A vintage year for private banking

While the rest of the financial services industry may be eating sour grapes, the private banking business is in a winning position, based on the 2007 results from more than 200 private banks worldwide. Above all, the results from last year point to an opportunity for the industry to capitalise on this moment in the limelight to make 2008 a vintage private banking year. Private banks with reach into the emerging markets undoubtedly have an advantage in the current market conditions. There is strong evidence that business development in these markets fuelled much of the success of 2007. Scorpio Partnership’s 2008 Private Banking KPI Benchmark, published in June, shows that growth in assets under management in the industry as a whole held steady at 12.8 per cent, in base currency terms, versus 13.1 per cent at year-end 2006. In US-dollar terms, the growth in assets under management (19.4 per cent) significantly outstripped growth in the MSCI World Index, which excludes emerging markets (Figure 1). Withprivate client portfolio performance indices on a downward trend, the importance of emerging market strategies comes to the fore. This is also a time when private banks are evidently capitalising on the talent losses in other sectors and hiring freezes that are opening up the graduate market. In 2007 private banks reported double-digit growth—15 per cent—in the number of client facing staff and 17 per cent growth in new client relationships. However, there is also growing evidence that recruitment strategies alone are not enough to support a growth strategy. Indeed, it is becoming apparent that there is no correlation between headcount growth and AUM growth (Figure 2). New recruits are only successful if there is organisational change supporting growth. In this market environment, that means strong brand management and proactive client communications to counteract low levels of client confidence in the financial services industry. The Scorpio Partnership 2008 Private Banking KPI Benchmark explains why private bankers are popping the corks. The study includes data on assets under management, staff numbers, income and expenses, margins and industry-leading key performance indicators segmented according to Scorpio Partnership’s proprietary business model methodology. Cath Tillotson is a ­partner at wealth management ­strategy thinktank Scorpio Partnership

Cath Tillotson