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The Rising Phenomenon of Exit Due to De-risking in Traditional Private Banking

Disclaimer: The views and opinions expressed in the vapa Swiss independent wealth management blog posts featured on this page are solely my own and do not necessarily represent the views of any institutions or organisations I may be associated with. These posts are intended to share personal insights and perspectives and should not be interpreted as official statements or positions of any affiliated entities.

“We regret to inform you that our bank has decided to terminate its business relationship with you. The termination is made by the relevant section of our General Terms and Conditions, which we attach for your reference.”

When this process begins, clients find themselves stranded. They abruptly lose the fine art of private banking and end up at the exit desk after 45 days.

This unexpected move can shake long-standing clients who have silently accepted private banking fees or even referred friends over the years. It’s a significant blow to their relationship manager, who loses a client or sees their entire client domicile market scrapped.

Often, exit due to decisions like this rely on spreadsheet analysis. They disregard the meticulously constructed marketing language about tailored service and utmost appreciation for esteemed clients.

Navigating Challenges in Modern Wealth Management

Quite often, the client isn’t at fault. Circumstances might force them to live in the wrong place at the wrong time, and they might struggle to provide the seamless wealth origin disclosure that current standards require. During the COVID-19 pandemic, a bank unexpectedly asked me for five years of salary statements to extend the mortgage term for a flat I bought in 2004.

Given these methods, it’s unsurprising that the independent wealth management model is becoming more appealing. This is especially true when facing non-sanctions-driven de-risking. For a wealth manager, this situation often means orchestrating a change to a different custodian bank internally rather than completely changing employers.

Regrettably, the industry often overlooks the practice of abrupt exits due to de-risking and business terminations. Trust, built over generations, especially in traditional private banking locations, is gradually eroding. This shift favours newer players and domiciles like Hong Kong, Singapore, and Dubai. Once damaged, this trust becomes challenging to repair.

Source: LinkedIn (SEO adjusted)

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A conceptual image showing bankers and financial professionals contemplating 'exit' strategies in the banking industry. Exit due to de-risking

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