The private banking industry in Germany, similar to other countries around the world, is facing many challenges as to find new strategies to cater to demanding HNWI clients. Following the low GDP levels that have been seen since 2009, the wealth management and private banking industry is experiencing a phase of adaptation to become more cost efficient, whilst still providing a high quality of service to clients.
Private Banks and wealth managers have coped with decreasing revenues, causing them to look to other markets and acquisitions to keep revenues high.
Our research shows a new trend in wealth management strategies in Germany and worldwide, such as a widening target markets to encompass the mass affluent category. However, some wealth managers and private banks have remained consistent with their entry criteria, developing a niche market for their product. Wealth managers are also looking to enhance knowledge of the financial sector, to provide additional complex products that further increase clients revenue. Private Banks and HNWIs need to identify rising opportunities to successfully invest in wealth management and make their wealth management services unique to the rest; this can include providing more complimentary products such as golf days that go the extra mile for the client.
Changes in client needs
Changing demographics, new technology and regulations are challenging traditional business models in Germany. With HNWI numbers expecting to rise by 11% over the next five years, private banks need to invest heavily in staff training and additional resources to provide to these client needs. This will take some time to implement, with private banks across Germany using cost cutting measures to keep shareholders satisfied. Also, with a increased demand for more openness and transparency in wealth management, private banks need to also invest in staff training so that the quality of service does not decrease with rising demand.
Expected increased competition from foreign banks over the forecast period and a difficult market over the past six years has forced wealth management firms in Germany to shift their focus to one wealth band below their traditional target audience. This is likely to change in the near future as GDP growth starts to rise above pre-crisis levels.
Ensuring data integrity and proper data management
A minority of financial institutions in Germany have already begun to focus on data integrity, forming partnerships to provide in depth knowledge and expertise on how to manage data on a large scale, increasing client awareness. The forecasted recovery in the German economy will create business opportunities for private banks. Financial institutions will continue to implement reporting processes to prioritize information and present it in such a way that it adds value to decision-making processes and increases efficiency.
Challenging traditional business models
Due to the high level of competition from foreign private banks, the challenge to traditional German private banking practices have become greater than ever. With the German banking market being one of the most open in the world, these traditional business models will be tested, with foreign banks offering a more varied, efficient service which could provide larger gains in investments compared to domestic private banks.
German wealth management companies work with a range of clients, and opportunities for growth are considerably large, with the economy being the biggest in Europe and HNWI numbers set to increase by 11% up to 2020. With many HNWIs earning their capital in the financial services and investment industry. Providing in-depth advice and honest feedback to clients can increase private banks professionalism, whilst providing a high level of transparency to the client.