What is “Tomorrow’s Leading Private Bank” going to look like? This will be the major theme of PricewaterhouseCoopers forthcoming biennial Global Private Banking/ Wealth Management survey, and Bruce Weatherill, Global Leader of the firm’s Private Banking and Wealth Management practice has given WealthBriefing a unique insight.

What is “Tomorrow’s Leading Private Bank” going to look like? This will be the major theme of PricewaterhouseCoopers forthcoming biennial Global Private Banking/ Wealth Management survey, and Bruce Weatherill, Global Leader of the firm’s Private Banking and Wealth Management practice has given WealthBriefing a unique insight.

The forthcoming survey will consider: what the current position of the private banking market is; what’s going to happen over the next three years; and whether recent expectations on market trends have been fulfilled

Initial indications are that there will be over 200 participants - up from 130 last time - all of whom will receive an in-depth data pack of results. There is also the opportunity to have the data split in a number of other ways which include by organisation type, region, country and size. An executive summary of the results along with further analysis will be made generally available at www.pwc.com/wealth.

Previous surveys and the extensive analysis completed over the last eighteen months have thrown up some very interesting predictions on the direction in which private banking is heading, and Mr Weatherill is keen to divulge them with his customary enthusiasm.

All the statistics indicate that the growth in the wealth management market is sustainable. “Private banking is, of course, an annuity business and M&A multiples reflect this,” he said.

PwC judge the wealth management market to be growing globally at broadly 8 per cent per year but considerably higher in Asia. It sees the share of the high net worth wallet taken by individual private banks increasing, but this is largely at the expense of their competitors.

“Expanding organically is going to be the way forward bearing in mind the tight M&A market at the moment. But this will be very difficult. Hiring individuals from another bank tends to be more difficult, now more so than before.

“Historically 60/70 per cent of clients would follow their CRMs to the new organisation in a 2/3 year period. Now it’s more likely to be 30 per cent. M&A will still therefore be important if wealth managers are to achieve their ambitions – and those of their shareholders,” Mr Weatherill told WealthBriefing.

“Acquiring complete teams on the other hand, tends to be more successful, and this is where the focus will be in the future,” he said.

Their research shows that private banks are surprisingly poor at being advisors, and many organisations acknowledge that they have some way to go to be thought of as trusted advisors by the majority of their customers. According to Mr Weatherill they are much better at distributing and manufacturing products. But in the next three years new businesses will be built around a new model, which will be much more advisory than transactional, he said.

“In the future, we will see a number of small players which are niche product providers, but which are not really private banks. They will not have the capacity to extend the brand to give top-quality advice.” However, they can be successful if they stick to their chosen area of expertise.

"We’ll then have the mid-tier players, both on a national and international level, who will find themselves under increasing pressure. The danger is that they are too big to be small, and too small to be big.”

Then there are the truly global private banks that have reaped the benefit of their brands and have generally been very successful at growing assets under management and profitability. “They tend to think that they have to supply the full range of services and this creates a huge burden, especially on the regulatory and compliance side.”

Banks aspiring to be global players will be squeezed in the middle as the market expands. They will tend to fall behind unless they get the focus right, according to Mr Weatherill.

“The key battles will be fought around service provision. And here they will also need to compete with small local IFAs as well as the national players.”

So what does Mr Weatherill think that “Tomorrows Leading Private Bank” will look like?

“Currently most private banks are still silo centric, seeing their businesses in terms of a series of distinct offerings. In the future private banks must be more client centric, with a fully integrated approach and this must be even more important than short-term profitability.”

“All the services that a private bank provides are currently offered free indirectly elsewhere so having an integrated, relationship based approach is the only way to proceed.”

“Talent management will also be critical. It is astounding that in today’s environment of fierce competition for good relationship managers, around 40 per cent of private banks do not have a client relationship manager retention policy, continuing this strategy will amount to corporate suicide especially in areas such as Singapore, and the BRIC countries where the fight for talent is well and truly on.”

Equally astounding is that, as the complexity of products increases, an average of less than $1,500 is spent each year training CRMs (per CRM), according to PwC research. And most of this is spent on product training rather than looking at interpersonal skills.

“Equally, private banks would do well to recognise that most high net worth individuals don’t always relish meeting a private banker for lunch!”

So how will today's private banker grow into tomorrow’s successful wealth manager? Can you simply “re-spray” an investment banker who wants to make the switch into private banking?

“This is a very difficult transformation to make. Private banking is a long-term business which doesn’t fit well with the transactional bonus-driven focus of investment bankers.”

And although private banking is often seen as an institutional offering to private clients, these clients don’t want to feel that they are the key fee provider for a relationship manager, says Mr Weatherill. He points out that they would rightly be concerned about independence here.

“Systems are particularly important in the transformation to a customer-led model. Some of the newer players, and especially the family offices are not weighed down by the legacy systems that some of the mid-tier players cannot afford to move away from.”

The future certainly holds more price competition amongst private banks, according to Mr Weatherill.

“We see that in the future private banks will need to give up margin in order to gain a greater share of wallet. This will in turn lead to benefits with word of mouth marketing,” he said.

These are clearly exciting and fast moving times for the private banking industry and PwC along with WealthBriefing are looking forward to the findings of the upcoming 2007 Global Survey, especially given the enhanced ability to look in more detail at certain regions and type of organisation.

If your organisation would like to participate in the 2007 survey or for any further information, please do not hesitate to contact Bruce Weatherill directly on 020 7213 5521 or Tim Prince, survey manager on 020 7212 3344 or email timothy.s.prince@uk.pwc.com.