1. Heterogeneous definitions of private clients and the private banking market
In times of high unemployment and crisis it seems to be paradoxical, that just the private client business proves often as support to the financial sector and that it can lead to relatively stable returns for the banks and the clients. Especially the business with the wealthy private clients, which is generally summarized in the term “Private Banking”, made, according to a study of McKinsey, just in the time from 1997 to 2001 annual yields of 40,8%. Yields which of course resulted in a massively increasing competition between the “servicing” financial institutions about private clients, especially because of the private banking sector being regarded as one of the growing markets in the next years. The consulting and servicing concepts of the financial service providers are as various as there are terms for them. A differentiation of the segments is difficult and mostly on the basis of the traditional idea of private banking in contrast to the appreciation of the terms retail banking, private wealth management or family office. Despite the definition difficulties about these various and nevertheless similar terms, this shall now happen for a better understanding also with regard to the development of these various servicing concepts.
1.1. The different private banking client segments and their differentiation in general
As in every branch, there are numerous terms in the financial industry, too, its exact meaning many private clients do not know, since they also seem to overlap. In the following thus first the various private client segments are marked off. Generally one can subdivide in mass- and quantity business, i.e. in the business with minor customers, also named “Retail Banking”, and in the business with the wealthy clients, also named “Private Banking”. This sector private banking is complemented by expanded concepts like wealth management and the family office, in order to adjust to the rising claims of the wealthy clientele according to range and type of the wealth.
A segmentation of the market is necessary since the individual sectors have different requirements in terms of the financial service offering and thus show a different purchasing behaviour. Only in this way the vendors can adopt a goal-oriented and efficient strategy. During segmentation process itself the vendors advance according to different methods, but mainly the criterion “financial assets” or the “net financial assets” is considered as the wealth.
In many cases the financial assets are also defined as “liquid or investable assets”, as in the annual appearing World Wealth Report of Merrill Lynch and CapGemini, too. The wealthy client here starts with e.g. US-$ 1 m., while other investigations indicate quite different sizes. Thus it is to be considered, that each classification is more or less arbitrary. Since, however, the classification of Merrill Lynch and CapGemini is generally accepted, the appropriate classifications and data base are used here. Thus also in the literature and in practice the terms “Affluent Clients”, “High Net Worth Individuals (HNWI)” and “Ultra High Net Worth Individuals (UHNWI)” for the appropriate orders of magnitude, also used here in the following, became generally accepted.
Affluent clients means clients with a total wealth within the range of US-$ 100.000, - to US-$ 1 m. and thus being added to the so called “middle market”. That means they are rather in a range settled between the mass clients, i.e. the retail clients and the private banking clients. Depending upon the definition of the respective service provider this segment or a part of it can thoroughly be added to the range of the wealthy private clients.
The High Net Worth Individuals own a total wealth of more than US-$ 1 m. and so are a part of the clientele which is, strictly speaking, regarded as the target group for the private banking sector.
The Ultra High Net Worth Individuals own a total wealth of more than US-$ 30 m. and are a “higher” part of the HWNI. Despite the relatively small number of UHNWI due to their complexity and their special servicing needs this group is to be regarded as an exceptionally interesting segment for long term financial planning.
It applies to notice, that for an extensive analysis in the context of financial planning all assets, and not only the liquid or financial ones, have to be considered.
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Illustration 1: Service-concepts of the private client segments according to size of wealth
Source: Own presentation
 Cp. n.a.: Im Banking schlummert Renditepotenzial, in: Finanz Betrieb, Sammelband 2002, Issue 7-8
 Cp. n.a.: World Wealth Report, done by Merrill Lynch and CapGemini, 2004
 Cp. Lingel, M.: Zukünftige Wettbewerbsstrategien deutscher Privatbankiers, 2003, P. 139
 Cp. von Maltzan, B.A.: Private Banking, in: Hagen, J./ Stein, J.H. von (Hrsg.): Geld-, Bank- und Börsen- wesen: Handbuch, 2000, 40th completely revised issue, P. 925-937
 Cp. Fuchs, H.J.; Girke, M.: Wachstumsmarkt Wealth Management, in: Die Bank, Sammelband 2002, Issue 2, P. 90-95
 Cp. Düzgünkaya, S.: Family Office – Finanzdienstleistung für Highend-Kunden, 2002
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- private banking client segments differentiation HNWI UHNWI family office wealth management wealth retail banking financial assets high net worth ultra high net worth affluent financial services tailor-made assets financial planning bank banking private clients