The biggest challenges private banks are facing

In an ever-evolving financial landscape, private banks find themselves faced with a range of challenges. As providers of exclusive financial services to some of the world’s wealthiest individuals, these institutions must adeptly navigate through complex obstacles to stay relevant and meet the diverse needs of their discerning clients. These will include plotting a course through volatile market conditions and adapting to rapidly advancing technologies, as well as addressing regulatory complexities and meeting the ever-evolving demands of clients.

Recently, Citywire hosted a roundtable of CEOs from renowned private banks to delve into the pressing challenges they currently face within the market. This insightful session shed light on the intricacies and hurdles these institutions confront on a day-to-day basis. In this blog, we will explore some of the key challenges that were highlighted and share Delio’s own perspectives on these topics.

Meeting the needs of the next generation of clients

Duncan MacIntyre, CEO, Lombard Odier UK focussed on the importance of changing client behaviour, commenting; “We as an industry have to be really conscious about that intergenerational shift going on.” To contextualise this shift, research suggests a staggering $30 trillion in wealth is going to pass to heirs in the United States alone over the next 20 years.

This is set to have a big impact on the economy and financial markets. Eva Lindholm, CEO, UBS Wealth Management, UK and Jersey, said; “We might have been able to assume that the next generation would bank with us, but today you’ve got to win them all over again as if they aren’t clients yet.”

Research shows that the next generation of investors are likely to take a more proactive role in their investments, that they want their portfolio to be more ESG focussed, and that they expect a higher level of digital integration from their financial services providers. If they inherit a relationship with a firm that doesn’t meet at least some of these requirements, they will very likely move their wealth to another manager that can.

Therefore, the challenge for financial institutions is to engage with the next generation of clients as soon as possible, build rapport, and demonstrate that they have the digital solutions to meet their expectations. 

For example, clients that wish to deploy more of their capital to private markets are likely to want to be able to explore opportunities at their convenience, rather than having to wait for a meeting with their wealth manager. Delio’s technology enables institutions to offer their clients digital access to deal information at their convenience 24/7. This means that clients can take a more proactive approach to expanding their portfolio, access rich digital resources to support their decision making, and even organise meetings with the founding team or fund managers, all through a single digital hub. For the financial institution, this approach also generates a previously unobtainable level of data insights that can be used to personalise services like never before.

Sustainability comes to the fore

This leads nicely onto another challenge highlighted on the roundtable – sustainability in investments. Duncan MacIntyre explained that it’s “possibly the biggest, most exciting opportunity that we will see in our careers. We’re effectively seeing a new industrial revolution going on.” 

With more investors prioritising environmental, social, and governance (ESG) factors in their investment decisions, financial institutions are recognising the growing significance of providing access to investment opportunities that align with strong impact or sustainability themes. Offering such opportunities has become a crucial factor in gaining a commercial edge with clients in an increasingly competitive market. 

Highlighting how products and services align with a client’s stance on sustainability is now vitally important. Through the Delio Core platform, firms can assign UN Sustainable Development Goals to individual deals, enabling investors to conveniently identify the environmental or social impact of their investments. This functionality empowers investors to filter investment opportunities and focus on those that align with their specific values and beliefs. By providing a clear framework for evaluating the impact of investments, the Delio Core platform delivers a transparent view for investors and enables them to make better informed decisions.

The opportunity associated with sustainable investing also brings new found risks, however. Duncan MacIntyre highlighted this crucial concern: the risk of greenwashing. He explained that financial institutions need to exercise caution and avoid using the promotion of ESG-focused investments as a mere marketing exercise, and double down on opportunities that deliver tangible evidence of social or environmental improvements.

The global regulatory challenge

Navigating regulatory frameworks within a single jurisdiction can be difficult enough, but with firms serving clients across multiple jurisdictions they face an even greater challenge. Eva Lindholm emphasised the impact of regulatory governance in an increasingly globalised world, stating; “As the world becomes more interconnected, it becomes more difficult to serve global citizens due to regulatory frameworks that isolate themselves or conflict with one another, either willingly or unintentionally.”

One potential solution to address the multi-jurisdictional challenge is to use technology as a tool to deliver more personalised service through enhanced client profiling. This approach has been recognised as crucial for firms given the complexities arising from cross-border operations. By digitising operational processes and automating workflows based on specific criteria, such as regulatory jurisdiction, wealth managers can proactively mitigate many of the common risks associated with cross-border operations.

Duncan MacIntyre went on to discuss the regulatory hurdles faced by small businesses entering the industry, suggesting that they may struggle to meet the required regulatory obligations. At Delio, we have a team of regulatory experts who can assist boutique firms or new entrants into private markets by implementing a robust governance framework, ensuring a smooth launch of their proposition. By leveraging Delio’s proven private markets technology to deliver these services, their investors can enjoy a streamlined, user-friendly, and seamless experience.

Technology now plays a vital role

Technology is revolutionising financial markets in unprecedented ways. With the rise of digital platforms, artificial intelligence, machine learning and blockchain technology, traditional financial practices are being reshaped. This poses both a challenge and an opportunity for private banks.

Duncan MacIntyre summarised this well; “Without investing in technology, we will simply not have the basic licence to operate. It is the foundation on which all of our businesses are based. I think all CEOs and all business leaders need to be investing in that as a matter of priority.”

Technology is not only changing the way financial markets operate but it is also playing a key role in democratising access to services and empowering individuals to take control of their financial futures. As Duncan stressed, those who don’t adopt a digital solution will likely be left behind. 

One example of this is how firms are turning to technology to improve client access to previously niche products, such as private markets. Delio’s white-labelled platform digitises what has traditionally been a slow, manual and resource-intensive process – the end-to-end private markets investment lifecycle. We work with private banks, wealth managers and other international organisations to transform how they distribute deals, manage investments, operationalise workflows, and deliver the best client experience. Not only does automating these workflows improve operational efficiency and free-up resources, it also provides a more intuitive client experience for the investor.   

For more information on Delio’s private markets technology and how we can help you take a technology-led approach, book a demo with our experts.