3 April 2014

Training Manager's Guide To... Private Banking

Part three in the series: Our private banking expert walks you through the latest trends, important terms, key jobs and skill gaps.

Private banks provide a wide range of services to high net worth individuals which go beyond just wealth management and managing investments. Clients expect private banks to address their entire financial situation, from protecting and growing their assets to providing personalised financial solutions, helping them prepare for retirement and estate planning.

Important to know right now...

Despite slower global economic growth in recent years, the growing number of high net worth individuals means that private banks could find themselves increasingly in demand.

However, it’s not just an influx of new customers banks will have to contend with, it’s their shifting demands. Since the global economic crisis of 2008, clients’ expectations in terms of transparency, simplicity and level of service have altered, requiring banks to make significant changes to their business models and strategies. 

This is coupled with the fact that the private banking industry is facing a raft of new post-crisis regulations including the Foreign Account Tax Compliance Act (Facta), which is a US requirement designed to identify Americans who have accounts with non-American financial organisations, a system which is expected to be replicated by a number of other countries in the near future. The coming years will also see the implementation of the Markets in Financial Instruments Directive (MiFID) part 2 within the European Union, which aims to update regulation of the financial market in the aftermath of the financial crisis.

While adjusting to this challenging new world, private banks must also deal with increased competition in the global market, as new local players emerge, and embrace digitisation as a means attracting a new generation of clients while still maintaining the level of personal service for which they are known.

Need to know key terms...

Behavioural finance combines psychology and financial theory to help explain why investors behave in certain ways and how they make their decisions about their money. Since the global financial crisis, investors’ demands and behaviours have shifted and a growing number of banks are looking to integrate behavioural finance and behavioural frameworks into their asset allocation process.

Entrepreneurial wealth management is becoming an increasingly important part of private banking as competition to find and retain clients heats up. The entrepreneur market provides a solid avenue for growth and banks are increasingly looking at ways to understand such clients’ needs and develop new financial solutions to suit them.

Family offices which serve the needs of ultra high net worth investors are becoming increasingly common. They differ from traditional wealth management offices in that they offer a full range of financial and investment services to families or individuals including budgeting, insurance, and tax services. In some instances they also handle non-financial issues such as schooling and travel arrangements.

Who works in private banking?

Relationship managers – Private banking is all about building a solid relationship with customers and relationship managers (sometimes known as private bankers) will be the main point of contact for clients. They’ll work with customers to develop a personal financial plan and maintain contact with them, managing expectations and up-selling services where possible.

Bank specialists (experts) – Behind every relationship manager is a team of specialists, including portfolio managers, financial analysts, wealth planners, credit officers and a variety of others depending on the range of services a bank offers. They’ll be the ones who are ultimately responsible for deciding on a client’s financial strategy.

Compliance officers – The growth in regulation within the private banking industry means that compliance officers are becoming increasingly vital. Their role primarily involves designing and implementing compliance monitoring programmes and obtaining regulatory approval for products.

Back and middle office specialists – No private bank could function without a team of back and middle office specialists who are dedicated to running the company itself. They also take care of the administrative functions which support the bank’s services including record keeping, regulatory compliance and the clearance and settlement of transactions.

Wealth planners – Also known as financial planners or wealth managers, wealth planners help people plan for their financial futures, including providing retirement and estate planning. A good wealth planner will have an understanding of a range of financial products, including insurance, tax and investments.

Key challenges and common skills gaps

The myriad of changes taking place within the private banking sector at the moment are creating a number of challenges which the industry must take steps to tackle in the coming months and years.

Shifting expectations of clients, who are becoming increasingly financially savvy, means that banks are under greater scrutiny and facing increased pressure to diversify their products and services and offer non-traditional value-added services.

The increasing number of high net worth individuals across the globe brings with it its own challenges too, with a talent bubble looming within many nations if steps aren’t taken to recruit and train up top talent. Recruiting experienced professionals and providing them with specialist private banking training can ensure that clients are dealing with staff who are both experienced and technically proficient.

Now take a look at Euromoney Training's entire range of private banking courses.

Sign up to our blog updates