Benelux bankers gathering in Antwerp were keen to address the challenges facing their industry’s long-term lustre.
There have been previous eras where senior private bankers have enjoyed a swashbuckling certainty around client loyalty, asset growth and digital prowess. Sadly, we are no longer living through those heady days.
During a recent lunch discussion with leading Belgian and Dutch players in the historic port city of Antwerp — famous for its diamond trade and Flemish Renaissance architecture — the confidence essential to the mindset of the career wealth manager was still apparent, if slightly dented.
At the event, hosted by Leaders in Finance, representatives of both large banks and mid-size wealth managers were optimistic about the steady rise of discretionary wealth management across European markets. But they were also aware of key challenges and talked urgently about practical pathways towards meeting them.
Most importantly, the rise of AI in the digital revolution was close to their hearts. There was an understanding that this could not be facilitated by traditional private bankers, that innovation teams must be engineers rather than financiers first, introducing a culture foreign to many wealth management groups. Several talked about the looming challenge from outside the industry, including the VC-funded start-ups of Silicon Valley and the big techs of China’s Pearl River Delta, cited by DBS bosses in Singapore to accompany their famous “innovate or die” mantra.
The fear among Benelux bankers was whether service providers — including tech firms and custody players — proficient in data gathering and provision, could eventually challenge the traditional overseers of wealth.
Poor geopolitical predictions
The former infallibility of the chosen few appeared to be a thing of the past, with a tacit admission that private banks had been very poor in predicting geopolitical challenges and risks in the markets they monitored, particularly assessing Russia’s invasion of Ukraine and its long-term implications for the global economy.
A nervousness was certainly building following Israel’s attacks on Iranian targets, although participants did point to a better understanding of China and its internal dynamics. An increasing willingness to look at sociological, historical patterns and theories of international relations was also noted in an industry not normally known for leveraging ideas from other spheres to enhance its own space.
This incremental appreciation of history meant there was an understanding that the liquidity dynamics which led to the partial demise of the hedge funds phenomenon in 2008 — when most private banks were recommending huge positions in alternatives to ultra-high net worth investors — might also extend to current uber-enthusiasm around private assets.
That said, several voices claimed there was too much caution around unlisted investments and that investors should be given a chance to profit from excellent opportunities and that the banks should not hesitate to publicise these more firmly to a sometimes-sceptical client base.
Private banks understand that they must be “coaches” or “sparring partners” to their younger clients rather than product pushers but have yet to work out the correct business model to instigate this
Lingering for longer
And here lurks the most complex challenge of all, agreed our wealth firms. Private banking players are desperate to hold onto the loyalty of wealthy family investors, especially with the $100tn generational handover between different cohorts looming.
Most agreed they need to build a stronger bond — using data as well as personal relationships to achieve this — yet were reluctant to relinquish the power of their meticulously constructed internal product factories, of which many private clients are suspicious.
They understand that they must be “coaches” or “sparring partners” to their younger clients rather than product pushers but have yet to work out the correct business model to instigate this. As an investment manager for a major Belgian family later told me: “Relationship managers with US banks typically stay for three years, while most family clients have a five-year time horizon.” Swiss private banking partners may linger for longer, “but they don’t have the right tool boxes”.
In other words, both dominant wealth management business models are currently severely challenged.
There is an understanding in Antwerp’s diamond trade — dating back to the 16th century — that it must negotiate a world of sanctions against Russian clients and competition from cheaper cost hubs in India and Dubai if it is to flourish on the international stage.
Similarly, the Benelux private banking industry must make similar adjustments to its geopolitical prediction models and data analysis — but particularly its relationship management — if its hidden gems are still to be appreciated by new generations of wealthy traders and investors.
Yuri Bender is editor in chief of PWM
