Growth in times of uncertainty: Rectifying underpriced client relationships

Introduction

In times of uncertainty and market volatility, as income is adversely impacted by reduced transaction volumes and falling asset values, private banks and wealth managers should set a key commercial priority to review their existing price enforcement and discounting approach.

Until the market downturn in 2022, private banks and wealth managers had enjoyed favorable market conditions for more than a decade, with growing asset values and healthy investing activity. As such, price enforcement was not a main concern for banks when acquiring new clients, resulting in a more relaxed pricing discipline and, in turn, to relatively large and unstructured discounts. This lack of a structured, differentiated target price and discounting logic results in excessive, ongoing revenue leakage, which builds up over time within the client book.

Only now, as margins have come under more pressure, banks are starting to truly feel the consequences…