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.
