In 2016, private banks will be more disciplined in terms of targeting and servicing client and market segments. They will also be more open to collaborate with other financial services companies to access and leverage expertise for their clients, says Kong Eng Huat, Chief Executive Officer for Singapore Branch and Southeast Asia, EFG Bank
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The world economy is expected to continue to grow slowly with heightened geo political risks. Interest rates although expected to be increased in the USA will still be low and divergent across the world. In this environment, clients will still want to enhance yields but on a conservative and defensive basis.
Clients will not be keen to take aggressive speculative positions. Hence private banks will accelerate the move away from transactions and product sales to asset allocation and long term investments. Managed solutions including discretionary and advisory portfolios will be the focus. In line with the managed solutions approach, banks will strengthen their investment leadership to ensure that they are providing clients with the right asset allocation models and advise.
Private banks will have to renew their efforts to refresh clients on the relevance of their Trust structures in the environment of common reporting standards and automatic exchange of information (AEOI). The banks will also have to help clients understand the implications of AEOI on their existing wealth structures and their wealth transfer strategies to the next generation.
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By GlobalDataIn line with the implementation of the AEOI, countries are offering tax amnesties to their citizens. This means that there may be more repatriation of funds back to the home countries. Offshore banking is still the core business for most private banks and they will have to find ways to retain the offshore funds and also consider going onshore in markets with huge client base. Offshore funds that are kept offshore on deposits with low yields and not part of a global investment and business strategy are more likely to be brought back home.
Private banks will focus relentlessly on profits. Banks who have difficulty growing revenues will continue to implement cost containment exercises. Private banking is a service business and the bulk of the costs is bankers compensation. Hence bankers productivity and performance management will be key to ensure profitability. Although banks will continue to recruit senior bankers, they will also exit non performing bankers more aggressively resulting in marginal growth of private bankers.
Finally, private banks will be more disciplined in terms of targeting and servicing client and market segments. They will also be more open to collaborate with other financial services companies to access and leverage expertise for their clients. For example, pure play private banks like EFG Bank will retain an open architecture platform to source best in class products and work with or refer business to other financial services company where it make sense.
The year 2016 will be another challenging year but there are opportunities to grow the business. Like the fire monkey which is the chinese zodiac sign for the lunar new year in 2016, we all need to be strong and determined and be excellent in setting direction and meeting them.
