Abstract
M.Comm.
Since the creation of private banking in the 16th century, it has evolved from a discreet
service for the wealthy few to a broader base of services provided for high net worth
individuals. Private banking today offers a complex, highly diverse array of personalised
wealth preservation, -creation and —management services for a growing population of
sophisticated and affluent individuals. Such people have multiple needs that range from
banking services to investment and estate planning.
The high net worth market is one of the most promising areas for banks to generate
revenues and fee income. It is therefore not surprising that private banking is one of the
highest growth services in the banking industry today. Private banking is not a business
for everyone, however. Not all providers have the client base, the service background
and product range, the market location, the management culture or the shareholder
commitment to succeed.
A myriad of service providers are entering the South African market, ranging from trust
companies, investment banks, retail banks, stock brokers, treasury operations and foreign
players. All these players brand themselves as deliverers of private banking (in the case
of licensed banks) or private client (in the case of non-banks) services. A result of the
diversity of institutions claiming to be private banks or at the very least deliverers of
private client services, is that not only do the products available to clients differ substantially from institution to institution, but also the service delivery mechanism.
True private banking is about relationships and the management of those relationships.
Almost any service can be delivered but there is always a cost attached to the delivery
thereof. The secret to success in the South African private banking market is the
balancing of the costs and the level of service delivery to the appropriate target market.
At present there are no standard entry criteria and service delivery model to guide
institutions that wish to enter the private banking arena. The existing private banks are so
diverse in nature that an independent study was necessary to find the common
denominators that underpin a successful private bank in South Africa.
Private banking in Europe, although not restricted to Switzerland and the United
Kingdom, is largely concentrated in these two countries. Private bankers, particularly in
Europe, have traditionally focused on "old wealth" or "passive wealth", which is
concerned primarily with secrecy, capital preservation, personal service and relationship
longevity. Old wealth has tended to be relatively price insensitive.
There are two main European private banking styles, dubbed the Zurich and London
models.