A recent VRL/PBI breakfast briefing in Hong Kong
focused on what customers want from their bankers and financial
advisers as Asian markets deteriorate in tandem with the West. The
consensus was communication is vital to regaining customers’ trust
and that technology may also have a role to play.
Given the high-profile
saga and customer outrage from nearly 30,000 retail investors in
Singapore and Hong Kong who invested – and lost – $2 billion in
Lehman-backed structured notes, client confidence has been a thorny
issue for private bankers and wealth managers in the Asia-Pacific
region.
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The customer outrage was well-documented
in the evening news. The investors, who were initially attracted by
the high returns from investments as low as S$5,000 ($3,360), took
to the streets and the local dailies splashed their front pages
with news of retirees losing their life savings.
The banks have since sought to compensate
investors that were found to be victims of mis-selling but the
impact on banking reputations has been felt across the market.
A recent Hong Kong breakfast briefing,
organised by PBI publisher VRL and Oracle Financial Services
Software, looked at trends in the private banking market and what
customers want from their bankers and financial advisers given the
background of economic uncertainty and a loss of client
confidence.
Roman Scott, managing director for
Calamander Group, pointed out that the much-touted decoupling of
Asian markets from the US and European markets has not taken place
– the region’s economies have been affected by the crisis affecting
the Western markets, and Asia’s private banks that rode on buoyant
growth through aggressive recruiting and expansion will be
affected.
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By GlobalData“The loss of trust and loss of performance
is a bad combination as the giants in private banking disappoint,”
Scott said. “There is a growing revolt against the industrial sales
model evident in private banking and wealth management as clients
seek trusted advice.”
A recent research report by local equities
research company, Tai Fook Research, concurred with Scott’s bleak
viewpoint: “Already in a cyclical downturn by mid-2008, banks’
wealth management business has been put into the deep freeze by the
Lehman mini-bond debacle that threatens to engender customer
antipathy and potentially lengthy litigation. Following a bumper
year in 2007, securities brokerage income has shrunk to only a
fraction of the previous year’s level, while fund sales, structured
products and insurance sales almost ground to a halt in the third
quarter with no signs of recovery in sight.”
“On the other hand, most banks have
expanded their headcount and premises devoted to private banking
and/or wealth management in the last few years that would be costly
to maintain. While fee income from other segments will be under
less pressure, their near-term room for growth appears limited at
best.”
Wealth business expansion too
fast?
As one of the newer banks in India to
focus on wealth management, KVS Manian, group head of liabilities
and branch banking from Kotak Mahindra, and Vikram Gupta,
vice-president, private wealth management at Oracle Financial
Services Software, spoke about their experience in leveraging
technology to deliver a more segmented approach to serving the
affluent market.
Kotak Mahindra and Oracle Financial
Services Software collaborated to launch a wealth management
business within a short time-frame in one of the fast-growing
markets in the world. In order to serve customers more effectively,
Manian advocates targeting specific segments such as non-salaried
business clients. Market research often highlights that clients
cite service quality, client focus and the personal nature of the
relationship as more important than the firm’s public image.
For the affluent, it is more important to
be treated as an individual, not as an account number. Although the
needs of private banking clients are hugely diverse depending on
how their wealth was created, geography, age, gender and attitude
to risks, common themes include excellent service, trust and
personal relationships.
“There is a need to recognize that
customers – and their wealth management or investment advisory
needs – are not homogenous,” Manian said. “The question is not
whether to pursue the affluent segment but how to tap this
opportunity profitably.”
He added: “The adviser has to be the
central point in the client relationship but enablers for this are
critical. Tools that can leverage current technology are e-advice,
smart CRM usage and technology-enabled channels.”
The general theme of questions during the
open floor session at the end of the presentations was how the
industry should communicate to clients and gain client
confidence.
“Affluent customers are extremely
interested in advice,” said Manian. “The amount of information
available to the affluent is overwhelming but what is missing is
advice.”
Scott pointed out that “independent
financial advisers will be the new threat to private banks” because
of client concerns over the exposure of large banks to toxic assets
and their loss of confidence in their private banker’s ability to
give timely advice.
