Reversals of multi-year trends, huge generational transfers of wealth, new perceptions of risk. On the basis of these key areas, private banking takes stock of the situation after 2023 which saw growth of 8,2% compared to 2022, reaching, at the end of 2023, 1.076 billion euros in assets under management driven by a collection grew by 5,3%.
The data emerge from the 28th edition of the AIPB Forum (“A pact between generations: the agenda of Private Banking”) which will be held on 450 November at Palazzo Mezzanotte in Milan, with over 2.000 representatives of the distribution and production of the Private sector Banking and more than XNUMX Private Bankers and financial advisors will connect remotely.
The reversal of multi-year trends for liquidity and administered savings
“In 2023, long-term trends were interrupted: the liquid assets has fallen after 10 years of uninterrupted growth, and the food sector managed savings, after 15 years of decline, has undergone a decisive rebound” he said Andrea Ragaini, President of the Italian Private Banking Association (AIPB). “We are very happy that in this context, advanced paid consultancy has grown significantly (+25% in the first half of 2023 alone), confirming the uniqueness of the Private Banking service model”.
They have been identified in the Private Banking sector three key challenges for sustainable growth, says a note: the ability to strengthen the presence of future generations of customers with an approach to multigenerational consultancy; the development of a “protection” which is not limited only to the financial sphere; the ability to seize the opportunities offered by the use of data andartificial intelligence.
Added to these three challenges is the need to attract new generations within the sector, to bring new skills, while ensuring not to waste those gained over time and promoting the creation of multigenerational teams.
The concerns of families and the recomposition of portfolios in 2023
“The concerns of families consequently orient their investment preferences and modify the time horizon with which customers face wealth planning choices”, observed the President of Aipb, recalling that “in 2023 the fears related to the effects of inflation and falling income, combined with concerns about family health, longevity and well-being."
The preferences of private families in the first half of the year were oriented towards investments that benefited most from the increase in rates. Government bonds and bonds thus grew by 33% of the total value of assets managed by the sector. The contribution of stocks, however, was marginal. Investment funds and asset management recorded positive but significantly lower growth, equal to 4,3% of assets under management, while the insurance sector suffered a decline of 1,7%.
Concern for family health, longevity and well-being have instead influenced the need for protection of private families, an area in which priorities have taken on different characteristics depending on the age of the customers. “These are complex objectives that customers would willingly discuss with their banker and which find their point of synthesis in financial planning and insurance protection tools,” explained Ragaini.
Five generations of customers: the private banker at the hub of an intergenerational pact
Aware of the current scenario, Private Banking will have to implement an agenda that allows it to face the three great challenges of the near future: attracting the next generation of Private customers; broaden the concept of protection beyond financial protection; and seize new opportunities arising from innovation processes.
Today Privare Banking is managing simultaneously five generations of customers, which have very different weights: the one reaching 44 years (9% of the AuM); those between 45 and 54 years old (11%); the 55-64 range (25%); those between 65 and 74 years old (23%); finally, 32% of customers who are over 74 years old. Each of these generations has different needs, expectations and desires, which must be taken into account in dynamic and intertemporal management of the heritage. For example, in consulting on the asset management of a 55-64 year old client, the Private Banker will on average be faced with needs that also involve the presence of a child under 40 and a parent over 70.
Huge transfers of wealth between generations in sight
In the coming years the sector expects huge transfers of wealth towards younger generations: the AIPB estimates 180 billion euros within 5 years and 300 billion by 2033. Already in 2023, 22 billion have changed hands. “In order not to disperse the assets served by Private Banking, it will therefore be essential to renew the pact of trust with a new generation of customers, encouraging greater involvement and learning to know them right away, investigating their life priorities, service expectations and value system ” Ragaini said again.
Private Banking will have to be able to bring the different generations into dialogue, reducing the share of customers (equal to 69% between 65 and 74 years and 58% among those over 74) who do not involve their children in the management of their assets and increasing the percentage of those who will confirm the family consultant (only 23% between 45 and 65 years old). To preserve the relationship built over time, it is necessary to renew the pact of trust with the heirs of the acquired customers, activating in time moments of involvement and understanding of the different system of values, life priorities and service expectations.
From the AIPB Customer Observatory it emerges, for example, that between the ages of 45 and 54 the motivations that lead to investing are linked to the accumulation and construction of capital, while between the ages of 55 and 64 it becomes central to be able to build something for future heirs. The younger age groups want to understand the impact of their investments, while the more senior ones above all ask for a systematic meeting with the Banker.
Accordingly, the consultancy service must hire diversified modalities: in the first case (45-54 years) customers take into consideration a longer time horizon and a higher potential risk, to seek greater return opportunities; while in the second (55-64 years) customers think about how to build the future of their family (e.g. distribution of shares, generational transition).
The many faces of risk: from real estate, to professional, to health, as well as financial
53% of the wealth of Italian families (equal to 10.900 billion euros) is held in property. However, this heritage is dated (86% were built before 1990) and is located in fragile territories (94% of the municipalities are located in a risk area). Furthermore, Private families have a large and varied real estate portfolio and are therefore more exposed than average (two thirds have a second or third home and a fifth own the company property). Added to this is that over the years the risk of natural disasters has increased considerably.
Despite this, the Italians remain under-insured: the international comparison, in fact, records an average premium in Italy of 300 euros (excluding car insurance), while in other European countries much higher values are recorded. For example, around 550 euros in Spain up to almost 3.500 in the Netherlands.
Private families also carry out most exposed professions to "risks", since 23% are represented by entrepreneurs, 18% by freelancers and 17% by self-employed, professions that most need to be insured.
The third factor is linked to the increase inlife expectation, reached the age of 84. The AIPB Customer Observatory also reports that Private customers perceive themselves, on average, as "elderly" at 76 years of age and consider themselves "active" and capable of producing income up to the age of 69. In 2023 the health returns to be the primary concern of Private families, consequently the attention towards its protection increases. Italy still relies heavily on the National Health System, with a percentage of total healthcare expenditure reaching 76%, compared to 49% of the European average. An issue that is even more felt by Private customers, as the average age is much higher than the Italian one and equal to 58 years (55% are over 65), giving even more importance to the need to take out Long Term Care policies.
