Two thirds of the 39 banks interviewed in the KMPG Switzerland survey agree that because of these challenges – and the increased complexity of their clients’ wealth management needs – private banks of the future will need to enlarge and increase their assets under management to at least CHFbn Swiss francs (€ 8.1bn, £6.8bn, $11bn).
“To achieve critical mass, many private banks need to grow substantially,” the report stated.
This is the approach that Swiss Bank Julius Baer has adopted with its acquisition of Merrill Lynch’s International Wealth Management business outside the US, which, the bank says, will bring the group’s presence to more than 25 countries and 50 locations.
While larger banks are pursuing expansion, KPMG recommends that smaller, typically private Swiss institutions needed to focus on “networking, partnerships and increased focus on technology to compensate for smaller economies of scale".
Over the next 10 years, most banks therefore are expected to focus increasingly on clients with assets of between CHF1m and CHF5m, the survey revealed.
The KPMG study was carried out jointly by KPMG and the Institute of Management at the University of St Gallen, and was based on a combination of interviews and an online survey. Interviews were also conducted with 10 international asset managers (IAMs). Switzerland’s two largest banks – UBS and Credit Suisse – did not participate, KPMG said.
Non-Swiss markets seen key
New client groups in such growth markets as Singapore and Hong Kong, as well as the BRIC countries and the Middle East, are viewed by the Swiss bankers surveyed as key to their survival.
Still, around 60% of those surveyed said that they were also aiming to increase their number of home-grown clients "in relative terms" by 2022.
International asset managers were cited as as a strategic option for further growth by some two-thirds of those surveyed, who said these IAMs could help them to reach new clients while also achieving greater economies of scale.
These IAMs, though, needed to ensure that the banks they choose are “a suitable fit for the end client, thereby enabling a long-term relationship to be built”, KPMG noted.
Automatic info exchange
While many of those surveyed expressed a desire to see privacy survive in the Swiss private banking sector, banking secrecy is seen as all but dead, with most of those surveyed predicting that the automatic exchange of information would be in effect within three years’ time.
Most also said there needed to be a sharp increase in the number of compliance staff employed in the industry.
Around 85% of those surveyed said they believed that the compliance programmes in their own banks would be fully automated in 2022.
However, while compliance staff may be on the increase, pay appears to be heading in the opposite direction, with 40% of those working in the Swiss banking sector expecting pay to drop or by between 15 and 25%.
Only 15% of respondents expected that employee remuneration in Swiss Banks would be either higher or unchanged in 2022, compared with today’s levels.
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