pre­vi­ous year. Private bank­ing has been part of In­vestec’s core busi­ness since its in­cep­tion and last year ranked along­side in­vest­ment bank­ing in terms of profit con­tri­bu­tion. Ci­tadel CEO Keith Betty says new funds are flow­ing into the group at around R

Finweek English Edition - - Private banking -

Private banks are more will­ing to open the credit spig­ots

to as­sist in the process of wealth cre­ation.

tol­er­ance for risk and want banks to gear their ex­ist­ing bal­ance sheets to ac­cel­er­ate the wealth cre­ation process.

At the lower end of the mar­ket there’s lit­tle to sep­a­rate the dif­fer­ent banks in terms of ser­vice. At the top end of the mar­ket, bank­ing is all about re­la­tion­ships: a private banker or wealth man­ager acts as a link be­tween the client and the bank’s var­i­ous de­part­ments.

The private banker will have a good over­all knowl­edge of the client’s fi­nan­cial af­fairs but will call on spe­cial­ists else­where in the bank as re­quired, whether for tax, prop­erty fi­nanc­ing, off­shore in­vest­ment, es­tate plan­ning or fidu­ciary ser­vices.

There are no hard and fast in­come thresh­olds in this mar­ket, though those earn­ing in ex­cess of R500 000/year would gen­er­ally qual­ify as “af­flu­ent” clients – the bot­tom rung of the private bank­ing mar­ket. At that level clients fall un­der a re­la­tion­ship man­ager, who may have 200 or 300 other clients to ser­vice – so don’t ex­pect much in the way of per­son­alised ser­vice.

One way to test a bank’s claims of per­son­alised ser­vice is to ask how many clients are ser­viced by a sin­gle private banker. Above 200, you’re un­likely to get the ser­vice you ex­pect. That’s one way the banks at­tempt to dif­fer­en­ti­ate them­selves. The more es­tab­lished banks limit the num­ber of clients per private banker, who serves as a con­duit to spe­cial­ist ex­perts in tax, fi­nan­cial and es­tate plan­ning res­i­dent else­where in the bank.

An­other ques­tion to ask is the rate of staff turnover in the private bank, bear­ing in mind that ev­ery time a new banker is ap­pointed to your ac­count you have to start the fa­mil­iari­sa­tion process all over again.

Af­flu­ent clients have deeper ac­cess to offthe-shelf bank­ing prod­ucts, such as mort­gage, credit card and over­draft fi­nance and can use the re­la­tion­ship man­ager to avoid en­ter­ing crowded bank­ing halls for mun­dane tasks, such as ap­ply­ing for over­draft ex­ten­sions and open­ing new ac­counts.

The af­flu­ent mar­ket is typ­i­cally com­puter lit­er­ate and there­fore likely to con­duct most trans­ac­tions on­line, us­ing a bank’s In­ter­net plat­forms. That suits the banks, as it keeps peo­ple out of the bank­ing halls and re­duces the need for ad­di­tional branches.

Banks are be­com­ing bet­ter at cross-sell­ing other ser­vices to their clients, such as in­sur­ance, as­set man­age­ment and ve­hi­cle fi­nance. Those are highly com­modi­tised prod­ucts and clients are tend­ing to shop around more to get bet­ter deals, par­tic­u­larly in fiercely com­pet­i­tive ar­eas such as mort­gage and credit card fi­nance.

They may hold their cheque ac­count with one bank but have credit cards from two or three oth­ers. Non-bank­ing en­trants, such as Vir­gin (credit cards) and SA Home Loans (mort­gage fi­nance), have opened new fron­tiers in the war for wal­let share, forc­ing the tra­di­tional banks to adopt a more com­pet­i­tive pos­ture to re­tain mar­ket share.

Debt con­sol­i­da­tion is in grow­ing de­mand at this end of the mar­ket. That’s where clients are able to roll their credit cards, over­drafts, mort­gage and other debts – each at­tract­ing dif­fer­ent in­ter­est rates – into a sin­gle, low in­ter­est-pay­ing ac­count.

When your an­nual in­come jumps above R1m/year, lights start flash­ing on the radar screens of the private banks. High-in­come earn­ers are typ­i­cally busi­ness own­ers or topflight pro­fes­sion­als still in the process of build­ing their wealth.

Private banks are more will­ing to open the credit spig­ots to as­sist in the process of wealth cre­ation. Sas­fin Bank has styled it­self as the en­trepreneurs’ bank, ser­vic­ing both the busi­ness and per­sonal needs of its en­tre­pre­neur­ial clients. That gives it a de­gree of flex­i­bil­ity not typ­i­cally avail­able to clients of the Big Four banks.

High net worth clients have ac­cess to an army of pro­fes­sion­als, from at­tor­neys to char­tered ac­coun­tants, tax spe­cial­ists, fi­nan­cial plan­ners, in­vest­ment ad­vis­ers, es­tate and trust ex­perts. Given the com­plex­ity of the tax codes, tax-plan­ning forms a cru­cial as­pect of the over­all ad­vi­sory ser­vice at that level.

New funds are flow-

ing into the group at around R135m/ month. Keith Betty

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