Remote channels and algorithms provide cost savings, but only to a certain extent. If personal relationships are compromised so too are private banks’ bottom lines, says GlobalData
The importance of personal relationships in private banking is well established. Data from GlobalData’s Global Wealth Managers Survey shows that personal relationships are the number one reason why HNW investors choose one competitor over another. Yet costs pressures have led to greater advisor per client ratios and the digitization of advice channels, leaving less room for fostering loyalty.
Only a quarter of the world’s wealth managers rate longstanding advisor-client relationships as the most important retention tool. But this proportion is notably higher in North America, with 37% of wealth managers making the link between loyalty and relationships.
And indeed, HNW investors in North America tend to be notably more loyal than their global peers. GlobalData’s survey shows that Canadian and US investors are significantly less likely to spread their wealth across multiple wealth managers, using 2.4 and 2.3 providers respectively. This compares to an average of 3.7 providers globally.
On a global scale, 28.3% of HNW investors’ children change providers upon inheriting, while only 17.7% in the US and a mere 15.5% of Canadians move their assets. This highlights the greater level of trust North American investors place in their main service providers. Even in times of market turbulence, these investors show greater levels of loyalty. Just 21.9% of industry participants in the US believe that volatile market conditions are having a negative effect on client retention rates. On a global level, this proportion is more than twice as high.
While this can be attributed to a range of factors – such as cultural differences and elaborate client engagement campaigns – personal relationships are ultimately key. Cost pressures will not subside, and wealth managers need to find the right balance between client engagement and reducing costs. Failing to do so means loyalty will suffer, in which case even the most effective cost saving measures will prove ineffective.
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