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July 14, 2021updated 11 Jan 2022 3:14pm

Predicting the investment behaviour of younger generations

The private banking market is constantly evolving – every year is a little different from the year before. The changes have been small so far, but with all the global innovations from fintech, artificial intelligence and robotics, changes are now forecast to come much more rapidly.

For now, the calm before the apparent storm prevails in Switzerland, where private banking is still developing steadily and solidly. In actual fact, client behaviour has remained reasonably constant over the decades. Even during the Covid-19 crisis, wealthy private clients have remained loyal to Switzerland.

Traditional Swiss private banks are still highly regarded thanks to their “quiet hand” strategy through long-term concepts, which allows them to differentiate themselves thanks to discretionary mandates. Certain fees have broken away from the trend towards narrowing margins and have instead risen where clients recognise clear added value in the advisory service offered.

The more complex a client’s asset situation, the more important the long-term and human factor becomes. Private banking boutiques therefore allocate more advisors for fewer clients than usual, so that they have enough time for each individual’s needs. Such added value can be provided, for example, through an advisory model that is similarly aligned with the entrepreneurial challenges that the client experiences throughout their lifetime. Of course, added value also lies in achieving goals, especially when the advisor and client enjoy a close working relationship.

Time vs. money

In the past, clients rarely had access to up-to-date market news. Today, they are well-informed through the internet and various apps. However, keeping track of all the important information in real time is time-consuming, and entrepreneurs usually have other priorities. Therefore, another added value in advisory services lies in helping clients to select relevant investment options and information.

Hybrid offerings providing useful digital tools paired with competent personal advice are highly sought after. Clients with active professional lives usually require support in implementing or managing investments, and now bring a more informed view to discussions with their bankers. Here, digitalisation improves the quality of advice and services for the client.

Management vs. solo operations

Today, it is common for clients to make use of multiple services to manage their finances: a dedicated private banker; an app for their credit and debit cards; a wallet to hold bitcoin; e-banking for payments; push notifications on their smartphone for the latest analyst ratings; robo-advice; a trading app for their active trading. Then, there are group chats via messenger apps to exchange information with friends.

One thing does not necessarily contradict the other within this ecosystem. Often, clients have a Discretionary Portfolio Management (DPM) contract with their bank, but also want a sub-account to make their own transactions and investments and follow their personal ideas: clients are usually willing to take bigger risks with a smaller amount. These clients’ needs are then primarily transaction-oriented according to the best-execution-only principle. On the other hand, clients today also invest in less liquid instruments that do not necessarily have to be part of the DPM. These can be investments in art notes, certificates, long-term real estate funds or in impact investing.

Switzerland vs. elsewhere

The trend for foreign clients holding part of their assets in Switzerland is unbroken, largely due to the diversification it brings. The Swiss financial centre continues to be extremely well-positioned, benefitting from highly qualified personnel with unparalleled expertise and experience in asset management. Added to this are its excellent reputation, high service quality and, most recently, Swiss digital offerings: tradition paired with innovation. In this sense, Switzerland is perfectly positioned to bridge the gap between traditional Swiss private banking clients and the next generation, who often want to implement their own ideas.

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