Swiss private banks with expiration date

Supposedly successful financial institutions are saying goodbye to the parade discipline in Swiss private banking. Why?

There has been talk of consolidation in Swiss asset management (private banking) for years. Known actors are already injured. However, with the acquisition of Pâris Bertrand by the renowned Rothschild bank (yesterday), this development has reached a new level of escalation.

A clear trend emerges from the various transactions over the past 18 months: quiet Swiss private banking is coming to an end. Be it Bank am Bellevue, Landolt, GS Bank, Banca Arner or Banque Profil de Gestion and now Pâris Bertrand, these institutions seem to have done everything right.

No chance of survival

They had a strong Swiss clientele, they didn’t put any old paper in front of them, and they were committed to serious asset management as written in the book. However, in this configuration, they clearly no longer had any right to exist. Why?

A look at the recent past shows that the disappearance of such institutions can be traced back to four factors: the end of the era of black money, the stricter laws and regulations in dealing with clients from emerging countries, the complexity of client needs. super rich and lack of added value. in the product range.

Money laundering and black money scandals

The first two points are quickly explained: since the de facto end of Swiss banking secrecy, custody of black money is no longer a business model for local financial institutions; And finding clients from emerging markets turned out to be a complicated undertaking in many cases, leaving more than a few banks having more trouble than additional revenue at the end of the day. The PDVSA money laundering scandal in Venezuela, for example, illustrates well how several private Swiss banks got into trouble.

But doing business with very wealthy private clients, so-called ultra-high net worth individuals (UHNWI), is also a delicate matter; Today less because of the problem of money laundering and more because the needs of the super-rich are now so complex that an ordinary private bank can no longer keep up. Additionally, many UHNWIs advocate for astute consultants who cut commissions and fees so much that super-rich clients no longer pay for many banks.

Capital and credits

Small and medium financial institutions also do not have the balance to support large private clients with loans or complex equity financing; In addition, they often no longer have the most modern information technologies to offer this clientele first-class solutions.

It’s no wonder that business has become increasingly difficult for many private banks in recent years. Now we must add a fourth factor: What added value can a traditional private bank still offer?

Old world against new world

Advice on securities trading, which in the past was one of the most important income pillars, is no longer available because today many clients are well informed, sometimes even have an information advantage over their advisor and can process most of the transactions themselves online. In addition, they pay a fraction of a private bank’s fees with the corresponding digital providers.

There is also the fact that many private banking financial products are not very innovative or do not take into account the latest developments in the financial universe, such as cryptocurrencies, private market investments or club offers. This has to do with the fact that many employees of traditional private banks continue to be arrested in the “old world”, so a noble private bank is not the first work address for young people.

This inevitably leads to the fact that the clientele of many private banks is no longer rejuvenated, but “dies”, especially since the heirs, the so-called next generation, also prefer to consider a more modern institute.

Banking like drinking coffee

In other words, many private banks lack a differentiator to attract new customers. Above all, many houses lack an emotional component with which the customer can identify, as it does in other industries with Apple, Starbucks or On trainers. Without a user experience, customers stay away.

Under these premises, the acquisition of Bank Paris Bertrand by Rothschild symbolizes a whole range of financial institutions that really no longer need it. With increased digitization and the new challenges posed by a world in corona mode, the market will inevitably drive this.