Private bank market may be a third larger than thought, says FirstRand
FirstRand ’ s private banking division, one of the largest in the country, says the market for people earning more than R1.5m a year may be nearly one-third larger than previously thought.
This implies there may be more opportunities in SA for asset managers and offshore banking and fiduciary specialists to cater to the needs of the wellheeled. Besides FirstRand’s offering, the other dominant competitor is Investec, followed by the rest of the big four banks.
“Based on external research and internal data reference points, we size the top end private banking market, i.e. people earning in excess of R1.5m per annum, at 180,000 to 200,000 people. Many self-employed people are often missed in the market research and market sizing efforts,” said Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank.
FirstRand, the country’s largest financial institution by market capitalisation, operates three private bank offerings through FNB Private Clients, RMB Private Bank and FNB Private Wealth.
In the case of entrepreneurs, a preference to pay out proceeds from business activities in disbursements rather than via a salary could mean tax and payroll data may not adequately reflect the true situation.
NET WORTH
When it comes to classifying private clients according to net asset value, where the threshold for the group’s wealth management division is a net worth of R15m, Enslin said that some clients with large commercial property portfolios may not be adequately captured.
But this is no time to be complacent, as the market is being seriously eroded by the scale of emigration taking place across two categories of clients, Enslin said.
“The first comprise of qualified professionals aged between 30 and 40 that possess soughtafter skills. This is not only a drain on our already limited skills pool but also negatively impacts our tax base.
“The second grouping consists of people, typically older, who have the financial means and resources to establish them and their families in a new country,” Enslin said.
The good news, according to Bridgette Kruger, CEO of FNB Private Clients, is the composition of the private client market is changing.
“The market is starting to balance out from a race and gender perspective. The target market now comprises of more people of colour and females,” according to Kruger, who said the group, through its RMB Private Banking brand, is “aggressively” targeting clients in the R1.1m R1.5m income band.
While the private bank market has been fairly stable over the past few years with few new sources of competition, the industry looks set to be shaken up by the arrival of Adrian Gore’s Discovery Bank, which is shifting gears in its bid to win market share.
While Discovery’s offering does not explicitly target the private bank market, Enslin said it would certainly appeal to clients in the segment.
“Discovery Bank’s offering will have relevance in especially the mid-retail market, extending into the private banking market segment. We see Discovery Bank as a competitor in the retail and private banking market,” Enslin said.
FirstRand will, for a short while longer, administer most Discovery Card account holders before they are all migrated across to Discovery Bank. Gore said at Discovery’s results presentation last week that he expects this process to be completed by the middle of 2020.