Will Inflation Devour Wealth?
In conversation with OTP Bank's private banking executives Levente Ujhelyi (left) and Tamás Bozsogi (right).
Last year saw a serious downturn for most investment vehicles, and experts are still on the lookout for a turnaround this year. What strategy do the wealthiest bank customers pursue in this challenging environment? How can you achieve real yields, and possibly growth? This was the topic of conversation when speaking with OTP Private Banking representatives Tamás Bozsogi, head of Prestige Private Banking, and Levente Ujhelyi, head of Private Banking.
BBJ: It is rare to see equities and bonds suffer at the same time, but last year this occurred in several instances. How can you get through such a difficult period and turn it into an advantage?
Levente Ujhelyi: If I had to answer in one word, I would say diversification. If I turn the question around, to whether private banking portfolios can beat inflation, then we can say that there are solutions and portfolios that can provide the opportunity for growth in the long term while also maintaining the real value of assets, even in such circumstances. Just as in a downward or an upward trend the success of an investment depends on good timing, this is also true in a highly volatile environment. It’s important not to rush, but to reassure customers. ‘Wait-and-see’ might potentially be a good technique in the short term for some asset classes, so it may be a good idea to keep the powder dry, or at least part of it.
Tamás Bozsogi: All these factors – including, for example, the COVID effect, geopolitical risks, and unprecedented inflation – have tended to increase the value of up-to-date market knowledge, expertise, and the ability to react quickly. This has led to increased demand for active investment advisory services in particular, but also for discretionary portfolio management. At the same time, I do want to stress that, as a private banking provider, we’re equipped to help our clients in any situation, even in the most extreme market circumstances, and the experiences of the past period have proved this.
BBJ: What are the most common questions and problems that clients turn to private bankers with?
TB: Clients were looking to build complex portfolios, which required more proactive decision support: active portfolio management and personalized advice, which in turn required us to offer a more innovative and diverse range of products and services. This was accompanied by – as an increasingly dominant trend – a generational change: clients are increasingly keen to involve the younger generation in asset management, thus helping to ensure smooth transitions. In addition, families and family members need private banking-level services. We have a solution that satisfies all needs.
LU: On the topic of trends, we should also mention digitalization. It’s a fact that personal contact continues to be one of the key values in private banking advisory services, but more and more clients are taking advantage of digital technologies. These innovative tools range from routine transactions to investment advice through digital channels – and, in our OTP Digital Private Bank category, we offer a combination of outstanding attention and innovative digital solutions. The products offered and the main private banking advisory services provided are the same; only the service channels are different.
BBJ: OTP Private Banking offers three service categories. How do you decide which is the most suitable for the client?
LU: The size of the assets, as the financial and investment needs of a client with HUF 100 million and a client with HUF 300 ml or more are different. Therefore, within OTP Private Banking, the prestige private bank is offered to high-net-worth clients with assets of HUF 300 mln and above. The private bank is made available from HUF 40 mln and the digital private bank from HUF 20 mln. Our aim is to provide the most bespoke service in each private banking segment, which is the service that the wealth and risk tolerance of our clients demand.
BBJ: Is the Western European red carpet service available to OTP Private Banking clients in Hungary?
TB: Yes, we're working on it; we're constantly developing in that direction. This way we’ll be among the first private banking providers in Hungary to offer a Swiss and Liechtenstein-style model to our prestige private banking clientele, with fully-customized service and investment and business solutions tailored to this particular asset size. One example is our aforementioned family asset management service, to make life easier for families. This involves treating the family as a single unit, allowing members access to private banking services that they wouldn’t otherwise be able to access individually. This is no coincidence, of course: passing on family wealth to the next generation in the most efficient way possible, in a planned fashion, is one of the most important tasks of private banking portfolio management. This includes preparing the heirs to manage the assets effectively. It is our aspiration that if a client in Hungary or a customer belonging to an OTP Group subsidiary bank wants to use the above services then they shouldn’t have to travel to Western Europe, but can access these from the OTP Group headquarters in Budapest.
BBJ: What do you expect from this year?
LU: We don't expect all circumstances to improve suddenly, because there are a number of factors, such as geopolitical risks, high Hungarian inflation, and the volatile forint exchange rate, which are likely to remain with us this year. That's why we must ‘always be on our guard’: up-to-date investment advice can only be given by a well-prepared professional, so ensuring that our staff have internationally marketable knowledge will be a focus for us again this year.
TB: Uncertainty remains high, but this year we expect the trends that dominated last year to ease. In 2023, we will continue to place great emphasis on preserving the real value of investments and helping our clients take advantage of opportunities, in line with their individual risk profiles. We have an extremely broad range of products available in order to diversify portfolios, and the up-to-date market knowledge and expertise of our advisors ensure that we can react quickly to market opportunities as entry levels become favorable.
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