Challenges for private banking in 2023: the return to fundamentals

At a recent event on Private Banking and Wealth Management organized by Unidad Editorial, several executives from leading private banking entities in Spain -Andbank, Singular Bank, Banco Mediolanum and Banca March- debated the challenges and expectations for the business in 2023. 

It is an uncertain year that is full of complications, according to the speakers at the event. This is especially so because 2022 has seen unusual phenomena in the economy and markets, such as double-digit declines in fixed income, interest rate hikes of a sort not seen for decades and significant rises in inflation. 

In addition, other events in 2022 have cast a shadow over the outlook for investors, creating a high degree of uncertainty. These include events such as the war in Ukraine, rising commodity prices driven by the cut in gas and oil supplies from Russia, tensions between China and Taiwan, or the slowdown in the Chinese economy due to the zero Covid policy. 


A difficult 2022 will give way to a 2023 full of challenges for private banking, according to the managers of specialized entities. 

Challenges for growth, because actors will have to choose which model -organic or inorganic- will be able to grow their business efficiently; for the economy, because there will be a need to know the real impact of the expected recession; for the markets, because after a year with losses in most assets that reached double digits in some fixed income segments, upside potential is seen in both equities and fixed income, albeit with caution; or for clients’ peace of mind, after the threats caused by harsher regulatory and tax conditions. 

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And lastly, there’s the challenge of how to improve a badly damaged reputation, both in the banking sector and in private banking: this means that in 2023 it will still be difficult to win clients’ trust and attract new business. 

Putting the customer at the center

The speakers agreed that the ideal solution to overcome these challenges is to go back to the “basics” of the business. In other words, to focus on the fundamentals of private banking, a business whose focus is on quality of service and putting the customer at the center.  To help them manage their wealth in any kind of scenario, and with the use of a key tool, the specialized advice provided by their banker, and supported by specialists in all aspects of their wealth. 

All so that the client has the most appropriate asset allocation at all times, in tune with economic and market conditions.  A private banker will always seek optimal asset allocation to meet the individual objectives defined for each client’s assets.  

So only if the client fully trusts their relationship manager will the private banking service provider be able to know what the client’s real intentions are for their money. This premise, as one speaker emphasized, is the key to being able to develop long-term, bespoke wealth planning.

This is key to achieving client loyalty with their provider over time in a way that generates satisfaction for their wealth, financial and non-financial needs, and income in a stable and lasting manner over time.  

In summary, for the speakers at this private banking event, all signs point to an even more decisive return to the classic business model in private banking in 2023, based on nurturing the personal relationship between the banker and client, the glue that binds them together, namely trust.

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This model takes the shape of value-added services for high net worth clients, such as active management of portfolios, or comprehensive advisory for all aspects of their assets. The concept of comprehensive wealth management, in which the banker plays the leading role as the sole interlocutor with the client, will regain its full value by 2023, according to the executives participating in the event. 

The banker is going back what he has always been. That is, a highly qualified personal manager, surrounded by a whole range of tools and support specialists: in advanced technology, in solutions to any client’s financial needs (taxation, generational planning, real estate, private equity, etc.) in other services necessary for wealth management.

And, as some speakers pointed out, a banker will need to add sustainability to their advisory offering. Because “clients have not yet accepted it as an essential part of their investment activity. A client thinks it’s great to benefit the environment, corporate governance and society, but they don’t yet know what purposeful investing is.” 

Strategies for growing in 2023

Speakers at the event agreed that organic growth will be key in this business next year. This is despite the fact that 2022 was a year with abundant corporate activity in response to falling margins, harsher regulatory and tax conditions and instability in the markets, which have generally reduced profits for specialized entities. 

However, the sheer size of the industry – more than 650 billion euros under management in the different models available, according to Funds People – remains a compelling argument for many competitors to vie for a piece of the huge pie in this business. 

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The speakers, all of them belonging to banks dedicated exclusively to private banking, advocated for this provider format: being a bank – a credit institution – is the best for the client, in their opinion, better than an investment services company, an insurance company, or others. 

 Because “it is easier to gain the client’s trust when all their positions and operations are carried out from a single entity, and you can provide them with products or services for their transaction or financing needs, as well as for the management, advice and planning of their assets.” 

Therefore, the key to continued growth in a large sector will be to attract talented bankers who can attract clients. Several speakers agreed that it is necessary to create a “comfortable” environment for the banker, in which he feels he is the key player in the relationship, where remuneration would be based only on their achievements and expertise in private banking, and there is an alignment of interests between the banker, the provider and the client.

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