through a combination of the product and service offering, the use of appropriate channels, client reporting, the relationship manager profile, brand image and pricing. We believe that reinforcing and clarifying the value proposition is and will continue to be critical in the next few years.

We hope that you enjoy reading this report and gain useful insights from it.

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