Robo Advisor vs Relationship Manager? The digitalisation of private banking
The world of private banking is undergoing a significant transformation. More and more banks are moving their client services to the digital realm by developing apps that allow customers to access their accounts, investments, stocks and returns in real time. Up until now, private banking was designed to sell a service, not just the product. They have offered and their clients have come to expect an exclusive ‘white glove’ service. However, private banks are starting to realise they must play catch-up with commercial banks where digital expectation and delivery already exist - with the added nuance that there still needs to be a very personal touch for high net worth individuals. This personal touch is so important in fact, that according to a recent report from Accenture Strategy, over 77% of surveyed individuals said they preferred dealing with human beings over digital channels to get advice.
Some regions have been quicker and more agile to react to the growing market demand for digitalisation in private banking than others. The results from the 2021 FIS Readiness Report show that only one in 10 UK wealth management and private banking firms are planning significant increases in technology. This is compared to a worldwide average of closer to a third.
That being said, the real challenge for all banks lies in getting the balance between digital and personal just right. I’ll explore all this and more below, but first…
Why the move to digitalisation?
The trend towards digitalisation is largely driven by the transfer of wealth from generation to generation, and the shift in target demographic for private banks. The generation of private bankers and clients today are younger, tech-savvy and much more digitally inclined. One only has to look at the changing client base of Coutts as an example. Established even before the United States became a country, Coutts banks most of the global royalty and traditional HNWIs - and now, an increasing number of young, wealthy entrepreneurs and influencers.
Coutts, along with other private banks, are seeing more 20 to 30-year-olds walk through their doors. Many of these young individuals have built fortunes through digital channels such as Instagram, YouTube or gaming, and correspondingly, seek a strong digital platform when choosing their private bank. Moreover, wealth is also transferring between generations. As business founders retire, their children, more familiar with the digital world, are taking over.
In addition to the wealth generational transfer, the COVID-19 pandemic was an unprecedented catalyst for digital banking across the world. With many face to face interactions limited through multiple lockdowns, clients had no choice but to embrace digital service channels, which demonstrated our ability to function online almost as well as we do offline. This also forced many private banks to pay close attention to investing in and upgrading their digital offerings as a ‘future-proofing’ mechanism.
Alongside this, private banks have realised that through transitioning some of the more laborious elements of their workflow to the digital realm (such as onboarding and account opening), there are efficiency gains and significant cost savings to be had. These cost savings could also be passed onto the end client in time to come.
Private banks that are leading the digital trend
Emirates NBD is a perfect example of this private banking digitalisation trend. In 2017, they became the UAE’s first digital bank by launching an app called Liv. According to financial expert Richard Hartung, in its first year of launch, “Liv acquired on average 10,000 users per month, topping Emirates NBD’s average customer growth in the same period. The bank claims that 86% of those are new-to-bank customers.” The app has continued to grow in popularity ever since.
Another example of forward-looking private banking digitalisation comes from the Qatari Central Bank. Earlier this year, they launched the ‘Qatar Fintech Strategy 2023,’ which is aimed at supporting diversification and innovation within the financial services sector. This is an area that has been identified as a crucial tool to achieve long term development in Qatar’s financial sector, in line with Qatar National Vision 2030.
In general, Middle Eastern countries have been quicker to adapt to the digitalisation trend, largely because they don't have the entrenched legacy issues that the UK or other older, more traditional institutions have. They're smaller, newer and more flexible, making the transition to digital smoother and faster. Additionally, there’s also been a rise of family wealth offices in the Middle East, which is supporting this transition.
What does this increasing digitalisation mean for relationship managers at private banks?
From my perspective, this digitalisation trend is very intriguing. As an executive search professional who places relationship managers in banks, I've witnessed a significant shift in the skills and expertise demanded. Relationship managers, once prized for their Rolodexes of wealthy contacts, are now expected to also have investment knowledge and expertise.
The profile of individuals private banks seek to recruit today has changed dramatically. The traditional relationship manager who travelled the globe, wining and dining clients, has been replaced by a new breed: a hybrid of relationship manager and investment advisor.
This change in profile and demand has shifted the type of individuals I place and the skills they have. Relationship managers are no longer judged solely by the weight of their Rolodex. Now, their differentiating factor is their technical skill and ability to generate the best return for their clients as more of the interaction becomes ‘faceless’ through digital platforms.
Why private banks need to embrace this move to digital
While there are concerns that the move to digital might replace relationship managers with robo advisors, I think there’s a way for both to coexist. While an app can provide real-time information, I believe that HNWIs will always want that personal touch and exclusive service. The ideal private bank is one that customers can carry in their pocket - but also one that provides the opportunity for human interaction.
Those banks reluctant to embrace digitalisation due to fears of disrupting the relationship management role risk alienating their younger client base. The future of private banking lies in a balance between cutting-edge technology and human interaction.
If you're looking for professionals who can navigate this new landscape and cater to the needs of a younger, more digitally oriented client base, contact me directly and let’s have a chat about the talented professionals I know who are ready to meet the demands of the evolving private banking industry.