Private banks and wealth managers must adapt to far higher expectations from clients and a new set of regulations. Those that can't simply won't survive, according to a global survey of senior industry executives.
Making their operations more efficient also is essential, according to the PwC survey.
"The status quo is not an option," said Steve Crosby, PwC Global Private Banking and Wealth Management, Americas leader. "You have to be able to change, and your competitors are definitely going to change."
PwC UK's International Survey Unit polled senior executives at 275 private banking and wealth management companies in 67 countries. Surveys were sent out in January and respondents had between 60 and 90 days to respond.
The dominance of existing players is being challenged, and achieving both revenue growth and managing the bottom line is now more challenging, Crosby said. The cost-income ratio shows a company's costs in relation to its income, and a lower ratio is better. Just 28% of respondents have cost-income ratios below 60%, and 72% have cost-income ratios above 60%, PwC found.
"Only a small percentage of people are generating revenue and managing costs in a successful way," Crosby said. "For the rest the jury's out, but consolidation is increasingly out there."
Among respondents, more than 30% believed there would be significant consolidation over the next two years.
"There are roll-up plays, merger and acquisition opportunities and transactions," Crosby said. "Even on the outsourcing and IT [information technology] side, we're seeing lift-outs again that we haven't seen in years."
Asked to rank their three strategic priorities, respondents listed attracting new clients at the top. Second was hiring senior relationship managers to acquire clients and enhancing the caliber of their relationship managers as a whole. Gaining more clients through referrals from professional intermediaries and from other divisions in their own institutions was also considered a priority, PwC said.
To get new clients, wealth managers need to recognize how attitudes have shifted in recent years, Crosby said. "The fundamental DNA of the affluent investor has changed," he said, with clients now much more skeptical about the merits of both financial markets and the wealth management industry. Performance once was king, but service is now the differentiator in dealing with today's more self-directed clients, PwC said.
Wealth management executives were apprehensive about the challenges to business growth. They were most concerned about new regulations and the costs of implementing them.
Their second-greatest concern was attracting and retaining high-quality client relationship managers. They're also concerned about the increased cost of hiring and retaining top talent, growing competition and increased focus on clients' demands for continued service and reporting requirements.
