FirstRand’s banking units, FNB and RMB, want to redefine private banking in SA by merging the roles of high-end bankers with those of financial advisers to provide a more holistic service to their more than 1.2-million upmarket customers.
FNB and RMB’s private banking offerings comprise three main client segments — premier banking, private clients and private wealth — making them the market leader in the high-end segment, though Standard Bank’s recent merger with Liberty Holdings makes it a strong competitor.
The premier banking segment targets clients earning R450,000- R749,000 annually; private clients are those earning R750,000-R1.799m a year; while private wealth caters to those earning more than R1.8m annually or who have a net asset value of at least R15m.
Competition in the high-end banking arena is hotting up, thanks to new entrants such as Discovery Bank and new innovations such as Investec’s programmable banking offering, which caters specifically to IT professionals. Incumbent lenders are on a mission to enhance their offerings to increasingly discerning clients.
Eric Enslin, CEO of FNB and RMB private banking, says the units are rapidly upskilling their combined pool of about 700 traditional bankers to bolster their financial advisory capabilities. It has caused them to add more than 30 insurance and investment professionals to their team in the past three months alone.
“We’re fast tracking that quite a bit, but the challenge that we have in SA is that we don’t have enough of those skills,” Enslin tells Business Day. “We’re on a journey to evolve private banking in SA and align it with what we see internationally, where private banking is more about offering integrated advice — client contextual advice across banking, credit, invest, insure and estate planning. At FNB and RMB we see ourselves as an integrated financial services institution. We are much more than just banking.”
Cross-selling
With SA’s economy hampered by years of suboptimal growth even before the devastation of the 2020 Covid-19 pandemic, banks and other financial institutions are increasingly battling it out to tap new revenues from the same, somewhat stagnant, customer base. New entrants such as TymeBank and Discovery Bank are also chipping away at the market share of traditional lenders, rolling out new digital solutions aimed at ease of use and convenience.
Large groups such Standard Bank, which recently bought out minority shareholders in insurer Liberty, are looking to tap into cross-selling opportunities by making more of their diversified products available to their customers. The array of companies within the FirstRand group, which span motor-vehicle finance through WesBank and asset management via Ashburton Investments, offer similar opportunities, especially if they can tap into the banking client bases of FNB and RMB.
“When we talk about advice the default reaction of most people is to think that it’s about investment and insurance advice but that’s a fallacy,” says Enslin. “That may be a component, but advice can only be relevant if it’s integrated across a client and a family’s full financial spectrum ... our ambition is to provide integrated advice.”
One of the areas in which Enslin believes the local financial advisory industry has it wrong is by focusing too much attention on investment fund selection and performance. He says financial advice should take a more holistic approach, encompassing everything from asset allocation and fund selection to preparing wills and optimising client loan portfolios as well as general banking, foreign exchange requirements and insurance needs.
“It shouldn’t just be about fund performance; it should be about whether the advice provided is right for the [clients] and whether it helps them meet their long-term financial goals,” says Enslin.
“A fund might be first quartile in terms of performance but the [clients] could still end up not meeting their goal of having enough money to put their child through university. That’s why we see the evolution of private banking actually more towards integrated advice.”
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