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| Building Your Family's 100 Year Plan: The Series |
100 Year Plan Part II: An Industry in Flux
Dwight Cass
01/01/2004
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Private banks now operate in a drastically different environment than in the 1990s. New business is much harder to come by. Bruce Holley, vice president and director of BCG’s North American financial services practice, says, "Five years ago, share capture was driven largely by a client’s change in circumstances." For example, many Internet entrepreneurs established their fortune by taking their companies public, and became clients of private banks. "That’s not the case anymore," Holley notes. "It’s a zero-sum game now."
The banking industry’s belief that private banking is a scalable business—meaning, essentially, that its existing infrastructure can support a very large number of clients before it needs to be expanded—has also been sorely tested. The financial supermarkets that have sought to add a multitude of clients to their private banking arms have promoted the concept of "holistic" wealth management, involving asset management, advisory and a host of other services. One-stop shopping that offers a variety of standardized financial products and services may have significant advantages for less-affluent Americans; it saves time, it may lower the total of the banking and insurance fees they pay, and so on. However, it does not satisfy our need for advice and tailored solutions to our more unconventional problems.
A survey of 327 Americans with minimum investable assets of $5 million and up, conducted last summer by the Spectrem Group, a Chicago-based consultancy, showed that one-stop shopping and an emphasis on investment advice—from which banks try to reap transaction revenues—is a far lower priority for us than objective, specific advice on taxes, accounting and family issues. Spectrem’s report, Relationships With Advisors, reveals that only 30 percent of the affluent households surveyed use a full-service broker as their primary advisor, down from 41 percent in 2001.
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