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May 23, 2012updated 04 Apr 2017 3:40pm

A road map for restoring client trust

The global business model of private client banking services is fundamentally based on relationship and advice Thus, it is based on confidence.Declining client confidence in advisory services as provided by banks is an indirect consequence of the financial crisis Clients have begun to ask: Why should I trust in the advice of banks which have seen such bad results in their own management operations how will they manage my money and assets?Will they manage my assets fairly, honestly and in my best interests?It is very obvious: confidence in the ability of banks to serve as a trusted advisory partner has been deeply tarnished

By Gregor Broschinski

The global business model of private client banking services is fundamentally based on relationship and advice. Thus, it is based on confidence.

Declining client confidence in advisory services as provided by banks is an indirect consequence of the financial crisis. Clients have begun to ask: “Why should I trust in the advice of banks which have seen such bad results in their own management operations – how will they manage my money and assets?

“Will they manage my assets fairly, honestly and in my best interests?”

It is very obvious: confidence in the ability of banks to serve as a trusted advisory partner has been deeply tarnished. What we find is a “perfect storm” for advisory services. And this finding affects the business model of a whole industry.

Banking at a crossroads

A number of scientific disciplines have tried to define the term confidence. We can hold that there is no “one and only definition”.

By analysing psychological models for the constitution of confidence we can find that confidence is linked directly to “good old virtues”. These are for example: acting transparently and predictably; paying focused attention, reinforcing listening skills and empathy and communicating effectively.

The non-industry specific customer advocacy model (CAM) also describes the need to meet good, old-fashioned virtues in business practice.

However, according to Massachusetts Institute of Technology Professor Glen Urban and his contribution to the debate, Customer advocacy: a new era in marketing: “The customer advocacy model can be viewed as the top of the pyramid.”

“Total quality management and customer satisfaction form the base of the pyramid. They are necessary conditions for trust and advocacy.

“If a company is to recommend its own products honestly, it must have products that are good enough to recommend.”

Urban adds: “Customer advocacy strategy aims to build deeper relationships with customers by earning greater levels of trust and commitment.”

Put simply, CAM can be defined by doing what is best for the customer even if it entails recommending a competitor’s product. By acting as a customers’ advocate in a market, a company has a greater chance of earning more trust, sustaining better relationships, creating positive word-of-mouth, reducing marketing costs, increasing brand value – and achieving profit and growth. Customer advocacy reflects a cultural shift towards an advanced and mature customer orientation.

‘Virtue-driven’ guidelines

In the course of our findings, we have found a vital need for a recreation of confidence and the creation of let’s say “virtue driven” guidelines for achieving confidence, including fairness, frankness, delivering on promises, acting predictably and transparency.

Only if a thorough and uncompromising set of strategic imperatives are implemented within the business model of the industry can banks move towards a paradigm we have called “confidence banking 2.0”.

This will need to encompass: strategy, style, structure, systems, services and products, branding and proposition, staff, shared values and skills.

• This is an edited extract from an academic contribution, during the 11th International Conference of the Society for Global Business & Economic Development, May 2009 in Bratislava, Confidence Banking: the challenge of recreating a climate of client confidence for banking advisory services, by Gregor Broschinski, German Expert for Banking; and Jozef Komornik, Professor in Management, Comenius University in Bratislava, Slovak Republic

Gregor Broschinski

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