Classic private banks have often been described as obsolescent models. New technologies and disruptive developments made this happen. But there will continue to be important banking services that even a robot cannot provide, writes Michael Welti for finews.first.
This article is published on finews.first, a forum for authors specialized in economic and financial topics.
The statement ‹Banking is essential, banks are not› is attributed to Bill Gates. It has gained credibility because a generation is now established which, as digital natives, has been shaped by technological possibilities from the outset. But can the same house maintain traditional private banking and launch a digital neobank?
Classic private banking is a relationship business, as emphasized by the frequently used job title ‘relationship manager’. Empathy and good interpersonal ‘chemistry’ are vital in building trust and maintaining a long-term, close relationship with the client.
«It’s not a matter of opening drawers and putting the clients inside»
Does this mean that private banking is only slightly affected by the disruptive developments? Yes and no. Private banking is not a heartless and standardized service. It’s not a matter of opening drawers and putting clients inside. Personal consultation offers the highest possible data security as well as protection of privacy.
It is based on a personal relationship and appreciation along with a client advisor characterized by integrity and loyalty. Consultation makes use of long-term client data, enabling personal support. And it is based on the bank’s good reputation. An entrepreneurial approach is ultimately the decisive factor: if the client is happy, the consultant is happy too.
«Wealthy clients are early adopters of new technologies»
The complexity of the exponentially increasing flood of data and changing client demands require a higher degree of tailor-made individual services and innovative consulting approaches. Strictly speaking, even the ‹60-plus› client generation has a growing affinity for technology. In particular, wealthy clients are early adopters of new technologies. Despite this affinity for technological innovation, these clients would prefer not to do without a personal advisor or the bank.
The degree of complexity of services in private banking varies greatly depending on the client group and type of product or service. For the super-rich, a holistic approach to consultancy is offered, taking due account of all the asset, tax and pension issues. Clients can therefore expect the consultant to set aside time for a personal discussion that takes full account of their circumstances in their life cycle. Traditional private banking is based on a unique tradition of serving clients from very different countries. Flexibly structured institutions of manageable size can often respond more quickly to the client’s various needs. A high degree of continuity in the relationship between advisor and client is important.
«Online, too, clients want holistic, preferably individualized advice supported by practical IT»
Private banking will not in the future be possible without online options. Only they can meet growing client demand for banking services independent of place and time. The new Private Banking 24/7 gives clients the opportunity to interact with the bank and their advisor mainly virtually. It offers tailor-made mass services for the sophisticated mass market, providing access to a wider range of standardized products and services. This can be combined with a personal consultation if the human touch is desired. The offering is based on a digital financial assistant operated as a smartphone app.
A good data management system (DMS) is a prerequisite for a needs-oriented online offering: all documents must be digitalized and the information must be included in the personalized offering. Digitalization covers all areas of life. It turns traditional value chains and business models upside down: digitalization enables low error rates in the account and deposit management as well as a proactive information policy that creates transparency and communicates as neutrally and impartially as possible. Online, too, clients want holistic, preferably individualized advice supported by practical IT.
«Digitalization therefore also means democratization of the banking business»
Investment advice and asset management were formerly central to private banking. This has become increasingly automated and centralized. Today, investment advice, viewed soberly, has become an algorithm that can be implemented automatically using software. This is where digital banks come into play: they offer standardization, automation and digitalization of services. Digitalization therefore also means democratization of the banking business. Consistently available information and services as well as the associated decision-making options focus more on the client’s personality than his/her assets.
Private banks must in the future offer a wider range of offline and online options and services if they are to provide optimal support to clients. The well-coordinated coexistence of the traditional, personal consulting approach and a technically supported automation with a digital offering is obvious. This hybrid model combines the advantages of two approaches. Launching our own neobank has the advantage of a lack of legacy assets and a flexible size with lean structures.
«Intuition is the ability to gain insights into facts»
But despite all the digitalization, the robot with its artificial intelligence will never be completely able to replace humans. Money and wealth are sensitive issues for people. Human beings have been endowed with intuition and common sense. A robot will never be able to achieve this 100 percent. Intuition is the ability to gain insights into facts, points of view or a subjective coherence. Intuition comes from the unconscious and thus becomes a part of creative developments.
The intellect accompanies this development, but only executes or checks the results. It is the interplay of facial expressions, gestures and nuances with the context of life that creates a holistic consulting experience and will continue to remain the strength of private banking.
Michael A. Welti is the head of Reyl & Cie Zurich and the deputy head of wealth management of Reyl & Cie.
Previous contributions: Rudi Bogni, Peter Kurer, Rolf Banz, Dieter Ruloff, Werner Vogt, Walter Wittmann, Alfred Mettler, Robert Holzach, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris Rowe, Stefan Gerlach, Marc Lussy, Nuno Fernandes, Richard Egger, Maurice Pedergnana, Marco Bargel, Steve Hanke, Urs Schoettli, Ursula Finsterwald, Stefan Kreuzkamp, Oliver Bussmann, Michael Benz, Albert Steck, Martin Dahinden, Thomas Fedier, Alfred Mettler, Brigitte Strebel, Mirjam Staub-Bisang, Nicolas Roth, Thorsten Polleit, Kim Iskyan, Stephen Dover, Denise Kenyon-Rouvinez, Christian Dreyer, Kinan Khadam-Al-Jame, Robert Hemmi, Anton Affentranger, Yves Mirabaud, Katharina Bart, Frédéric Papp, Hans-Martin Kraus, Gerard Guerdat, Mario Bassi, Stephen Thariyan, Dan Steinbock, Rino Borini, Bert Flossbach, Michael Hasenstab, Guido Schilling, Werner E. Rutsch, Dorte Bech Vizard, Adriano B. Lucatelli, Katharina Bart, Maya Bhandari, Jean Tirole, Hans Jakob Roth, Marco Martinelli, Thomas Sutter, Tom King, Werner Peyer, Thomas Kupfer, Peter Kurer, Arturo Bris, Frederic Papp, James Syme, Dennis Larsen, Bernd Kramer, Ralph Ebert, Armin Jans, Nicolas Roth, Hans Ulrich Jost, Patrick Hunger, Fabrizio Quirighetti, Claire Shaw, Peter Fanconi, Alex Wolf, Dan Steinbock, Patrick Scheurle, Sandro Occhilupo, Will Ballard, Nicholas Yeo, Claude-Alain Margelisch, Jean-François Hirschel, Jens Pongratz, Samuel Gerber, Philipp Weckherlin, Anne Richards, Antoni Trenchev, Benoit Barbereau, Pascal R. Bersier, Shaul Lifshitz, Klaus Breiner, Ana Botín, Martin Gilbert, Jesper Koll, Ingo Rauser, Carlo Capaul, Claude Baumann, Markus Winkler, Konrad Hummler, Thomas Steinemann, Christina Boeck, Guillaume Compeyron, Miro Zivkovic, Alexander F. Wagner, Eric Heymann, Christoph Sax, Felix Brem, Jochen Moebert, Jacques-Aurélien Marcireau, Ursula Finsterwald, Claudia Kraaz, Michel Longhini, Stefan Blum, Zsolt Kohalmi, Karin M. Klossek, Nicolas Ramelet, Søren Bjønness, Lamara von Albertini, Andreas Britt, Gilles Prince, Darren Willams, Salman Ahmed, Stephane Monier, and Peter van der Welle, Beat Wittmann, Ken Orchard, Christian Gast, Didier Saint-Georges, Jeffrey Bohn, Juergen Braunstein, Jeff Voegeli, Fiona Frick, Stefan Schneider, Matthias Hunn, Andreas Vetsch, Fabiana Fedeli, Marionna Wegenstein, Kim Fournais, Carole Millet, Ralph Ebert, Swetha Ramachandran, Brigitte Kaps, Thomas Stucki, Teodoro Cocca, Neil Shearing, Claude Baumann, Guy de Blonay, Tom Naratil, Oliver Berger, Robert Sharps, Tobias Mueller, Florian Wicki, Jean Keller, Fabrizio Pagani, Niels Lan Doky, Michael Welti, Karin M. Klossek, Ralph Ebert, Johnny El Hachem, Judith Basad, Katharina Bart, Thorsten Polleit, Beat Wittmann, Bernardo Brunschwiler, Peter Schmid, Karam Hinduja, Stuart Dunbar, Zsolt Kohalmi, Raphaël Surber, Santosh Brivio, Gérard Piasko, Mark Urquhart, Olivier Kessler, Bruno Capone, Peter Hody, Lars Jaeger, Andrew Isbester, Florin Baeriswyl, and Michael Bornhaeusser, Agnieszka Walorska, and Thomas Mueller.
