Time for client needs to take centre stage

Orbium’s first survey of private banks and wealth managers shows a sector aware of the many challenges it faces and the short time frame in which to meet them, writes Ian Woodhouse.

Late last year Orbium commissioned its first annual survey of board-level executives at private banks and wealth managers. When we came to look at the responses we were surprised at their candid and unflinching nature. Here was a sector that understood the pressure it was under and the short time it had to fix things.

The survey confirmed that the industry is facing a number of widely accepted challenges, from the changing expectations of new clients to the technological disruption sweeping through the entire banking industry.

All our respondents expect structural change through mergers and acquisitions as banks seek to grow in scale; 94% agreed that margins are under pressure from increased competition; and fully 100% of respondents agreed they need to provide seamless multi-channel services to keep up with customer expectations.

But only a small number felt they could meet these and other challenges. Executives were concerned that they may not be fully meeting the needs of new and next-generation clients.

None believed they sufficiently or completely met millennials’ expectations of technology-enabled services and education; 24% believed they only partially met the needs of clients preparing for retirement; and 30% the needs of inter-generational wealth transfer.

There is light at the end of the tunnel, however. Within just two years – by 2020 – many respondents are expecting to deliver better technology-enabled services: 94% said their relationship managers would have technology to help them meet new clients’ requirements.

This is part of a trend picked up by the survey that shows many would like to change their offer to better serve the next generation, as well as their traditional clients. In part, this will require switching focus from products and transactions to target specific groups with relevant advice and solutions. There was an admission that the needs of women, millennials and first-generation entrepreneurs had been poorly met in the past. To do better, private bankers understand that they need to increase their use of technology throughout their businesses, not just at the front end.

This will involve industrialising the back office so they can scale up and cut costs. Investing in the front office, meanwhile, will allow bankers to upgrade the services and investment solutions expected by their clients.

At the same time, they know they must become better at understanding client data to create products that match needs and thereby capture more of the individual client’s wealth. To gain these skills quickly, bankers are prepared to work with outsiders – namely fintechs and regtechs – that can help them digitise services and understand data-protection legislation.

None of this will be simple to implement. With margins under pressure, some see the size of the required investment as a major hurdle and are putting off change. Others are instead looking at the changes needed in terms of rebalancing their businesses and investing accordingly. This may mean they become specialists in certain market sectors and move away from the one-size-fits-all private bank model. Perhaps they will start to differentiate themselves by their service to clients. For example, some private banks and wealth managers are beginning to equip relationship managers with technology that helps them personalise insight and advice.

The upside is that many expect that by 2020 they will be better at meeting client expectations. This will mean having the right technology to service millennials, improving inter-generational wealth-transfer services and helping senior executives diversify their portfolios. But having said that, few believe they will completely satisfy their customers’ changing expectations of private banking services. Taken together, the findings of the Orbium Wealth Management Survey 2018 highlight how hard it is to meet clients’ expectations with the current business models and legacy infrastructure at private banks and wealth managers.

But it also shows a notable level of clear-sightedness about how things should change. This might mean partnerships with fintechs and regtechs; recognising that new market segments may require different products and levels of service; or that investment in data analytics will help them capture more of their clients’ wealth. It’s a wake-up call.   

More information on the survey.