Overview of the industry

The industry is moving to a model of investment management for private wealth and away from just collecting funds.

Since the financial crisis began in 2008, stock markets have enjoyed a considerable bull run, GDP growth is again robust in many markets and assets under management are on the upswing around the globe. But these gains have not translated into the amount of top- and bottom-line growth that wealth managers would expect based on past recoveries.

According to a new study of global wealth managers by Strategy&, the prospects for wealth management have improved significantly over the past 12 months, but new global regulations (including the battle against undeclared offshore assets), changing client behavior, the rapid advance of digitization, and a fluid competitive landscape have permanently altered the rules of the game and raised the cost of doing business. Wealth managers must learn the new rules quickly and adapt their playbook accordingly if they are to capitalise on the continued economic recovery.

There is a four-part solution: apply a “capabilities lens” to look for markets where you can compete effectively, rethink your firm’s value proposition with tiered offerings aimed at transparency and client suitability, go digital with more effective use of information and communication tools, and use a Fit for Growth* approach to adapt your cost structure to the revenue realities.

Wealth managers need to take their firm’s strengths into account when deciding where to compete — onshore and/ or offshore. They are understandably drawn to markets that promise superior underlying growth, but managers have learned the hard way that the expense and patience required to compete in some of these markets make profits elusive. Going forward, wealth managers need to identify the markets where they can most effectively compete and maintain long- term differentiation. Even the biggest wealth managers can no longer be all things to all people.

Wealth managers and private bankers need to reconsider their business models in light of regulatory requirements regarding transparency and suitability, as well as changing client behavior, preferences, and expectations.

They need to develop and bundle products and services in tiered service offerings that comply with evolving regulations and appeal to different client sets, and they need to offer pricing schemes that are variable and transparent to clients. Furthermore, they need to enhance the investment management and advisory process to deliver greater value to clients.

Wealth managers must commit to a “digital agenda” to enhance the client experience to know their clients better, market products and services more effectively, lower costs in the back office, and improve compliance efforts. Adopt a Fit for Growth approach. Since cost pressures will persist, wealth managers must review their operating model with a systematic effort to separate “good” expenses from “bad” (nonstrategic) expenses. In this way, they can adapt their cost structure to the revenue realities.

Recruitment trends in the industry

Since the end of 2008, bankers were looking for a second wind and we have seen a strong trend where bankers wanted to make a move from their bank’s business to Private Banking Business. The continuing growth of wealth in emerging countries, especially in Asia and America, is creating opportunities for investment bankers.

After September 2008, we have noticed a shift in the behavior of Private Banking’s clients. Clients are more actively involved in their wealth management and keep a closer eye on their fortune. In addition, they are no longer satisfied with a traditional service. Clients are looking for a deeper expertise in regards to the complexity of the products. Investment banking professionals have acquired strong technical skills which are a unique added value to a more knowledgeable client.

Investment bankers found their reconversion in the private banking industry and while worldwide wealth is growing financial institution adapted their model to respond to their client’s demands. Private banks shifted their model in terms of talent management with more diversification and expertise within their teams. Finally, private bankers with strong technical knowledge fall into a smart commercial strategy to sell products which are more and more sophisticated.

Mapping – Functional practice vs Industries