Private banks have searched for ways to empower their relationship managers (RMs) in the client discussion, while managing cost more carefully. Thomas Zink talks to Andrew Au and Lawrence Grinceri from AG Delta about their vision of an integrated, dynamic one-stop platform for RMs.
Asia’s wealth momentum has turned private banking into a promising and busy market place. Western private banks, traditionally dominating the industry, are expanding further in the region to diversify from saturated home markets and tap into Asia’s growth potential, while local players push into the market.
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Still at an early stage, with many banks in investment mode, cost-to-income ratios in the industry however have increased beyond healthy levels. Given the often limited scale of business, many banks have held back on major technology investments in the past. Although many of today’s challenges are not new to the industry, the recent surge in compliance costs has raised the necessity to act.
Efficiency. Compliance. Customer Experience.
Efficiency, compliance and customer experience have become the top three items on banks’ priority lists as they face a range of challenges. Intensifying competition from domestic and foreign players over more careful and knowledgeable customers with a very scarce talent pool, and the recent increase of regulatory requirements and administrative work are making life tough.
Despite strong infrastructures in their home markets, many foreign banks have shied away from investment to upgrade systems in secondary markets. Private banks have also realised the benefits of supply chain automation and its impact on cost.
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By GlobalDataWith wealth management products becoming increasingly commoditised, an automated supply chain and efficient execution will become a necessity rather than a differentiator. This will be an important building block for improving the quality and delivery of advice, which many believe to be the battleground of the future.
Service as the differentiator
Andrew Au, chief executive officer at AG Delta, observes: "The commoditisation is already happening in the industry. Clearly product differences have become assimilated today. Consumers can go to various private banks and buy the same product. The differentiator is the service."
He elaborates: "Today, banks have very different levels of automation in their processes. The banks with higher automation will have stronger cost-income dynamics. Once RMs and banks can spend less time on transactional, administrative, and compliance tasks, the ultimate reason for a customer to stay with a bank is going to be the individual relationship and the quality of advice."
According to Au, tomorrow’s key differentiator will be a private bank’s ability to empower its frontline staff to deliver better and more efficient service and advice to their customers.
AG Delta is new on the radar of private banks. It is a new genre of wealth management solution that connects the frontline desktop to the core systems and data warehouse putting the right information at the RMs’ fingertips. This spans information on the customer portfolio, product information and customer suitability, pricing, compliance checks, transaction execution, and captures the customer conversation history including product pitches, customer preferences and interests.
Round that off with transactional alerts and reminders for customer engagement and you have a powerful tool to support both, experienced and the inexperienced RMs and let them focus on the customer relationship, rather than administrative tasks, Au argues.
"In the traditional client discussion, the RM uses static printouts of the information needed. During the conversation, the RM and client will discuss about where to go and how to get there – so basically a lot of important things to take note," Au describes.
"Today all these interactions are off-system and either have to be entered manually by the RM after the discussion or are not captured at all. Our technology allows banks to capture all these information – whether it’s a quote, a request, or an expressed interest by the client. If this is done across all segments it gives the RM a demand function and this in itself is a very powerful tool," he adds.
Following Amazon’s lead
Au draws the analogy with e-commerce provider Amazon. "Traditionally, the customer would have to walk into a brick-and-mortar store, and the only way to capture demand is through an annual stock-taking. But with the emergence of e-commerce technologies, the buying experience has been completely democratised with customers reviewing and comparing products online. All those clicks and actions taken online were mined by Amazon and this enabled them to achieve a much greater understanding of the consumers across different segments.
"Likewise in the wealth industry, people-to-people interactions were kept offline causing high opportunity cost for the stakeholders. Without the right insights, it will be tough to enhance the client experience."
The ability to have dynamic conversations is likely another differentiator in the customer experience. When a customer expresses interest in a particular product, the RM is able to demonstrate the impact on the portfolio and risk weight, additional information on the product and pricing, relevant news, and even if there are sufficient funds in the client account – and all that in real time.
Private banking efficiency
Lawrence Grinceri, COO at AG Delta, says: "In the next two to three years, private banks will have to reach a state, where they have put an efficient supply chain capability in place. We have seen the impact of disruptive technologies like supply chain automation on other industries, such as retail or manufacturing. Players not fast enough to adapt, usually find it very difficult to stay in the competition. I doubt private banking will be any different."
Grinceri adds: "Surely some banks will do it better than others. Those who rely on multiple platforms, which may do not communicate in a very well-engineered manner, will find it costly to maintain and difficult to innovate and supplement with new services. This may also increase risk and time-cost, as opposed to those that have put in place a more elegant solution."
With private banking a relatively young business for domestic banks, they do not face the same restrictions and legacy issues as established foreign banks. With less turf to block the evolution of technology and facing the massive potential of the mass affluent market, domestic banks are likely to be among the early movers in order to increase operational efficiency and better deal with the talent challenge.
