New York, NY (PRWEB) April 01, 2014
The Private Banking Services industry is a part of the broader wealth management market designed for high-net-worth clients, who have at least $1.0 million in investable assets, and ultra-high-net-worth clients, whose investable assets exceed $10.0 million. According to IBISWorld Industry Analyst Leah Goddard, “Private banks, which can be divisions of larger financial institutions or independent entities, compete for clients not only with each other, but also with full-service securities brokerages, financial planners and advisors and other firms that perform similar functions.” In this highly competitive environment, private banks differentiate themselves by providing customized investment strategies and specialized advisory services, such as estate planning, for wealthy clients.
The financial crisis resulted in massive devaluations of many client assets, particularly in equities and alternative investments, such as hedge funds and private equity funds. Since private banks primarily generate revenue through asset- and performance-based fees, investment losses lowered industry revenue. Declines in stock market values, as demonstrated by drops in the S&P 500 index, coupled with skyrocketing investor uncertainty, led private banks to redistribute client portfolios toward lower-risk investments, primarily fixed-income assets, such as bonds. However, in the low interest rate environment maintained by the Federal Reserve since the recession, market appreciation of these assets has been fairly low, putting pressure on industry revenue and profit. However, strong growth in the stock market has helped offset these low returns and bolster industry assets. As a result, industry revenue is forecast to grow 4.1% in the five years to 2014, including a rise of 2.7% to $33.1 billion in 2014.
In the coming years, private banks will need to take advantage of opportunities while adapting to challenges. “With the majority of growth occurring in the high-net-worth market, private banks will need to reorient their services to provide more suitable solutions for these clients,” says Goddard. As competition continues to increase from other financial firms, private banks should focus on rebuilding client trust that was damaged during the recession and delivering services cost-effectively through economies of scale. As private banks capitalize on the rising number of millionaires, industry revenue is projected to grow in the five years to 2019.
The Private Banking Services industry comprises a large number of mid-size companies, with the average establishment employing 12 people. As a result of the large amount of participants in this industry, market share concentration is low. The top four companies in the industry are Morgan Stanley Smith Barney, Bank of America, Wells Fargo and JPMorgan Chase. The industry is highly competitive with both large commercial banks and investment banks competing with smaller private banks for business, further leading to a low market share concentration for the industry.
For more information, visit IBISWorld’s Private Banking Services in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld.
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189.
IBISWorld industry Report Key Topics
The Private Banking Services industry comprises banking institutions that actively manage wealth for clients with investable assets exceeding $1.0 million. Private banks have the ability to make investment decisions and generate revenue through fees that are based on asset management, portfolio performance and specialty-wealth advisory services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.