Learn More about Private Banking and Asset Management Liability
Managing the wealth of high-profile individual clients has always been the focus for banks, but it has become one of the banking world’s most coveted businesses over the last few years. Recently, an increase in the assets managed by private banks has been noticed, which is mainly because households are now willing to use tailored financial advice. Along with banks, many asset management firms are springing up to take advantage of this banking segment. This has led to an increased competition within the industry, and due to these changes, banks are now compelled to find new tools to improve advisor effectiveness and strengthen existing client relationships.
Providing customized and sophisticated risk management is the basic goal of a successful private banking strategy. It also helps a bank stay a step ahead of industry competitors. An important concept now in use to strengthen both advisory quality and risk management is the so-called “asset management liability” approach.
ALM is all about adopting the portfolio management process with the intention of handling the presence of future financial constraints and objectives. The approach is also directly related to goal-based asset allocation, as mentioned in the behavioral finance literature. Many experts believe that individual investors often choose to go with those investment strategies that focus on their multiple investment goals, which may have different risk profiles or time horizons. Just like goal-based asset allocation, the basic reason for using ALM approach is to understand that a person’s portfolio should be altered to his consumption as well as spending objectives. This is exactly the time when a private banker uses ALM approach along with different tools to include individual goals into the portfolio construction by making a single liability benchmark that stands for all objectives.
Here, it is crucial to mention that though this approach is already in use by institutional asset managers, not many are applying it to money management in private banking. Actually, most financial economists have done nothing to deal with the financial needs of households. By assuming unlimited time horizons, complete markets, or the nonexistence of borrowing constraints, many of the textbook solutions are of no value in resolving everyday private banking issues. This is when a private banker comes forward with customized solutions to their client’s unique needs. But you can only expect an experienced and professional private banker doing this for you. It is so because not all private banks can help tailor an investment strategy that not only considers the investor’s risk preferences, but also reflects the correct time horizon of his investments and spending objectives.
The fact of the matter is that private banking is growing rapidly with more and more investors expressing interest in using these services. Banks, on the other hand, are trying their best to find new and improved strategies to help investors manage their assets in a much better way. Using ALM is a step toward providing clients with the best asset management services. Therefore, if you are interested in making use of these private banking services, you should take your time and select the bank that is well aware of when and how to introduce new techniques to help their clients.
Get more information about Alfredo Piacentini and how he has helped develop Banque Syz. Alfredo Piacentini:Co-Founder of Banque Syz & Co is one of the top private banks in Switzerland.