With the promise of increased digital disruption, strong volatility and geopolitical uncertainty, 2017 can be challenging for private banks. Yet these troubled times may present private bankers with an opportunity to make themselves more relevant to HNWIs. Those who can establish their value proposition as trusted advisors may find clients clinging to them for safety. Graeme McKenzie, EY Asia-Pacific sector leader for Wealth & Asset Management, examines three strategies to achieve this status in 2017
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Performance
In these volatile times, the role of the private banker is arguably more important than ever. Equities are at all-time highs; interest rates are at all-time lows. Neither position is sustainable.
In this environment, performance will mean different things to different people. In particular, relative returns won’t be the key focus of every client, whereas absolute and goal-based returns are likely to be more prominent. Instead, private bankers will need to focus on what each client wants to achieve, which will likely include protecting portfolios from the downside risk of volatility. This potentially means that lower-margin passive products will make up a sizable portion of many portfolios.
Given the importance of fee transparency, in 2017 private banks will need to be outcome-focused and innovative with their fee structures. Better pricing does not necessarily mean lower pricing; it often means that clients better understand the correlation between what they pay and what they receive.
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By GlobalDataIn the year ahead, private bankers will also need to spend less time providing standard asset allocation advice and other activities that can be automated by an algorithm or a robo. Instead, their time should be spent calming jittery nerves in choppy markets and providing clients with the tools to achieve life and financial goals. In essence, the role of the private banker may become more like a financial therapist.
Engagement
With clients embracing digital more rapidly than many financial institutions, traditional private banks need to make certain clients can interact at any time, from any device — as well as continuing to offer quality face-to-face interactions. Every client interaction (physical and digital) needs to be simple, convenient and intuitive. This is a real challenge at a time when KYC, AML and CRS data requirements are increasing, requiring banks to keep going back to their clients to get more information. The key will be to make that engagement meaningful — not irritating.
Customer journeys should recognize that, as revealed in EY’s 2016 Global Consumer Banking Survey, digital maturity is not an indicator of financial maturity — and vice versa. This means private banks need to carefully consider how to serve customers who are digitally savvy but do not necessarily understand sophisticated financial products — as well as those who are financially sophisticated but not digitally confident.
Trust
In 2017, private banks must build trust in the institution’s determination and ability to:
- Protect a client’s financial wealth and deliver the right outcomes
- Act in a client’s best interest — disproving regulatory concerns about misconduct
- Protect private, personal information from access by cyber criminals
The last two areas are industry-level concerns. A single case of misconduct — or a single cyber breach invading HNWI privacy — will tarnish every private bank. The industry needs to pull together to protect the private-banking brand.
In 2017, a year when advances in technology, new competition and shifting client expectations will continue to change the game, it will be the private banks that continue to innovate in the areas of performance, engagement and trust that come out on top.
Disclaimer: The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
