In a study based on interviews and surveys of 39 banks and 10 independent asset managers, it said it expects industry consolidation – already under way – will accelerate by 2012, while firms will increasingly look to technology-driven partnerships in the finance industry to find new ways to get a market position.

The study is called Success through innovation – achieving sustainability and client-centricity in Swiss Private Banking.

For some banks, the study said, they will need to achieve critical mass to win the economies of scale; the survey found that around two-thirds of banks believe that future survival will require an average two-fold increase in assets under management – firstly, because client requirements are becoming more complex and diverse and are necessitating heavy investment and, secondly, because growing regulatory requirements are favouring larger competitors.

When the following statement was put, “Swiss private banking industry value chain will have become disintegrated by 2022. Most banks will have become specialised at some stages of the industry value chain,” more than 60 per cent of respondents said they agreed; about 35 per cent had no answer either way, and 10 per cent disagreed.

13 areas

To stay competitive, the report identified 13 areas:

1. Innovation is a must;

2. Focus on growth markets and legal compliance;

3. Expansion of the Swiss client base: The analysis of the onshore market shows that around 60 per cent of interviewees wish to increase their Swiss client base in relative terms by 2022;

4. Information will be exchanged automatically: In an international context, there was no chance of Swiss banking secrecy surviving. However, private banks consider it important to continue to protect privacy in Switzerland without offering a platform for undeclared assets. The survey shows that Swiss private banks expect the automatic exchange of information to be in effect in three years;

5. Private banks believe that greater transparency and highly developed, comprehensive client service are key to a successful future. Particular attention needs to be devoted to capturing client data;

6. Growth through cooperation with independent asset managers (IAMs): Two-thirds of the private banks surveyed see IAMs as a strategic option for further growth in their area of business. By pursuing this option, the institutions hope to reach new clients and achieve economies of scale. To reduce emerging compliance risks, however, rigorous due diligence must be performed on both existing and new IAMs;

7. Open product architecture: In future, private banks will increasingly offer their in-house products and services in an open architecture, that is to say make them available to other providers. Of the banks surveyed, 84 per cent wish to improve their independent advice and their services by 2022;

8. Increase in digital communications: The distribution of products through electronic and mobile channels will also change markedly. Many clients, particularly the younger generations, are keen to use digital channels more and more. Interviewees expect mobile and internet-based solutions to be a greater differentiator among the individual banks in 2022;

9. Flat fees and fee-based advisory models: Future price models are currently the subject of intense discussion. Banks believe that price models need to be very open and transparent. Developments with regard to the reimbursement of trailer fees also indicate this to be the case. One possible trend in pricing could be toward flat fees;

10. Growth through new business models and minimum level of assets under management: Private banks agree that cost reductions alone bring only short-term success. Rather, the institutions need to concentrate on fundamentally rethinking their future business models. Besides costs, client advisors will also have to give increasing thought to the bank’s gradual transition to new, viable market positions. Interviewees agree that this also requires the bank to be of a certain size. According to the survey, the private bank of the future should, at a minimum, have assets under management of around SFr10 billion;

11. Examining the possibility of outsourcing: Private banks see huge potential to cut costs in outsourcing certain activities such as IT processes, capital market research, product development and legal affairs;

12. Drops in salaries: According to the survey, most private banks expect a downward shift in employee compensation in the coming years, with drops of between 15 and 25 per cent. Only 15 per cent of interviewees believe that employee remuneration in 2022 will be either higher than it is today or unchanged;

13. New regulation both a challenge and a competitive advantage: Cross-border and regulatory requirements such as Basel III or the Swiss Financial Services Act (FSA) currently under discussion pose considerable challenges when it comes to implementing new strategies. Some interviewees consider the new rules to be harmful or even a threat to the existence of smaller banks. However, the new regulations could become a competitive advantage in their efforts to differentiate themselves from banks under foreign control.