Roots of The History of Private Banking and Wealth Management

financialtreat – will explain the Roots of The History of Private Banking and Wealth Management that you will get in the following article. Let’s look at this article carefully!

Private banking is a banking, investment, and other financial services offered by banks and financial institutions to service people (wealthy individuals) by providing financial services. The term “private” refers to customer service provided more personally in mass-market retail banking, usually provided through a special bank advisor.

At least until recently, it consisted mostly of banking services (deposit taking and payments), discretionary asset management, intermediaries, limited tax consulting services, and some basic concierge-type services offered by a single appointed relationship manager. In a narrow sense, Private Banking is a part that is more devoted to wealth management aimed at very wealthy customers, then of course private bank customers are not ordinary customers.

History of Private Banking and Wealth Management

Private Banking in the lens of history cannot be separate from Wealth Management, because indee the two are interrelate despite significant differences. The term wealth management has become an important icon in the new Indonesian business world approximately 10 years ago, but from a world perspective, wealth management is not a new field.

Wealth management has age as old as the financial industry, although at the time of its birth, it has not been referre to as wealth management. Wealth management began in London around the 17th and 18th centuries. Which was the beginning of the development of international financial centers. Where traditional private bankers represente finance in their earliest forms.

This financial institution provides services to royal members who carry out international trade in its function as a depository, seeking loans, providing foreign currency, and so on. Private bankers which are the beginning of the evolution of banking later in the history of the future have create other types of banks such as commercial bankers, merchant bankers, corporate bankers, and so on.

Thanks to the industrial revolution. London and Paris became the center of wealth management development in the form of the services of these private bankers. The history of UK private banking can be seen in the following table. Institutional wealth management begins in London. Then expands to various European countries and then to the Americas, Asia, and other continents.

An important and noteworthy development of continental Europe is what happene in Switzerland. Although the term wealth management itself was not coine in Switzerland, in its development until now. It can be said that Swede is the ‘Mecca’ of wealth management. The development of private banks in the past, which is the forerunner of wealth management today is very rapid in Switzerland as seen in the table below.

The Swiss currency is the most stable currency compare to other countries currencies.

Another condition that is the great attraction of wealth placement in Swiss banks is the very strict secrecy guard maintaine by banks in Switzerland. Which at that time were second to none in the world.

The confidentiality of this bank information is considere a kind of relationship between the doctor and the patient or between the lawyer and his client. The Swiss government argues that freedom of privacy is a very fundamental principle and should be protecte by all democracies.

The swiss country’s footprint was then follow by the countries of Panama and Singapore which attracte investors by tightening bank secrecy. Singapore has change its rules by imposing higher fines and longer prison sentences for those who violate bank secrecy. Thus, Singapore has the ambition to become a Swiss in Asia. And Panama become a Swiss in the Americas in the sense of providing financial and banking services.

America began to pursue the rapid development of financial institutions with its famous Wall Street. Banking in the United States is not only strong in the field of asset management. And financial management but began to develop wealth management as well. So it is not surprising that the term wealth management for the first time was indee introduce by united states financial institutions. Financial institutions that are famous for developing the above include Citigroup, Morgan Stanley, Merril Lynch, and so on.


Technological developments in international economies. Such as the Internet and mobile phones confirm that banks must innovate with value propositions and look for new markets. For example, the traditional private bank market in low HNWI growth. As Europe against Asia can be compare with the number of millionaires has grown to up to 3.6 million.

Banks also provide examples of private bank services at lower prices than traditional private banks calle premium banking services or priority banking. Wealthy customers with accounts do not generate as much income as traditional private banks. But a large number of customers also makes the bank have a considerable income.

The products offere to premium banking customers are the same as those of private bank customers. Except they do not include global investment managers (hedge funds). Or facilities to manage their own business accounts. In short, it is part of wealth management on a much smaller scale.

In 2016, Credit Suisse and UBS replace the word “private banking” with wealth management; Private banks have face reputational risks as a limitation of tax avoidance or even tax evasion. Therefore, in private banking at this time we are more familiar with the term wealth management.

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Private Banking and Wealth Management in Indonesia

The development of the wealth management and private banking industry is still hampere by several domestic challenges. First, said Mulya, there is still an imbalance in the number of human resources (HR) wealth management and private banking compare to the growth of HNWI. The behavior of Indonesian customers is almost no different from customers in other regions in Asia.

In other words, it is still strongly driven by transactions, trade orientation. And of course yield orientation, as well as, lastly, government bonds, which give high yields. In addition, in Indonesia, which is a Muslim-majority country, Sharia products. And Sharia solutions must be further sharpene for the market. Both for investment and insurance.

Indonesians tend to be conservative in investing and prefer to deposit their funds. Investment in the capital market (stocks and bonds) is also still limite and not widely understood by the Indonesian people. Although Government Bonds offer a yield of more than 7%. This indicates that market education around investment products needs to be develope quickly and all industry players need to use time. And funds to increase the number of new customers in the future.

The second challenge is the development of wealth management and private banking business products and services. This is a tough challenge for Indonesia. Especially with the implementation of the ASEAN Economic Community (AEC) on December 31, 2015.

That was about the history of private banking and wealth management. The two cannot be separate because the embryo of wealth management birth starts from private banking. Good luck!

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