If the relationship with clients was close before, the pandemic turned it into “really close”, employees in the field of private banking in the world curse what their job looks like in a situation when everyone communicates from home, across the screen.
The market of private banking in Serbia is still in its infancy, but for a reason that cannot be solved even by “almighty” digitalization. There are few solvent clients for such a service, and there are even fewer offers due to the shallow capital market. However, we also have banks that offer this opportunity.
The pandemic has changed everything, including the relationship of personal bankers with their clients. At the end of 2020, Global Finance transmitted the words of David Bailin, IT Director of Citi Private Bank, one of the best in the world in this field: “We have always been in close relations with clients. And I would describe this year as really close.”
The Banker estimates that banks must continue to adapt to the needs of their clients: this is a decisive moment for private banks, whose face-to-face meetings quickly switched to on-screen meetings. Wealth advisers point out that the social changes, which they expected would take years to implement, took place in just a few weeks.
And where is Serbia?
Private banking in Serbia is unknown to many. And not only for the users, but also for the banks themselves. While some state that digitalization and the availability of banking services have made the need for investment advice “face to face” meaningless, others claim that Serbia missed its chance for private banking, which requires high costs, even before the great world crisis in 2008. Third, they believe that our country does not have enough rich and influential users for these types of services. Despite this majority view, some private banking services are widely offered to clients.
What advice do users get from a private banker? To answer this question, it is necessary for the client to have a slightly higher income that he wants to invest wisely. Many use the services of private banks in other countries for this purpose, bypassing the domestic market because it is shallow and, apart from the banking sector and real estate, does not provide many investment opportunities.
Milan Kovac, head of the private banking segment at Raiffeisen Bank for “Business and Finance”, points out that Raiffeisen Bank has been providing private banking services in Serbia since June last year, under the special name “Friedrich Wilhelm Raiffeisen”. According to him, private banking is the highest level of service that the bank provides in doing business with citizens who want to use standard banking products tailored to their needs, as well as to preserve and increase their assets with appropriate advice by using investment products. He points out that the use of investment products that are tailored to the goals of clients is one of the most important aspects of private banking services.
“The underdeveloped domestic capital market is one of the reasons that real estate investments are still the most common choice of clients for investment. Our approach is to offer new investment products to private banking clients, using all local and group expertise, using the appropriate process of advising clients, including local investment funds managed by Raiffeisen Invest, structured products – certificates issued by Raiffeisen Centrobank, investing in bonds, etc,” states Kovac.
Raiffeisen Private Banking currently provides services to more than 17,000 clients in the region and has over 18 billion euros in assets under management. The private banking service within this banking group currently exists in selected markets in Russia, the Czech Republic, Slovakia, Hungary, Romania, Croatia, and since last year in Serbia.
“The decision to offer this type of service to clients in Serbia is at the same time a sign of trust in the potential of the domestic market, as well as the capacity of the domestic bank to provide the appropriate level of service,” Kovac points out.
OTP Bank also offers a private banking service. As it is pointed out on the official website of OTP ank, clients, through face-to-face meetings, are provided with access to specially adapted services, through the creation of various investment products in various financial markets.
Clients are few but demanding
In the study “Characteristics and perspectives of private banking – is there a place for it in Serbia?”, the authors Isidora Ljumovic and Goranka Knezevic point out that in our country, private banking, both as a concept and as an activity, is in its infancy. “Clients who meet the criteria for entering this segment are a rarity, while the financial market is shallow and illiquid with few potential earnings opportunities,” the paper points out.
A typical private banking client has exceptional wealth, large inflow of funds, often important influence in the local community, is well informed, does not want to waste time in banks and counters that provide a standardized set of services, has no time to analyze information and make investment decisions. He leaves those jobs to the bank, but requires a high level and consistency of services, the study states.
The authors point out that private banking clients often do not have only one banker. “As they are well informed, and not overly loyal to a particular private banker, they constantly review and compare the quality of services they receive, monitor the earnings that private bankers make for them, their ideas and proactivity.”
Potential clients on the Serbian market are successful managers, athletes, media personalities, former shareholders of the company, ie people who due to business obligations cannot dedicate themselves to taking care of their private money and that is why they need private bankers.
“Private bankers should point out important events on the financial market, to consider the risks together with them. It is desirable that private bankers also be investment advisers. The specific offer of private banking services of a local bank includes contracting higher interest rates on deposits of defined amounts, lower commissions for transaction costs, more favorable interest rates for the bank’s engaged funds, advisory services related to investments in domestic and world financial markets,” the study explains.
Wealth is preferred to be entrusted to banks in the world
According to the data presented in this paper, private banking is still the most developed in Switzerland, but new centers such as Hong Kong and Shanghai are threatening to take over. Of the surrounding countries, private banking is most developed in Turkey, Croatia and Bulgaria.
Private banking is mixed with traditional banking services provided by privately owned banks. Also, the services provided within private banking are identified with the services of VIP clients, which are only one characteristic of private banking.
“Often employees in the banking sector have no knowledge of private banking and cannot define it. An additional problem that banks face in providing private banking services is related to the investment segment. Namely, with traditional services such as deposit and credit operations, banks have no problems, but due to the shallow, underdeveloped and illiquid financial market, banks are limited in investment operations,” the study concludes.
On the other hand, the authors point out, clients who have crossed the border to enter the private banking market, by the size of their liquid assets, have long focused on private banks in Switzerland, Luxembourg or Austria, and rarely in New York, Kamatica reports.
