Proa Comunicación has been one of the companies that has collaborated in the edition and production of the book “Historia de la Banca Privada en España: Creadores de Prosperidad” (History of Private Banking in Spain: Creators of Prosperity), which was presented at a recent event at the Casino de Madrid. The work reviews the history of Private Banking in Spain, dividing it into three periods: the origins of the business until 1988, the stage of private banking formation in which both business models and actors were configured, and the phase from 2008 to the present, characterized by the profound regulatory changes as a result of the financial crisis.
The idea behind the launch of the book came from A&G Banca Privada, one of the leading entities in the sector, which organized the presentation event attended by around 150 professionals from the world of finance and communication.
The book defines private banking as “the group of financial institutions that provide advisory and wealth management services to wealthy clients”. A sector that is little known among Spanish society, but which performs a key social function: to support individuals in making savings and investment decisions, considering their level of risk aversion and their life cycle. A function that grows in importance, as life expectancy has increased, and individuals depend more and more on savings and own investment to cover their vital needs in retirement. Bearing in mind that the financing capacity of the Spanish public pension system is diminishing.
On the other hand, the book highlights that private banking is one of the sectors that contribute most to the growth of financial education in society, because the job of the private banker is to explain to his clients, in an intelligible and rigorous way, the risks and benefits not only of a good management of their portfolios, but also of the investment strategies adopted. To do this, it must make the relationship between profitability and risk understood in investment decision making, given that, the higher the expected profitability, the greater the investment risk must be.
Investment has also become a growing activity in broad sectors of society, given the low level of current interest rates that provide zero or even negative returns on risk-free assets (deposits, current accounts, short-term fixed income, etc.). The advice provided by private banks therefore contributes to the reallocation of capital for projects with real potential and promotes economic growth.
The experts who participated in the book’s presentation debated some of the challenges that private banking must face in the future, considering both the impact of regulation after the financial crisis of 2008, and the advance of technology and its influence on relations between customers and their financial institution.
The first of the sector’s challenges is how to reconfigure the customer’s relationship with their private banking institution in an environment in which technology accelerates disintermediation in financial decisions, and new formulas are created for automated advice with lower costs.
The speakers highlighted the irreplaceable role of the private banker as a personal and unique interlocutor, who channels the entire range of products and services tailored to the individual financial needs of its customers, which consolidates a personal relationship and trust in the long term.
Technology, the experts concluded, can complement the banker’s work by making it more efficient and effective, but the “robot advisor” models, whose advice is based on algorithms, have their target audience among clients with less wealth than private banking.
The second challenge is the impact of regulation, which affects both the solvency required of operators, as well as scalability in the costs of services, and the capacity to generate income for specialized entities.
The speakers’ opnion was that regulation affects the business model to a large extent, which makes it all the more necessary to be able to provide value to customers with personalized, high-quality advice. Must be characterized by personal values such as trust and empathy with the customer, in order to understand their patrimonial needs in their entirety, and to achieve maximum satisfaction in their aspirations for their entire financial life cycle.
Financial Communication Manager at Proa Comunicación