Just over a year ago, HNWIs ranked “relation ship with a retail bank” as the least important factor when choosing a private bank, but research by the Australian Private Banking Council (APBC) shows this is now front of mind.
Alan Shields, research director of Retail Financial Intelligence, which carried out the survey of 100 HNWIs, says the wealthy are focusing more attention on the stability and security of the institution.
“People’s perceptions of brand and stability have been shaken, and that’s been no different, as far as we can tell, amongst high net worth individu als,” he says.
“Things like the link that a private bank has to a retail bank have become more important, because retail banks are seen as more stable than investment banks perhaps, and exclusivity has diminished substantially in people’s minds.”
These findings would indicate that the likes of Commonwealth Private Bank, Westpac Private Bank, NAB Private Wealth, St George Private Cli ents and ANZ Private Bank are all well placed to pick up business from increasingly wary investors.
These domestic players are at a further advan tage, given Australian brands have faired better than international brands over the past 12 months.
“At the moment the domestic brands are well perceived relatively speaking, so they’re at a bit of an advantage, whereas in the past wealthy individuals probably looked to them for their banking needs and then when they thought of investments they thought of Macquarie or UBS,” Shields says.
“People’s belief in the domestic brands as investment institutions is probably a lot higher than it has been for years.”
Indeed, Angela Mentis, general manager of NAB Private Wealth, says the private bank has seen “significant inflows” in the last six months from new clients that have left international private banks.
“There are a lot of very wealthy Australians who are coming home from offshore and tradition ally, if they worked for Citigroup, UBS or HSBC, they would have come back and put their banking with those institutions,” she says.
“But what we’re seeing is they’re coming back and enquiring about the domestic private banking offer. Three years ago, we would have been very much focused on the transactional affairs of our clients, and that has held us in good stead… but if I look at the last six months, we’ve doubled in our penetration on wealth.”
The APBC is a research and networking-focused body which aims to lift the level of service and knowledge in the private banking sector. The council carries out in-depth surveys of 100 high net worth individuals every six months.
The results, from the council’s September 2008 survey, revealed some interesting differences in HNWIs’ attitudes compared to September 2007.
While professional reputation is still the number one factor for individuals when choosing a private bank, the degree to which it’s important has increased. In addition, “prestige” or “exclusivity” has dropped further down the list.
“Relationship with the retail bank was the least important thing a year ago… whereas today it’s the fifth most important thing in choosing a private banking brand,” Shields says.
“Prestige or image of the private bank has diminished in importance dramatically. It comes down to what’s important; the most important things are that the institution knows what it’s do ing, that it’s stable, that it will be here tomorrow.”
According to the survey, the size of the institu tion in the domestic market, and its physical pres ence, has also increased in importance.
“If you put yourself in the shoes of somebody who wants to know that their institution will be there tomorrow, the fact that if you walk down the street and see branches and branding of that institution counts for a lot,” Shields says.
“Merrill Lynch, for example, has a presence in Australia, but it’s almost an ethereal presence. There’s not much you can physically touch and I think that’s become more important.”
The rich want experience in the Australian market, Shields says, indicating that those banks that are able to market their knowledge effectively will prosper.
“If I was a private bank, I’d be underlining the fact that I’d been here for ‘x’ number of years, that I know the Australian market,” he says.
“Now is not a great time for people to be look ing overseas for investments, so I’d be underlining the fact that I’m well versed in Australian invest ments. Knowledge and experience were two big things from the high net worth perspective and beyond that, attention to the service you’re provid ing and attention to the individual needs of the people that you’re serving. You can make that count for the clients that you’ve got but you have to try to get that [message] across to the clients that you want to acquire.”