This is the kick-off to our new series on the Future of Private Banking & Wealth Management. In collaboration with a number of leading executives of the Swiss Private Banking sector we developed a select number of likely scenarios for the future. In the next months to come, we will publish these scenarios as well as their implications on the industry.

As a starting point, this blog focuses on three prevailing themes which all our scenarios have in common, all of them with fundamental impact on the way business is done to date:

1. Segment for value: Banks need to deliver what clients really value – no more, no less
2. Experience above all: Experience is the new loyalty
3. Power of ecosystems: Wealth managers of the future are assembled, not built

Over the past months we engaged with numerous leading executives of the Swiss Private Banking sector to discuss the industry’s future. Together, we ranked, dissected and clustered a large number of trends, and developed a select number of likely scenarios that were expected to take place in the sector 2030. All of them seemed to be relevant and it is difficult to predict what will prevail – maybe it will be a combination of the scenarios that actually materialises. However, the real purpose of these scenarios is not to predict an absolute future but rather tell us what to watch out for on the journey towards 2030.

With this in mind, we identified 3 common themes that all scenarios share and that will impact private banks and how they need to prepare for them:

1. Segment for value

Banks will need to choose between scale vs. niche. Either selling basic services at low price and at scale to those clients, who see Wealth Management as a commodity and don’t value in a more customised offering. In this segment, it is likely that new entrants which don’t build on IT legacy structures and rely on pre-dominantly digital channels will be able to grab significant market share.

Alternatively, private banks may target a niche clientele who expect sophisticated products and services, and value long-term relationships. In this context, the two questions to ask are:

• How big will this niche be in the future?
• Are we prepared to truly provide value-add services tailored to the client need?

2. Experience above all

Client loyalty is eroding in many businesses that are subject to commoditisation – this can only be countered by exceptional client experience.

With the venue of digital technology, clients expect to access 24/7 services anytime, anywhere. They expect this to be effortless and multifaceted through various communication channels and data sources. There are more people over 60 years old with tablets than people below 24 years old. So this is here and now. Are private banks really ready for this?

To achieve exceptional client experience, we need to properly understand what clients need. During our workshops with Swiss Private Banking executives we asked them to prepare two columns: 1) client needs and 2) service/ product offerings. While the second column was completed very quickly, the first one was filled only very little. This raises a number of questions:

• Maybe we know client needs too well and it is so obvious that we don’t need to write them down?
• Maybe we don’t know what clients want and we offer services/ products that we hope to fit their needs?

We often work with private banks to improve front office efficiency and client acquisition effectiveness. It is very rare that we see client interviews, client service assessments being performed.

How can we provide exceptional client experience and increase their loyalty if we do not know what is important to them?

3. Power of ecosystems

This lego picture shows various functions that are present within a bank. Many banks still today manage all these functions themselves as a fully integrated bank. When even some of the largest banks are thinking about outsourcing or using third party specialists to operate parts of the value chain, how can small and mid-size banks operate fully integrated?

In the retail banking sector, we already today see players focusing on slices of the value chain. Others try to become platforms and focus on distribution. Translating this into Wealth Management, each private bank needs to make distinct choices about how, with what and with whom they serve their clients, and what role they will play in the ecosystem. This might result in a battle for orchestrating the ecosystem and retaining the client interface as a trusted advisor, unless banks decide to be utility providers or product producers. On the other hand, these developments allow wealth managers to incorporate new offerings much faster by collaborating with other ecosystem players.

This is why we believe that the future wealth manager won’t be built – it will be an assembled ecosystem of individual best-of-breed platforms and service providers.

Conclusion

In conclusion, even if as an industry team we have been able to define scenarios for the future of Wealth Management, navigating towards it requires to manage the unknowns and prepare for the knowns. By appreciating uncertainty and systematically scanning for change-drivers that will inform the future, we can exploit the opportunities that lie ahead proactively rather than reacting to change as it falls upon us.

Let’s not forget that it is a change in leadership culture and mind-set that is required: uncertainty is an opportunity!

Jean-François Lagassé - Partner, Financial Advisory

Jean-François is the Romandie Market Leader and a Partner within Deloitte Switzerland’s Financial Advisory practice. He has more than 20 years of professional experience in the field and has worked in the United States, Canada and Switzerland. He has more than 20 years of professional experience in the field and has worked in the United States, Canada and Switzerland. Jean-François has successfully completed numerous M&A advisory and valuation mandates in sectors such as financial services, consumer business, technology and telecom.

Email 

Patrik Spiller - Partner, Head of Monitor Deloitte Strategy Consulting

Patrik is the Partner leading the Swiss Financial Services Strategy Practice, with over 17 years banking industry experience. He supported many of the leading international wealth and asset managers in the development of commercial excellence, pricing and innovation strategies,  major restructuring and transformational strategies, strategic cost reduction initiatives, and M&A assessments. Patrik focuses on operating model optimization and commercial excellence, improving bank’s revenue and cost base and delivery capability. He managed projects for most of the leading global banks, developing expertise in areas such as corporate strategy, IT strategy, organisational design, cost reduction, and offshoring strategies.

Email 

Johannes Schlotmann, Senior Manager, Monitor Deloitte

Johannes is a Senior Manager within the Swiss Monitor Deloitte Strategy practice and co-author of the Deloitte studies “Innovation in Private Banking and Wealth Management”, “Swiss Banking Business Models of the Future” and “Growth in Banking”. He is an expert in the Private Banking and Wealth Management industry and focuses specifically on pricing and profitability as well as growth and innovation topics in this area. Prior to joining Monitor Deloitte, Johannes worked for a Liechtenstein private bank as well as for a family office and private equity company.

Email

Dr. Stefan Bucherer - Senior Manager, Monitor Deloitte

Stefan is a Senior Manager at Monitor Deloitte in Zurich with eight years of experience in strategic consulting for banks. He leads the Business Transformation practice in Switzerland and is specialised in strategic business model transformations in banking. His main expertise is in retail banking, private banking and asset management. He publishes regular insights into areas such as the future of banking and industrialisation in banking, and is a member of Deloitte Switzerland’s Open Banking think tank. He is also a co-author of the Deloitte Wealth Management Centre Ranking.

Email