Proa Comunicación participates in the edition of the book “Historia de la Banca Privada en España: Creadores de Prosperidad” (History of Private Banking in Spain: Creators of Prosperity)

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.

Social function

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.

 Future challenges

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.


Javier Ferrer
Financial Communication Manager at Proa Comunicación

Private Banking: Models for Growth in a Complex Environment

Recent estimates published by DBK consultants on the Spanish private banking market confirm that it is still a very appealing niche for operators in this sector. According to their latest report, at the end of 2019, the total volume of the market will reach 480,000 million euros, and there will be 420,000 people with level of financial assets sufficient to swell the customer base in this segment.

Another conclusion from the DBK report is that three quarters of the market are managed by universal banking units, and the rest by a diverse range of formats and models: exclusive Spanish and foreign private banking banks, wealthtech, investment services companies, companies of insurance, family office, or investment banking.

Given this complex scenario, what is the ideal growth model to strengthen the businesses in an environment of reduced margins, the implementation of Mifid II, uncertainty in the markets, and political instability? The answer is that each model is based on a series of distinctive strengths that support its efficiency and its capacity to grow.  For this reason, it has strengths and weaknesses. It is most important to gain customer loyalty and trust.

The Strengths of Size

Universal banks, which manage 77% of the market, use segmentation as a criterion to identify and provide exclusive services to Private Banking customers, while sharing some resources with other segments of the customer base.  Size is one of the brand’s greatest strengths, because it distils intangible values that are highly appreciated by customers, such as solvency, solidity or security.

The other entities manage their own offer structure in order to be able to focus both on the key services identified in Mifid II (investment advice -independent and non-independent-, and discretionary management) and on other services: estate planning, marketing, or execution.  Very few provide financing and/or transactionality, which require a large balance sheet.

Non-Banking Models

Investment Service Companies (Securities Agencies and Companies, EAFs) are the ones that most need to adapt to the new environment. Some are immersed in merger processes, others have decided to diversify their structure into differentiated entities that provide distribution, management and advisory services. The offer of Independent Advice based on explicit payment to clients and without incentives, is proving to be complex for them.

The large insurance companies have decided to start offering Private Banking to their largest customers, taking advantage of the fact that, given their idiosyncrasies, they have built up over time a large base of loyal customers.  They rely on the distribution of IICs -funds and pension plans- and on discretionary management, as well as asset advice.

The emergence of cost-saving technology and its ability to improve the relationship between the customer and the entity is becoming an increasingly important factor. Bearing in mind that all entities must invest in technology to comply with Mifid II requirements, and that this environment reinforces disintermediation, offers have been launched that opt for automating distribution, advice and management.

These are models that provide managed portfolios, selection of sufficient funds to a predetermined profile, or investment proposals based on risk levels, among others. Products designed and managed with algorithms. Their main advantage is the substantial cost savings, although they are missing a fundamental element, the personal relationship between the client and the manager.

Banking Models

The exclusive banks of Private Banking, both local and international, continue to firmly believe in the potential of the Spanish market. Their efforts have focused on expanding the offer via open architecture, third party funds, and alternative assets such as venture capital, real estate assets, etc.

This strengthening of the offer is explained because the role of the relationship management is key, as a channel and sole intermediary who distributes client-tailored solutions. As a complement, and in order to avoid the impact of growing financial disintermediation, these banks sell products (mainly their own funds and those of third parties) through digital platforms or marketplaces.

Independent advisory services, as with ESIs, have not yet sufficiently penetrated their clients.  On the other hand, some international banks have management teams outside Spain, where only customer relationship managers work. A factor that therefore results in cost savings.

Other Models

Finally, there are operators who enter Private Banking from other businesses. Investment banking, due to advising services for corporate clients on mergers and acquisitions, expansion strategies, or financing, among others, has generated a sufficient level of trust among those clients who are owners and senior executives of the companies, to make them loyal to Wealth Management services.

The Family Office, entities that advise large fortunes in the selection of their investments and the integral planning of their assets, have positioned themselves as Private Banking for the largest family estates, insofar as they require full trust in the manager who acts as a channel for the best financial and non-financial solutions for a client’s estate objectives.

Javier Ferrer
Director of Financial Communication at Proa Comunicación

The Current Challenges of Private Banking and the Keys to Effective Business Communication

The private banking business in Spain continues to be an appealing niche for the financial sector. According to the consulting firm DBK, at the end of 2017 assets under client management with financial assets of at least 300,000 euros amounted to 450 billion euros. This grouping consists of almost 400,000 people, mostly residents of large urban centers of autonomous communities with higher levels of wealth per capita, commonly known as the “golden triangle” (Basque Country, Navarre, Cantabria, Valencian Community, Catalonia, Madrid).

Strong Investment in Resources

The majority of suppliers set 500,000 euros as the minimum threshold that allows them to provide a specialized offering in products, tools, equipment, relationship managers, and even offices, to their clients with a higher level of capital. The search for an efficient and profitable model is the cause of this limitation.

Private banking customers provide high margins both on and off the balance sheet in the income statement of their financial institutions. But they demand a personalized and very professional treatment, for their high level of financial culture and for the imperative need to trust in a contact person that in practice becomes the “director” of the strategy to be undertaken with their client’s capital to fulfill a host of particular objectives, such as the time horizon, risk profile, assets and preferred markets, inheritance, shareholding structure of the family group, tax optimization, profitability of their investments, among others…

This obliges relationship managers to demonstrate a high level of financial expertise and quality in their services, maintain awareness of regulatory changes, use advanced technology to manage all areas required by their client and coordinate specialized teams that provide the individualized solutions. Only in this way can a stable and long-term relationship with each client be strengthened.

This means that capturing and gaining the loyalty of a private banking client requires a large investment in resources for any financial operator. This is because it is essential to have a value proposition that is global, tailor-made, differentiated and independent, with the focus placed exclusively on the interests of the client.

Business Models

In Spain, the private banking business is still dominated by the large commercial banking brands. According to DBK, they manage 77% of the total assets in this segment of clients, compared to the 23% held by specialized operators. Universal banking has a great advantage over the rest: it can share resources in serving several customer segments, therefore lowering costs. What resources? Above all, those intended for corporate activities (HR, financial management, products on the balance sheet, technology …), and commercial activities (branch network, business growth objectives).

But this advantage can turn itself into a disadvantage. Because in practice, in universal banking, it is more difficult to build loyalty for the type of client that puts trust in personalized services with a partner, since they value less aspects of the service such as digitization, achieving profitability for their investments, among others.

The greatest attraction universal banking has for this type of client is the strength and solvency of the brand, garnering trust for an institution that due to its size and strength of its balance sheet is conceivably not in danger of decapitalization.

Private independent banking, however, can a priori better meet the demands of an exclusive service and quality, although this requires making heavy investments in resources to materialize. Even more so in the current regulatory environment, which after the entry into force of Mifid II, reduces the prospects of income generation and increases costs.

The Effect of Mifid II

The objective of the European directive Mifid II’s implementation is to strengthen the investor and client protections of financial products and services. The regulation covers many areas of activity: product governance, listing and defining the services that can be provided -management, advising, information, marketing, execution-, customer reporting, advanced training of suppliers, transparency in costs, monitoring processes and optimizing investments …

The impact on the private banking business is, therefore, enormous. To the point that the sector considers Mifid II as an opportunity to reorganize business models, since it must adapt most of its activities (and with it, the predicted of costs and revenues) to this new way of working.

At this point, we can see the dilemma between independent advising, for which the client pays a recurring fee and can access the whole universe of marketable financial assets with the recommendations of his/her advisor, as opposed to dependent advising, where the advisor recommends assets to the investor and charges fees from the manufacturer for those that his client has purchased within a limited universe of products (provided that requirements are met in terms of transparency in revenues and costs, and quality of service),

Technology is fulfilling its role as a tool to expedite the implementation of Mifid II requirements, achieving the greatest possible cost savings. It is even allowing private banking models to supported by automated management and / or advising to emerge, aimed at larger quantities of capital, without the help of relationship managers in order to reduce expenses.

The Role of Specialized Communication

However, any business model in private banking must rely on a personal relationship between the client and his/her manager, so that  the objectives of efficiency/profitability and growth are achieved. These are challenges that only with customers with 100% loyalty and with all the financial and equity needs satisfied by their service provider, can be achieved.

The role of specialized financial communication is key to helping each operator optimize its regulatory adaptation and business growth strategies. It certainly helps to position each brand with its strengths, whether its structure is that of a universal bank with specialized teams and areas, or whether it operates on exclusive and independent private banking models, or even other non-banking models. The secret of success in building loyalty is to provide a global service tailored to each client, which can be achieved so long as the differentiating strengths of its service provider’s brand are perceived.

Private banking is a service that manages the integral relationship of the client with his/her financial service provider: the needs of advising and management for his/her capital, the needs of fiscal optimization, the needs of transactionality and financing needs. Communication becomes, therefore, a tool that transmits the differentiating value chosen by each private banking provider, and the key to its success within the strategy of customer loyalty and business growth.


Javier Ferrer
Director of Financial Communication at Proa Comunicación