Antonello Di Mascio: "Being a generalist is no longer enough"

An interview to Antonello Di Mascio, Chief Research Officer of Gruppo Excellence, published on Wall Street Italia magazine

In recent years, Italian private banking has been undergoing a major transformation. The challenge for banks and advisory networks is no longer simply to attract new assets, but to establish a clear and distinctive positioning to avoid becoming indistinguishable. Antonello Di Mascio, Chief Research Officer at Gruppo Excellence, takes stock of the situation.

Private banking clients often work with several financial institutions. How should service offerings become more specialised?
Italian clients have always maintained relationships with multiple banks, for several reasons. Spreading wealth across several institutions reduces the potential risk associated with the solvency of individual banks. A second reason is more sophisticated: clients with a high level of financial literacy may choose to allocate their wealth across several counterparties according to the objectives they wish to pursue for themselves and their families, within or across generations, selecting each institution on the basis of its particular strengths. They may allocate a portion of their assets to a bank specialising in private assets, another to an institution offering specific life insurance policies or specialising in equity markets, or to one equipped with advanced technology platforms that also reduce cyber risks.

How, then, can financial institutions differentiate themselves?
In private banking, financial institutions need to establish their own positioning: those with branches abroad can draw on geopolitical or tax risks in the client’s home country; those that have invested in asset management talent can emphasise performance.
The one thing a private bank must avoid is being indistinguishable or generalist. Specialisation in tax and legal services, complemented by family business services, makes a bank particularly attractive to entrepreneurs; platforms and remote advisers appeal to younger, digitally oriented generations.
A comprehensive and, I would say, innovative and sophisticated private insurance offering to manage longevity risk and everyday risks could make a private bank attractive and set it apart, just as a charitable giving allocation strategy could provide another distinguishing feature.
Excessive use of multiple banks, however, exposes clients to the risk of a suboptimal overall asset allocation and lower tax efficiency. For wealth exceeding €10 million, having three banks already indicates a high degree of multiple-bank usage.

Equities offer long-term capital growth. Do you consider private clients’ current asset allocations appropriate?
Time is the client’s greatest ally in generating returns. In recent years, the annual market effect, measured against assets at the beginning of the year, has averaged between 5% and 6%, following the loss of more than 10% in 2022. In private banking, performance is generated by several drivers: the equity component, private assets and actively managed investment products.The level of risk nevertheless depends on each client’s profile, experience and age. So far, private banking portfolios have fulfilled their protective role.

How do you see the future of private banking?
The generational transfer of wealth over the coming years presents a cultural challenge for the entire wealth management industry. New clients are digitally oriented and cost-conscious. Research confirms that they turn to financial influencers, but also want to maintain a relationship with a banker. Bankers must be well prepared, because AI is now an unexpected and permanent presence.New clients will interact with AI and then with their banker, while also seeking to keep portfolio costs down. Others will manage things independently. For private banks, this is a challenge that requires skilled advisers, central support teams, pricing linked more closely to advice and returns than to individual products, remote advisers and mobile banking apps. The real issue is how to use ETFs in clients’ portfolios.
Managed investment products must be capable of generating alpha rather than simply replicating the market. Finally, serving female private banking clients must not be overlooked: they will hold a growing share of wealth, partly as a result of inheritance.

How many bankers would be needed to cover the market?
There is still a gap to fill, because private wealth continues to grow. The number of bankers will also depend on how many banks each family wishes to use. In other words, the number of counterparties will matter more than the number of clients, since each institution will need its own private banking advisers.