Summary
Traditionally, Swiss banks only targeted the high net worth and the mega wealth, however, through the years, these two client segments have proven to be difficult to manage and more importantly, difficult to convert to a profitable relationship.
Analysis
The mega wealth and high net worth has considerable influence and power and therefore, most private banks initiate relationships on a loss leader and unfortunately, this position continues and it is near impossible for them to improve the profitability.
So most private banks have now shifted their attention to the affluent segment, in other words, they have gone down market in order to cultivate a new clientele base that is less sophisticated, less demanding and more profitable.
The affluent segment which is defined as possessing net worth from US$1Million to US$5Million are people who love to be associated with being a private banking client and therefore, are prepared to pay a price for the prestige. I call them the aspiring high net worth.
By comparison, profitability from high net worth and mega clients are usually about 100 bps, while profitability from the affluent segment averages 230bps.
Private banks like Rabobank, ANZ, UBS, Credit Suisse, Pictet & Cie, Deutsche Bank, HSBC and ABN Amro are examples of private banks that have gone down market to cultivate the 'core affluent' segment.
Warmest Regards,
Andrew Dekguang Jhou Chew
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
