Investire | February 2024
Wealth management is about to face a new renaissance for at least four reasons.
The first is that all over the globe we are inexorably witnessing a concentration of wealth, the wealthier individuals are increasing and the rich are becoming richer.
In Italy, where wealth is less concentrated than in other European countries, 5% of the population holds 46% of total wealth.
The second reason is linked to a cyclical factor, with the drop-in rates, asset management will resume its pace, temporarily slowed down by the BTP phenomenon.
In an interview given to Bloomberg TV by Carlo Messina on the occasion of the World Economic Forum in Davos, the CEO of Intesa Sanpaolo declared that “one hundred billion euros of our clients’ assets can be converted into asset management products. This is a huge amount that will guarantee commissions.”
Essentially, all banks that are able to convert liquidity into managed savings and asset management will be able to benefit from an increase in profitability once interest rates begin to fall, making government bonds less attractive.
The third reason is that the management of a few customers with large portfolios is theoretically less complex than the management of many customers with small financial amounts: in the first case skills and credibility are needed, in the second greater investments in the industrialization of processes.
The private banking and wealth management sector also requires ever greater investments in the digitalisation of processes, but the banker or wealth manager whose role is central remains the one who makes the difference.
There is then a fourth reason why wealth management is a sector that all banks are looking at with growing interest, and that is customer loyalty and the consequent stability of the portfolio.
Private banks are better able than others to satisfy their customers and this allows for greater loyalty and stability of revenues compared to other more volatile customer segments.
Certainly, the ability to provide a good wealth management service is not for everyone and requires experience and some essential ingredients.
The first ingredient for the success of a wealth management service is the ability to count on the best professionals, enhancing and offering growth prospects to those already in the workforce and attracting the best talent.
Private banks have invested and are investing huge resources in growth, research and the ability to attract the best talent.
In the last five years, investments in private banker training have more than doubled, the opportunities for meeting with management, which are fundamental for strengthening motivation and esprit de corps, have increased tenfold, the growth in salaries in this segment is on average twice higher than that of the retail banking.
The second fundamental ingredient is that of innovation: the private banker or wealth management is the pivot of private banking, but cannot be successful if it does not have a bank behind it that significantly invests in processes, digital innovation and multi-channel.
While it is certainly incontrovertible that the relationship between private clients and private bankers is based on a personal relationship, it is equally true that to make this relationship as efficient as possible, it is more necessary than ever to reduce the inefficiencies linked to obsolete procedures that take away time and quality from the relation.
Digital innovation in private banking has struggled to take off in the past, when it was less simple and usable by the senior segments most represented in wealth management.
Everything has changed with the spread and greater use of touch screen technologies and smart phones even by the wealthiest individuals – typically less young.
And this also explains the success of digital native financial advisor networks in private banking and wealth management.
The third fundamental ingredient for implementing a private banking service is the ability to build teams of professionals with multidisciplinary and, ideally, multigenerational skills.
The need to master multiple disciplines that support the ability to manage financial assets and that include tax, inheritance, real estate and corporate issues is related to the articulation and complexity of the assets of the most well-equipped clients.
The fact that in addition to specific skills, the presence of professionals belonging to multiple generations is also useful in the team responds to the mirrored need to dialogue with different generations of customers: attitudes and languages are almost always correlated to the different generational cohorts.
The fourth fundamental ingredient to be able to strengthen one’s position with the most well-equipped customers, converting liquidity into asset management, is the credibility and image of the bank.
This factor is often taken for granted, but equally often the investments to strengthen the brand value of a bank that wishes to target the wealthiest customers are not proportional to the objectives that the bank normally sets itself.
There are important exceptions represented by banks that invest in communication on traditional and digital media, which organize real road-shows in the area aimed at meeting hundreds of current and potential customers.
There are also banks that decide to change their name and therefore identity to better represent and intercept the needs of their customers and to acquire new ones.
One case above all is that of Mediobanca which gave its name to the former CheBanca! – which became Mediobanca Premier – precisely to enhance the DNA of a group and a brand synonymous with wealth management.
The re-branding operation follows a precise “One brand one culture” strategy which aims to strengthen the group’s wealth management also in the private segment as well as in the historically dominated HNWI segment.
The last factor necessary to compete and become increasingly attractive in the wealth management segment is linked to the size of the bank or group to which it belongs.
The reduction in margins and the increase in costs resulting from increasingly stringent regulations require economies of scale and therefore larger dimensions than in the past.
Size will matter more and more in private banking, there will be no alternative to internal growth, for already large banks, or to aggregation with other banks, for medium-sized banks.
More than in the past, size is an essential requirement for sustainable growth and therefore for the quality of wealth management.
Nicola Ronchetti