In a series of blogs we have highlighted how Swiss private banking executives see the future of wealth management in 2030 and discussed the implications. In this blog we outline a number of key steps that in our view every private bank should be taking today.
Clarify key beliefs and strategic focusToday, many private banks are stuck in the middle. They are too big to focus on the needs of a niche client segment that values a highly personal touch, but too small to enjoy the benefits of scale from focus on a single product group, country or client type– which in our experience kick in at only above CHF 100bn of assets under management. However some very successful players have found a niche and achieved impressive returns for their shareholders and clients by focusing on select markets and/ or client segments defined by needs – not assets. Private banks should seek to answer the following questions. What should be our purpose and ambition in the business of wealth management? What distinctive capabilities could we leverage to become the best – even if this is not in our core business today? How could we use these capabilities to create a unique value proposition for our selected market? What economic drivers do we focus on for the execution of our strategy?
The choices should be made according to the bank’s key beliefs about how the future will evolve. To deal with uncertainty, private banks should also define contingent strategies that can be deployed if the future develops differently from expectation. Scenarios such as those we have described in our previous blog post provide a basis for stress testing core strategies and defining contingent strategies.
Learn to partner in the ecosystemDigital technologies are creating an exponentially growing number of options for creating value for clients, and no single firm can cover all these options. So every private bank needs to determine what value it can deliver on its own, what value it can deliver by cooperating with ecosystem partners, and what value it should choose not to provide but leave to others. As opportunities emerge, decision-making should not be static and collaborations with ecosystem partners need to form evolve. Working within ecosystems is different from sourcing services along the value chain: it involves dealing with partners on an equal footing and identifying win-win business models, see also our ecosystem dos and don’ts blog post.Technologies such as API-based platforms for increasing connectivity or cloud services to provide scalability are enablers for efficient collaboration. Also, ecosystems are complex multidimensional networks, and experimentation is key to success – thus, private banks should seek to create or join a minimum viable ecosystem and also recognise that they can be players in several different ecosystems simultaneously.
Who might private banks partner with? This depends on the core needs of clients: these might include more obvious examples such as insurance companies, asset managers and fund platforms, but also less obvious examples such as hospitals, luxury stores, supercar dealers and hospitality services.
Last but not least, private banks need to accept that in many cases being a niche player and joining an ecosystem is a more realistic (and less risky) option than becoming the orchestrator of an ecosystem.
Focus relentlessly on client experienceMany banks have started to define client and/ or employee journeys to bring the client experience to new levels by focusing on the delivery of exceptional service in moments that matter. Human-centred design of products and services can make a huge difference from a client perspective, without necessarily incurring additional costs. The starting point, however, is a deep understanding of clients and their needs.
The needs of private banking clients can be vastly different, depending on age, occupation, family situation, domicile, available time, type of assets, and so on. But do private banks currently make sufficient use of all available information to give advice to their clients specific to their needs? However, the key to this type of deep understanding is the availability, accessibility and validity of (internal and external) data – maintained and analysed in full accordance with data protection laws. The first step, therefore, is to have a data strategy.
Empower your relationship managersIn response to new technology, changing client expectations and increasing pressure on margins, the relationship manager of the future will need to be more versatile and proactive than today. We believe that the future relationship manager should be able to form a community of clients in the digital and the real world and to build a strong individual brand. Private banks should empower their relationship managers by providing integrated tools, analytical insights and streamlined ways of working which reduce the administrative burden. One of the challenges for private banks is how to foster an entrepreneurial mind-set among its relationship managers while maintaining rigorous cost- and risk-awareness.
Increase organisational adaptabilityIn an age of uncertainty and rapid change, traditional management systems, structures and talent strategies tend to become outdated. Many organisations have therefore started to become more adaptable by taking action on five different layers: the ecosystem, the organisation, the team, the leader and the individual1. Some banks have started to organise their teams according to aspects of the customer experience (e.g., “I can easily reconcile my plan for retiring in financial comfort”) across functional silos and including both internal and external staff. Others are using informal structures to conduct network assessments to guide organisation design. Experience shows that these changes are best implemented incrementally, to try out what works for a particular organisation. For example, a private bank could introduce a mission team to serve a specific sub-set of clients, such as entrepreneurs. This multi-disciplinary team might comprise relationship managers, investment specialists, corporate financing experts, external tax experts, operations specialist and compliance experts. To increase the speed of delivering value to the client, these teams might employ agile methods based on iterative development, teamwork, distributed accountability and accepted standard project procedures.
These five recommendations form a basis for private banks to prepare themselves for the future. But it is not necessary for private banks to initiate all of them together. Private banks should move forward taking one small step at a time, gaining experience with new ways of working and developing greater clarity about its own business model. This should prevent the danger from trying to achieve too much in too little time, and also the risk of stagnation in the business from denying the need for any change.
“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction.” – Bill Gates
1 Deloitte (2018), “The Adaptable Organization”