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
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