It is difficult to sound surprised when private bankers share with you their latest insight into client demands. Apparently, what high net-worth clients want more than anything else is... good service. The fact that private bankers regard this as revolutionary is much more of a surprise, and raises some concerns.
Private bankers claim that this new demand for service is a result of greater client satisfaction with performance and, therefore, less of an ever-present concern with it on their part. This has taken some of the pressure off those banks that have spent most of the past few years explaining to clients why they have lost money. Interestingly though, the banks concede that performance demands have dissipated largely because of an upturn in equities and rising interest rates (and therefore cash returns), rather than as a result of in-house fund selection or management skills.
The fact that private banks are jumping on this new service-focused bandwagon as if it had never existed before is worrying. As the results of Euromoneys private banking survey published in this issue show, it is encouraging private banks to take on more staff, decrease the number of clients per relationship manager, and provide low-fee, high-quality services to stave off competition.
But private banks would do well to keep their eye on the ball when it comes to performance. It is far too soon to breathe a sigh of relief, and the past few years have demonstrated the importance of not becoming complacent. Piling money into low-margin offerings will serve no good purpose if markets turn. No matter how much high net-worth investors insist that service is crucial, it should be borne in mind that the biggest reason for changing a private bank is still poor investment performance.