Advisor | September 2022
In Italy, over 75% among the most affluent people – private clients or HNWIs – owes their fortune to an entrepreneurial activity. 34% of them has an active role in their company, while 17% of them has sold it.
The average age of Italian entrepreneurs is 68 years old and increases every year: over the past ten years, the number of entrepreneurs under 40 (9%) has decreased by 3%, while the number of entrepreneurs over 70 (31%) has increased by 2%.
Financial networks and banks compete to conquer the heart of entrepreneurs both because they are rich and old, and because they tend to be drawn to services with high added value.
Successions, corporate finance operations, mergers, acquisitions, the sale of shares, stock market listing, club deals, investments in private equity and debt ensure higher margins to recurring activities.
Contrary to financial networks, banks can assist their clients who are also entrepreneurs by financing their companies. In fact, although they absorb capital, financing activities tend to build loyalty in clients and – if well managed – they can be profitable.
What if an entrepreneur wishes to be assisted by the same financial professional both in the management of their business and of their personal situation?
A survey conducted by FINER on a sample of over one hundred entrepreneurs reveals that, when it comes to small businesses, entrepreneurs generally prefer to keep their business and personal spheres separate.
On the other hand, the larger the business the more welcome the option of maintaining one single subject, with different financial professionals and skills.
Assisting an entrepreneur on both fronts – business and personal – requires teamwork within banks, something far from simple to achieve.
The ideal solution would be to create teams made of one corporate manager and one private banker. There are, however, some obstacles.
The first is a cultural obstacle: corporate managers are used to being sought after by clients demanding money to the bank.
On the other hand, private bankers demand money (to be invested) to the client. And this is far from being a trivial gap.
Another obstacle is the issue of the ownership, so to speak, of the client and the concern of losing “my” client.
The worries of private bankers are connected to the possibility that the bank might not grant a loan to “their” clients or grant it on unfavorable terms; yet another, very concrete, concern is linked to bureaucratic lengthiness, which might lower the client’s level of satisfaction or wear out their relationship.
On the other hand, corporate managers fear that an unsuccessful investment might undermine an old and solid relationship.
From time to time, the issue of teamwork between business and private banking comes up. On such occasions, economies of scale are a very popular topic; however, while very clear on paper, they are very complex to achieve as they rely on financial professionals with very different mindsets.
Some banks have chosen to emphasize, also through their names, their willingness to assist clients who are also entrepreneurs. Others have been doing so, if more quietly, for years.
In any case, the issue is a very pertinent one because of the rising rates on loans, the marginality of corporate operations and the progressive erosion of the margins connected to investments and recurring activities.
It is, in conclusion, a hard puzzle. Maybe this is why the vast majority of financial networks keep – for now – a safe distance from credit activities directed to companies and instead hold on to entrepreneurs.