Commercial banks’ wealth management businesses recoup losses through diversified income streams
Better earnings masks deeper issues of customer disillusionment with products and services, lower fee income, high expense ratios and regulatory restrictions. August 27, 2012 | ResearchThe private banking and wealth management business of commercial banks continue to have a hard time winning back customer confidence. On hindsight, the financial crisis revealed that business practices where dubious and built around the fiefdoms of powerful relationship managers (RMs) who had little interest in sharing client information with the financial institutions they worked for or cared for the long term sustainability of the institution. Needs-based advisory services were often bypassed and traded for strategic products. The trusted advisor and full service relationship model was an aspiration rather than a reality. The system was, if not broken, deeply flawed. Since, regulators intervened, taking a hard-nosed, rules-based approach and driving up the cost of compliance, while consumers where doing less rather than more business with banks. Under pressure to generate fee income, operational cost, which was never really addressed in private banking, became toxic, with cost-to-income ratios escalating above 80%. Expense management, a pre-occupation in mass retail business, became a key torch point in private banking. Disillusionment with investment products and returns has made millionaire families taking greater control of their wealth, since they lost a lot of trust in their private banks and private bankers during the 2008 financial crisis. The private banking arms of commercial banks sought to address this with better segmentation by establishing up to four different top line segments in wealth management—centralisation, technology, discipline protocols and centralisation of command. A case at hand is Taiwan. Over the last few years, Taiwanese banks have been professionalising their segmentation models with enhanced specialist teams and advisory capabilities, improved service levels, better communication on investment risk concepts and the provision of real time market information. Equally, they are re-building their wealth risk ma... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Private Banking, Retail Banking, Wealth ManagementPrivate Banking,retail,Wealth Management, Private Banking,Retail Banking,Wealth Management, Keywords:Fubon Private Bank, Chinatrust Commercial Bank, Taishin Bank, DBS, HSBC, CMB, NAB Fubon Private Bank, Chinatrust Commercial Bank, Taishin Bank, DBS, HSBC, CMB, NAB
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