At first blush, the private banking industry looks in fine fettle: managed assets hit $2.2 trillion last year, according to the an annual wealth report compiled by Boston Consulting Group. 

However, a rise of 7 percent (in local currencies) and 12 percent in U.S. dollar terms is largely down to a favorable market tide which has hoisted all boats, and not private banks winning huge new assets, as a study by Scorpio Partnership noted earlier this week.

This is illustrated in the spread between net new money growth and revenue off the assets, BCG partner Anna Zakrzewski said at a media event in Zurich. While the average assets rose 9.2 percent in the last two years, revenue only climbed 5.9 percent (see graphic below).

In other words: private banks aren't translating their new assets into commensurate revenue. Why? Pricing pressure is one reason: tougher competition and the effect of digitization are forcing wealth managers into a corner. Costs including for regulation are rising at the same time, leading to a painful double whammy.

Switzerland has been especially hit by this dual effect: the country's private banking assets stand at $3.8 trillion, which translates to a 3.5 percent rise from 2012. But the return on assets under management – or revenue against client funds – worsened a full 15 percent within the same five years (see graphic below).

What led to the profit drop? Mainly traditional offshore business, particularly that with European clients. The end of banking secrecy and the subsequent rollout of data-swapping with Europe and others have led to a drain of funds from Switzerland. The alpine nation's finance industry has yet to prove that it can offset the siphon with other, equally lucrative revenue elsewhere.

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