Proa Comunicación has been one of the companies that has collaborated in the edition and production of the book. "History of Private Banking in Spain: Creators of Prosperity".which was presented at a recent event at the Casino de Madrid. The book reviews the history of private banking in Spain, dividing it into three periods: the origins of the business until 1988, the formative stage of private banking in which both business models and players were configured, and the phase from 2008 to the present, characterised by profound regulatory changes as a result of the financial crisis.
The idea for the book launch came from A&G Private Bankingone of the leading entities in the sector, which organised the presentation event attended by around 150 professionals from the world of finance and communication.
Social function
The book defines private banking as "the set of financial institutions that provide advisory and wealth management services to high net worth clients". A sector that is little known in Spanish society, but which performs a key social function: to support individuals in making savings and investment decisions, taking into account their level of risk aversion and their life cycle. This function is growing in importance as life expectancy has increased and individuals are increasingly dependent on their own savings and investments to cover their vital needs in retirement. Given that the financing capacity of the Spanish public pension system is dwindling.
Moreover, the book stresses that private banking is one of the sectors that contributes most to the growth of financial education in society.The private banker's job is to explain to his clients, in an intelligible and rigorous manner, the risks and benefits not only of good portfolio management, but also of the investment strategies adopted. To do so, he must make them understand the relationship between return and risk when making investment decisions, given that the higher the expected return, the higher the investment risk must be.
Investing has also become a growing activity for large sections of society, given the current low level of interest rates, which bring zero or even negative returns on risk-free assets (deposits, current accounts, short-term fixed income, etc.). The advice provided by private banking therefore contributes to the reallocation of capital to projects with real potential and fosters economic growth.
Challenges for the future
The experts who participated in the presentation of the book discussed some of the challenges that private banking must face in the future, taking into account the impact of regulation after the 2008 financial crisis, as well as the advance of technology and its influence on the relationship between customers and their financial institution.
The first of the sector's challenges is how to reconfigure the client'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 at lower costs.
The speakers highlighted the irreplaceable role of the private banker as a personal and unique interlocutorwhich channels the entire range of products and services tailored to the individual financial needs of its customers, thereby consolidating a personal and trusting relationship over the long term.
Technology, the experts concluded, can complement the banker's work by making it more efficient and effective, but "robo advisor" models, whose advice is based on algorithms, have their target audience among less affluent clients than private bankers.
The second challenge is the impact of regulation, which affects both the solvency required of operators, the scalability of service costs, and the revenue-generating capacity of specialised entities.
The opinion of the speakers was that regulation greatly affects the business model, which makes it all the more necessary to be able to provide value to clients with personalised, quality advice. A service that must be characterised by personal values such as trust and empathy with the client, in order to understand their wealth needs in their entirety, and to achieve maximum satisfaction in their aspirations for their entire financial life cycle.
Javier Ferrer
Director of the Financial Communication Department of Proa Comunicación