Rich clients spreading the wealth, PwC finds
In Asia, client loyalty does not come easily for private banking firms, especially after the huge losses investors experienced in the 2008 financial crisis.
PricewaterhouseCoopers discovered this in a recent survey of 43 companies across eight Asian economies. In fact, 75 per cent of Asia's private banking clients have relationships with three or more financial institutions, against 37 per cent globally.
Emily Lam, a partner of PwC's private banking advisory services in Hong Kong, said there were three main reasons for a decline in loyalty: loss of faith in private banking firms after the financial crisis, banks not doing enough to secure clients' loyalty, and the high reliance on trading for revenue growth, instead of portfolio management.
Clients are becoming less devoted to their relationship managers as well. The Hong Kong and Singapore firms surveyed said 25 per cent of relationship managers who left their organisations took more than 60 per cent of client assets under management with them. This is much lower than the amount they brought away several years ago.
Private banking firms also believe a large part of assets under management will be taken away when children inherit their clients' wealth. About 79 per cent of the firms said less than half of these assets would be retained when they were transferred to the next generation.
The control of cost-income ratios while trying to achieve decent revenue growth is another challenge.
The average ratio for private banking firms in Hong Kong and Singapore stood at 97 per cent last year, 23 percentage points higher than firms in Switzerland.
Salary and regulatory costs were the main causes of the higher ratio, Lam said. The opening of more private banking firms in the city increased the competition for talent and the cost of hiring bankers.