Private banking : an international and local perspective

M.Comm.Since the creation of private banking in the 16th century, it has evolved from a discreet service for the wealthy few to a broader base of services provided for high net worth individuals. Private banking today offers a complex, highly diverse array of personalised wealth preservation, -creation and —management services for a growing population of sophisticated and affluent individuals. Such people have multiple needs that range from banking services to investment and estate planning. The high net worth market is one of the most promising areas for banks to generate revenues and fee income. It is therefore not surprising that private banking is one of the highest growth services in the banking industry today. Private banking is not a business for everyone, however. Not all providers have the client base, the service background and product range, the market location, the management culture or the shareholder commitment to succeed. A myriad of service providers are entering the South African market, ranging from trust companies, investment banks, retail banks, stock brokers, treasury operations and foreign players. All these players brand themselves as deliverers of private banking (in the case of licensed banks) or private client (in the case of non-banks) services. A result of the diversity of institutions claiming to be private banks or at the very least deliverers of private client services, is that not only do the products available to clients differ substantially from institution to institution, but also the service delivery mechanism. True private banking is about relationships and the management of those relationships. Almost any service can be delivered but there is always a cost attached to the delivery thereof. The secret to success in the South African private banking market is the balancing of the costs and the level of service delivery to the appropriate target market. At present there are no standard entry criteria and service delivery model to guide institutions that wish to enter the private banking arena. The existing private banks are so diverse in nature that an independent study was necessary to find the common denominators that underpin a successful private bank in South Africa. Private banking in Europe, although not restricted to Switzerland and the United Kingdom, is largely concentrated in these two countries. Private bankers, particularly in Europe, have traditionally focused on "old wealth" or "passive wealth", which is concerned primarily with secrecy, capital preservation, personal service and relationship longevity. Old wealth has tended to be relatively price insensitive. There are two main European private banking styles, dubbed the Zurich and London models