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What Are the Challenges of Future Private Banking?
Private banking

What Are the Challenges of Future Private Banking?

Joao Martins unveils his perspective on the future challenges that the Private Banking sector will face. From ESG commitment to innovation, explore what tomorrow holds.
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20 DEC, 2023

By Johanna Zidani from RankiaPro Europe

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In the rapidly evolving landscape of private banking, technological advancements, regulatory compliance, the human element, and customized service stand out as pivotal pillars. As we navigate the challenges of a post-pandemic era, the imperative lies in solidifying the trust relationship with clients. In this dynamic environment, staying at the forefront of innovation, adhering to regulatory frameworks, understanding the human dimension, and tailoring services to individual needs will be instrumental for private banking entities seeking sustained success and client satisfaction.

Joao Martins, Team Leader Private Banking at Abanca Portugal

In the last years, the private banking industry has undergone significant changes, due to technological advancements and shifting client expectations. The biggest challenge has been how to use digital technologies to keep up with a good level of service to clients and to increase their satisfaction. Private banks are mainly investing in digital platforms and tools to improve efficiency, enhance their services, increase the relationship with their clients, and achieve excellence regarding level of service.

Another key factor has been the growing demand for sustainable and socially responsible investment options. Clients are giving more attention to this theme. Private banks are responding by developing tailormade solutions (products and services) in order to fulfill clients demand.

Global regulatory developments over ESG are evolving, in order to create a minimum level playing field on several aspects such as standardize disclosures, marketing material, and investment processes. All these changes put pressure over banks’ core processes. However, ESG oriented products are gaining market share. Currently, ESG mutual funds are already attracting more than 50 percent of new product inflows on mutual funds and are expected to account for more than 30 percent of mutual fund AuM in 2023.

In terms of regulatory developments, the private banking industry has been facing increased regulation and scrutiny in recent years. This has led to a greater emphasis on risk management and compliance, forcing the private banks to invest heavily in these areas to ensure they are meeting regulatory requirements and minimize business risk.

The private banking industry is expected to continue to adapt to this fast moving path and will attain the new client needs and regulatory requirements in the coming years. With the increasing use of digital technologies, a growing demand for sustainable investment options, and continued regulatory scrutiny, private banks will need to remain innovative and anticipate the new challenges to remain competitive in this marketplace.

Private banks have the responsibility to face today’s evolving and volatile environment with the strongest possible proposition, to attract and retain clients looking for better wealth solutions. Investment offerings should be re-evaluated taking into account scenarios that include higher inflation and interest rates, and the possibility of a local or global recession. 

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