Private Banking E-Book

Boris F. J. Collardi

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Finance Editions
• Sprache: Englisch

Seitenzahl: 454

Veröffentlichungsjahr: 2012

Beschreibung

An insightful overview of the keys to world-class client service in the private banking sector As the number of wealthy individuals around the world increases, private banking and wealth management companies have grown to keep pace. After the fast growth the long term success is predicated on both winning and keeping clients, making a client-centric model a must. Private Banking: Building a Culture of Excellence provides a clear, easy-to-follow guide to building a committed base, written by an industry expert. Presenting an overview of the elements required to build a successful and client-focused private bank that delivers the kind of care and excellence wealthy clients demand, the book even includes real-life examples for a better understanding of concepts and, to help you achieve your goal. * Outlines how to implement a practical strategy for success in the growing private banking sector * Explores the key drivers in the private banking industry as well as the most recent developments in the environment to help you stay on top of customer demands * Includes case studies and other resources to show the keys to private banking done right in action Private Banking provides useful, hands-on advice for building a strong, lasting business in the private banking sector.

Leseprobe

Contents

Preface

Acknowledgments

Chapter 1: A Framework for Excellence in Private Banking

Vision and Mission

Present Status

Where and How?

Processes, People, and Plans

Metrics

Conclusion

Chapter 2: What is Driving Private Banking?

An Industry in the Midst of Change

The Four Key Drivers

Conclusion

Notes

Chapter 3: Finding the Right Organisation and Operational Strategy

Organisational Forms and Trends

Private Banking Structures

Designing the Organisation

Conclusion

Notes

Chapter 4: Forces Shaping the Regulatory Environment

The Regulatory Environment

How Regulators and the Industry are Addressing Global and National Concerns

Conclusion

Note

Appendix: Some Key Regulatory Bodies and Legislation

Chapter 5: Putting Clients at the Centre

Making Sense of Client Diversity

Arguments for Segmentation

Current Segmentation Practices

Snapshot of Segmentation Criteria

Behavioural Segmentation

Attracting New Clients

Retaining Clients Over the Long Term

Conclusion

Notes

Chapter 6: Beyond Products—Offering Tailored Solutions

Crises as Catalysts

Has Volatility Become the New “Norm”?

The Role of Financial Services and Products in Wealth Creation

Adapting to a Changing Environment

Matching Client Needs to Products and Services

Conclusion

Notes

Appendix 1: Overview of the Most Common Financial Products

Appendix 2: Key Criteria in the Selection of Funds and Funds of Funds

Chapter 7: Why Brand Matters

The Origins of Branding

The Functions of a Brand

Why is Brand So Important in Private Banking?

How Premium Brands Thrive

Brand Building Requires Discipline and Consistency

Brands Have Personalities and “DNA”

Practical Challenges of Global Brand Building

Importance of Behavioural Branding

Alternative Brand Channels

Conclusion

Notes

Chapter 8: Delivering a Superior Client Experience

The Evolution of Client Experience

Inspiration From the Luxury Hotel Industry

The Mega-Trends Driving Client Experience

Understanding Client Experience

Phases of Client Experience

Creating “Delightful” Experiences

Creating a Client Experience Strategy

Conclusion

Notes

Chapter 9: Understanding Service Excellence

Service Excellence and the Internal Client

Defining the Internal Client

The Service Value Cycle

The Elusive Nature of Services

Sustainable Excellence

The Four Drivers of Service Excellence

Measuring Service Excellence

Conclusion

Notes

Chapter 10: Winning the War for Talent

Why the War Rages On

Why Talent is in Demand

Weapons to Win the War for Talent

Measuring Your Success: The HR Toolkit

Conclusion

Notes

Chapter 11: Defining and Growing Leadership and Culture

What Makes a Leader?

Conclusion

Notes

Chapter 12: Measuring and Managing Performance

Understanding Performance Measurement

The Evolution of Performance Management

From Models to Strategy to Metrics

The Performance Cycle

Dimensions of Performance Management

Defining the Metrics

Private Banking and Performance Measurement

Choosing What to Measure

Balanced Score Card: Soft Measures in Private Banking

Conclusion

Notes

Appendix: Key Performance Indicators

About the Author

Index

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This book is dedicated to my wife Cherin for always being encouraging and enthusiastic about all my endeavours, to Alex Widmer for sharing with me his passion for the business, and to my parents for giving me a great sense of curiosity and a keen interest in people.

Preface

Can an industry steeped in tradition adapt to an ever-faster changing business environment? The numerous challenges facing private banking, which are elaborated upon here, have arisen over many years. But the urgency with which these must be confronted has taken on a whole new meaning since the financial turmoil that made itself felt in all areas of financial services. This made the timing of this book especially meaningful.

I started to write this book in early 2008, on the eve of a period that would raise fundamental questions about the future of a business that has survived, literally, centuries. Today private banking is being shaken to its core by global events. These include volatile financial markets and the new wealth being created in developing regions of the world, offering not only tremendous opportunities but also potential risk factors to consider. Meanwhile, partly as a result of past crises, banks worldwide now face the challenges imposed by new regulatory regimes. These factors have contributed to a sense of urgency driving changes within our industry. Not only has the pace of change accelerated but the scope of potential issues banks face today is also enormously broad. This is affecting how the business adapts: Should a private bank act with uncertainty or wait for the dust to settle and risk losing out on key opportunities that accompany these changes? A period of rapid growth was followed by widespread setbacks, giving rise to a desire to make the business more sustainable and answerable to the considerations that influence the health and vitality of any industry. This, truly, is one of the most interesting periods our industry has faced. In that spirit, I decided to finish the book.

For perhaps the first time ever, each private bank is being forced to examine a business model that has survived for decades, in some cases, for over 100 or 200 years. What has transpired in just a short span over the past 30 years or so is now challenging that long-established model. Global economics and upheavals in financial markets, new clients coming onto the scene, and stricter regulatory requirements all are contributing to a radically changing environment. When I began in the business in 1993, every private banker decided autonomously on the services and solutions offered to his or her clients. Private bankers dealt with issues as they arose, dispensing investment ideas, legal guidance, and often also personal advice to clients more or less on an ad hoc basis. There was no uniformity, and thus no guarantee of any quality standard or minimum level of service—the banker was the bank.

Changes in the past years have radically altered the familiar, sometimes cosy world of Swiss private banking. Players are facing a variety of challenges. Today the business demands a high level of expertise in many different areas of competence along with professionalism that must exceed already significant expectations that clients rightly have. Given the growing complexity and inter-linkages among markets, the increased sophistication of investors and products, as well as the imperative to abide by regulations of different regions, a client advisor today must rely on a number of specialists. The all-in-one advisor of decades ago has been supplanted by someone backed by teams of professionals in areas ranging from local investment market and estate planning expertise to country-specific legal and compliance knowhow, to name just a few. Private banks must seek to remain viable for the future by refocusing or perhaps by expanding into new markets, either on their own or through acquisitions and partnerships. As the opportunities arise, so do the risks, given that an extended set of local rules and regulations must be applied and closely followed when private banks expand into foreign markets. After the financial crisis, regulators intensified their efforts to reduce the threat of a large financial institution failing. These rules should improve the safety and soundness of the system and help to restore trust in it. It is up to the banking industry to deal with this new environment and to comply.

Almost four years have passed since the collapse of Lehman Brothers in September 2008, and a number of open questions remain that must be addressed, such as how to further regulate systemically important institutions where a failure could undermine the stability of the entire financial system. Adding to the complexity, private banks in Switzerland must adhere to ever more stringent requirements governing foreign domiciled clients. Banking secrecy has been, and will continue to be the subject of much public debate, both inside the country and abroad.

While it should not be abused, privacy has played an important role in protecting clients’ assets in the past and will continue to be valued in the future. There will still be assets held offshore, but the motivation for this will not be tax avoidance. Clients will want to maintain diversification of jurisdiction. This business will remain interesting for banks but time will tell in what form, and in which markets, successful players will operate in the wake of changing regulations. Adapting and upholding a variety of new and more complex country-specific regulations clearly increases the cost pressures that banks face, requiring them to find ways to provide cost-efficient service. Nevertheless, the only way forward is through meeting the requirements and anticipating how these will develop to ensure that the correct internal controls are in place and clients are well informed about compliance requirements. Private banks should serve as role models for their industry. No less is expected of them by their clients, their staff, and regulators. Growth must be based on factors that take into account the latest developments.

Even facing a wide range of challenges, however, the private banking industry is surrounded by plenty of opportunities. In terms of global wealth, the potential remains truly enormous, and there is still significant room for growth. Economic growth in many regions of the world has added a new dimension to the business. For example, a rising class of young entrepreneurs in emerging markets will favour private banks able to deliver to a high standard. Thus, the surge in demand for competent wealth managers in regions beyond Western Europe, especially in Asia, is opening up new territory for those private banks able to offer expertise and know-how. Singapore, for example, is already today a financial hub rivalling those in Western Europe, including Switzerland. Meanwhile, a number of financial firms, after the damage to reputation and balance sheets suffered in the financial crisis and amid regulatory pressure, are reexamining their business models. For strong firms, this creates unique opportunities to expand their business and reposition themselves in those markets.

Private banks will have to look at all of the forces and trends that shape the industry and identify the opportunities as they arise along with the challenges. They can never afford to lose sight of the fact that their business depends first and foremost on maintaining high standards of quality and personalised, superior client service. For a business that should always place the client at the centre, the question becomes, how can private banks continue to ensure that each and every individual in different places in the world gets the level of personal attention, delivered with the consistent high quality of service that he or she requires and has come to expect? In many ways, growing sophistication has transformed the way private banks operate. No single advisor could hope to fulfil all the needs of each and every client. This trend has led to a mass customisation, if you will. There is no room any more for the advisor who may lack the expertise, the information, and the people skills that the job today demands. The focus remains on clients, and the aim is still to provide the best individualised service. But how this is achieved has raised the bar in terms of the knowledge and expertise demanded of relationship managers. No matter how much the industry changes, clients are and will remain the most important element. They are to be viewed always as individuals, making decisions that can profoundly affect their lives and the well-being of those people who depend on them.

With these aforementioned opportunities and challenges in mind, this book aims to provide an overview of the elements that play a critical role in our business, illustrating how they may be aligned to serve a single objective: to strive for excellence in private banking, keeping the client at the centre of focus for all activities. This book seeks to highlight the current patterns and trends providing direction from the perspective of a private bank and based on the experience I have gathered over the past 19 years. Through my academic involvement as a member of the Advisory Board at the Singapore Management University (SMU), I have realised that very little literature was available on private banking. I hope that this publication will appeal also to the next generation of people interested in our métier, a factor of outmost importance given the relative scarcity of available talent in the private banking industry today.

The book is arranged schematically, with the first chapters providing an overview of the main elements that should be considered by a private bank, which will then each be explored in greater detail during the subsequent chapters. Although written from the viewpoint of Swiss private banking, this book also looks at the issues from a global perspective. My aim is to offer insight into the bigger picture of a business that is still in the midst of change to share a vision of the future of the industry and the potential directions that may be taken with regard to best practices and strategies. Yet it is important to note that any book can offer only ideas. It should not be construed as a reference guide full of ready-made solutions or a guaranty to success. It is therefore important to highlight that this book, though providing a practical framework, should not be construed as a strict how-to manual for running a private bank. There are many ways to go about formulating strategies and adapting to change. This book should be treated as a collection of ideas and suggestions; it represents just one attempt to answer the most pressing questions regarding what makes a private bank successful. It clearly does not offer all the answers, and in the end, the well-reasoned and sound opinions of each individual reader must decide what solutions are most suitable and practical, based on the particular situation.

To come back to my original question: Can an industry with such a long tradition adjust to an environment where change is taking place at an ever-increasing pace, affecting nearly all aspects of the business? Those institutions that will succeed must meet numerous challenges, taking into account modern practices and ideas, while continuing to respect established traditions. Private banking needs a courageous new vision, but it also needs to continue to develop the basic expertise, competence, and capabilities necessary to work well and efficiently.

There are many ways to approach this. I have tried to touch on a few that might resonate especially with readers in or associated with the industry. It always requires work to realise a vision, but it is possible. This is the message of this book. Despite the many questions the business faces, the outlook for private banking gives every reason to be optimistic. The way ahead won’t always be easy. Yet the opportunities are vast. Private banking has a great future ahead of it.

Acknowledgments

When I started to write this book at the beginning of 2008, I did not anticipate that the upcoming four years would be the most intense, interesting, and thrilling ones I have up until now experienced in my professional life. I am not referring only to my career development but certainly also to the events that affected the financial industry and indeed much of the world during this period. The financial industry has entered a phase of radical change with the debate about the future of private banking—the very subject of this book—taking on new dimensions that hardly could have been imagined just a decade ago, or even when I started to write this book. Without a doubt, this period has provided me with much inspiration and a good deal of insight, furnishing fertile ground to bring this project to fruition.

Certainly, however, it would never have been possible to write this book during such turbulent times without the valuable contributions offered by those to whom I am grateful for their help and unflagging support. Two people in particular deserve mention for being there early on when the book was little more than an idea and sticking with it to the end. Christina Ziegler and Guido Ruoss have helped to take this book from a set of ideas to something with a carefully conceived and viable structure, providing considerable support in content management and research, going through numerous revisions, and pulling everything together whilst acting as a valuable sounding board. Without their help and unflagging commitment the book would not have been completed. I also would like to express my sincerest appreciation to Alice Ratcliffe for the extensive editing work and professional writing experience she has brought to the project.

Further I also would also like to thank the two industry leaders—Raymond Baer and Hans de Gier—for sharing their valuable experience and thoughts in the context of the book. My sincere thanks also go to Leo Charitos and Jan Bielinski for reading the manuscript and making valuable suggestions, which were readily incorporated. To Anthony Lassman, Gareth Penny, Alain Zimmermann, Andreas Zingg, Beat Blaesi, Gwen Walbert, Wolfgang Jenewein, Renate Meier, Daniel Aegerter, Marcel Widmer, Werner Hollenstein, Anne-Marie Nega-Ledermann, Eric Benischke, Cyril Schoch, and David Taylor for their valuable contributions and insightful discussions about their field of expertise. I also would like to thank the team from Wiley—Nick Wallwork, Jules Yap, Janis Soo, Emilie Herman, and Stefan Skeen—for their great editing support and production work. Finally, I would like to express my thankfulness and honest recognition to all the people who accompanied me during my career—in particular the employees of Julius Baer—for their trust and support and the various ways in which they have enriched my professional experience.

Chapter 1

A Framework for Excellence in Private Banking

One of the strangest lessons of the financial crisis was that despite the large number of people who were aware of the direction in which things were going and the many warnings sounded, the outcome was in a sense unavoidable because there were too many short-term—and short-sighted—incentives that were not aligned with long-term goals. As a business, wealth management poses interesting intellectual challenges: How can long-term goals of capital preservation and appreciation be matched with short-term market fluctuations? Another question is how do we achieve this while serving one of the most demanding client groups in a fast-growing and highly competitive market? This “culture of excellence” demands that one accepts basic assumptions, attitudes, practices, and concepts upon which to build a business capable of satisfying the most demanding clients. The best time to do that is not when business is booming; the foundations must be laid well in advance to take advantage of the opportunities provided by a crisis or recession.

Is it possible to change systems and alter the incentive structure based on one single event or a particular insight? Rarely is this the case. Too often, institutions tend to stick with the paradigm that they have chosen and, furthermore, fail to communicate it or to inspire employees. Often, individuals are not even aware of the bigger picture and how they fit into it. People in banking generally know what is expected of them based on a job description and performance objectives. But sometimes they lack the understanding of how they, or their function, fit into the bigger picture, along with the bank’s vision and the general direction the industry is taking. If a broader frame of reference is lacking, people have a more difficult time adjusting to the extreme fluctuations that may characterise private banking today. Achieving a “culture of excellence” in private banking isn’t merely an exercise involving surveys to find ways to improve client satisfaction, or about putting pressure on employees to meet particular goals. It goes right to the basic foundations of the business. It requires redefining the concepts and terms that are often taken for granted. Then, and only then, is it possible to get to the point of asking how structures and processes can be improved to create value for all parties involved.

Before going into more detail about specific topics, it is worthwhile to lay out the framework of this book. The way in which the book is structured can also serve to develop a strategy for a private bank. This framework will look at the following questions: What makes a successful private bank? Which aspects are important? How do these fit together? How should important goals be achieved?

To successfully steer a company striving for excellence, and particularly a bank, the vision and mission statement offer vital direction, but it doesn’t stop there. As outlined in Figure 1.1, there needs to be an honest appraisal of the business in its current state and how it really is performing. It also must ask tough questions regarding where and how it can best employ its resources, targeting which client groups and in which markets. Geography, the regulatory environment, and competition all play a role. In an ideal world, full data transparency would allow the market to be sliced and segmented so as to identify the most advantageous segments. In practice, knowledge of client behaviour is limited to the past, and the future is the realm of forecast and conjecture. Even the best strategy will be limited by what can be known. Running a bank therefore requires a mixture of managing and improving on what the bank already is doing, as well as transformational leadership, meaning venturing into new and unfamiliar territory. All of this requires measuring the performance on a regular basis to keep grounded. It’s no use formulating high-flown mission statements that have no basis in reality.

FIGURE 1.1 The Seven Main Components for Achieving Excellence—An Outline for This Book

Source: Author

The framework shown in Figure 1.1 offers a schematic approach to the steps necessary to take a bank from a simple vision to really achieving its concrete goals. This is done through a process that, hopefully, will lead to excellence—by definition something that also requires defining strategy, honing it, and constantly seeking to either reaffirm it or, as necessary, to make adjustments. What is “excellence,” and how can it be measured to know whether or not a bank is achieving it? To make it easy to understand the process that went into writing this book, the chapters are arranged in the same order as this overview: “future,” “now,” “where and how,” “through,” “plans,” and finally, “metrics.” These same elements correspond to the chapters, aiming to provide structure to a process that in practice is unlikely to be as neat as shown here. The chart represents an ideal to give guidance on the road to excellence. It does not rule out that there will be obstacles, detours, and unexpected bumps along the way.

The seven elements together define a strategy to achieve excellence. They can be further used to refine or to adjust an existing strategy or to guide a new business, an established one entering a new area, or, for example, one that aims to consolidate an existing business. The vision states how the bank would like to see the future. But first the current situation must be assessed, the now. Then management must decide where the bank wants to compete. This can include geographic regions or client segments that offer the most promising potential. Once that is accomplished, decisions must be made on how the bank will reach those markets and clients with a strong product range with a family of value propositions and excellent delivery. Then it must begin to implement that vision through its brand, people, performance management, and frontline processes. With the support of planning and information supplied by metrics, the process can be used on an ongoing basis to implement strategy, assess it, and alter it when needed.

VISION AND MISSION

The ideals and goals contained in the vision and mission statements take into account aspects of most chapters in this book. These are the inspirational elements that form the bedrock that defines a company’s existence. Anyone who has worked in a corporate environment will be familiar with the concept of company vision and mission statements. Ideally, the vision gives a sense of the company’s future aspirations. It gives a sense of purpose. Yet the reality often falls short of the ideal. Looking at existing vision and mission statements in all industries, no pattern emerges save for the fact that many companies want to be “number one,” or “the best,” or the “leading supplier.” Nevertheless, while companies have used or abused the concepts of vision and mission statements, it is possible to create meaningful ones that confer tangible benefits. It helps to recall that the vision is about leadership and painting a picture of the future that should explain why a company wants to create something. A mission is about management—managing how the company will achieve that vision. The mission serves as the link that takes a company from its vision to setting and meeting concrete targets. A vision describes a better future without saying exactly how the company will get there. The mission turns the vision into a concrete endeavour.

PRESENT STATUS

Along the path to excellence, the “now” shown in Figure 1.1 represents the current state of affairs. Chapter 2, “What Is Driving Private Banking?,” examines opportunities and challenges posed by the four main factors driving the industry. These include markets, the regulatory environment, clients, and competition. How these issues are dealt with and the success that individual banks have in facing changes in these major areas will be a determining factor in how they approach all the areas outlined here.

WHERE AND HOW?

To understand the “where” and “how” in the process, especially as it pertains to near-term developments, Chapter 3, “Finding the Right Organisation and Operational Strategy,” takes a detailed look at how this aspect of the business is changing. Companies are reviewing their basic strategies, and in some cases, this is driving them to consider alterations to their business models. These might be “pure-play” private banks joined together with other businesses as part of a larger “universal” bank, or it could include larger organisations that choose to focus on individual parts of the business. Equally important in terms of such developments, Chapter 4, “Forces Shaping the Regulatory Environment, ” provides an overview of the main changes that are key in terms of how banks can ensure that their business is transparent and meets stringent guidelines in terms of both local markets and international business. This is a major consideration when it comes to the discussion of where energy and resources should be deployed.

Chapter 5, “Putting Clients at the Centre,” examines long-term trends that determine whom banks serve. Changes with regard to the client mix and client expectations are key factors driving the business, and they will continue to do so in the future. While it is possible to segment clients by wealth level, risk preference, or any number of other variables, in all cases each client has a right to expect a tailored, customised service suited to his or her personal goals. This is discussed in Chapter 6, “Beyond Products—Offering Tailored Solutions.” Looking at how the changing market environment has affected clients’ preferences for certain types of instruments along with changes in the regulatory environment that also affect both the way needs are addressed and the types of solutions offered, it is a foregone conclusion that products and services must be suited to individual clients. This requires tailoring solutions to ensure that these best match clients’ needs.

PROCESSES, PEOPLE, AND PLANS

Allocating responsibilities allows goals to be achieved. But it is not the steps alone that are needed. There also has to be a way to give any story meaning by keeping in mind that all facets of this process are in some way intertwined. There are various ways that a bank can address the “thru” section of the path to excellence. A bank reaches its markets and clients through its brand. Especially in private banking, where brand is a relatively new focus, it is essential to understand what the brand stands for and how it can be reinforced. Chapter 7, “Why Brand Matters,” looks at these aspects, while Chapter 8, “Delivering a Superior Client Experience,” focuses on how clients perceive the bank, including by way of “touchpoints” that they encounter through advertising and by visiting the company premises. Chapter 9, “Understanding Service Excellence,” explores the idea that everyone working in an organisation is a client, even of other employees within the organisation. Much of this involves “processes.” Amid all the efforts to cultivate excellence, people, however, play the biggest role. Thus Chapter 10, “Winning the War for Talent,” takes a popular industry phrase as its title to explain how escalating demand for staff, especially in fast-growing markets, is influencing the industry as a whole.

All these factors can contribute to an optimal result if they are viewed objectively. It requires planning to ensure that the processes and, more important, the people work together to achieve the goals. Chapter 11, “Defining and Growing Leadership and Culture,” looks at how styles of leadership have evolved and how leadership can be encouraged, even in those who might consider themselves to be narrow specialists. Leaders must not only plan, but delegate. Planning is the art of turning goals into manageable steps.

METRICS

Every private banking “story” has a beginning, a middle, and an end. Very likely achieving goals in the quest to obtain excellence will prove that the process is self-perpetuating. To ensure that the bank is on track with regard to the strategy it has selected, targets are required. These need to be measured on a regular basis. Such targets can comprise key performance indicators (KPIs), for example. It is not necessary to measure 20 to 40 different parameters. A handful will do. They should be used to track developments in each region, market cluster, or organisational entity where the bank is active. At the management level, a relatively small number of KPIs tell the story. This is the focus of the final chapter of this book, Chapter 12, “Measuring and Managing Performance.”

CONCLUSION

This framework should serve as the unifying map to guide the reader through the different discussions in this book. By means of the steps outlined here, excellence gains a concrete dimension. It can be evaluated and analysed, and deficiencies can be addressed and strong points reinforced. Excellence then becomes more than just a word. It is something that can be strived for and, with effort, achieved. Without any plan, even the most inspiring vision will lead nowhere. Planning is the art of turning goals into manageable steps. By following a clear path and with a great deal of hard work, the desired aims can be achieved. The following chapters offer some insights into this process.

Chapter 2

What Is Driving Private Banking?

There are numerous forces at work shaping the private banking industry. Market volatility following the financial crisis of 2008 has led to a demand for simpler, more transparent types of investments among clients. Regulatory matters are also affecting the business. Concerns about the safety and soundness of banks have increased the pressure for stricter regulations to protect clients and to ensure that banks are adequately capitalised. As for clients, growth in nontraditional markets along with a shift taking place as a new generation takes over wealth planning also have affected how the business develops.