With a rise in pre-tax profits of 8.1 per cent in 2006, the industry's profits have nearly doubled over five years, spiralling 47 per cent since 2003.
Those banks that expanded their cost base by as much as 27 per cent have increased their roster of relationship managers by 18 per cent and their assets under management by 24 per cent on average, the Financial Times reports.
However, banks that kept their cost base flat saw losses of nine per cent in relationship managers and only saw asset growth of four per cent on average.
"Private banks that just try to rise with the tide, not having a clear growth strategy, are doomed," McKinsey's report stated. "Not investing is largely equivalent to slowly running off the franchise. The consistency of investment into growth will be even more critical during the next downturn."
The number of ultra high-net-worth investors has outpaced the increase in the rich by nearly twice the rate, accounting for 26 per cent of private banking assets last year, up three per cent since 2005.