Billet paru dans Bilan le 20 juillet 2016.
Qu’est-ce qui a changé depuis mon premier billet paru sur LinkedIn il y a 15 mois? Pas grand chose…
Et en tout cas pas l’état d’esprit. On profite donc de l’été pour refaire paraître dans Bilan, en 4 parties, ce billet de mars 2015.
On peut travailler sur les coûts et les risques, on le doit (même par beau temps), mais on préférera s’assurer que les dirigeants qui mènent ces projets travaillent pour la satisfaction des clients et de l’entreprise, pas juste celle du régulateur. C’est une question d’angle d’approche. Ce n’est pas l’un ou l’autre. C’est l’un ET l’autre.
Car le régulateur n’attend justement rien d’autre des banques que de travailler dans l’intérêt supérieur des clients
L’été est souvent propice pour faire un bilan et se relancer à la rentrée.
Je profite donc de cette « pause » estivale pour faire un bilan sur les 10 derniers mois.
Il me semble que l’on ne pourra affronter les défis actuels que si l’on pense d’abord client et développement d’affaires, en prenant en compte les coûts et les risques, et non pas l’inverse.
Retournons donc en Mars 2015 quand sur LinkedIn, je publiais un billet sur la transformation de l’industrie de la Gestion de fortune. Il y était beaucoup question d’état d’esprit.
Ce qui a changé depuis?
« Pas grand-chose », si j’en crois un banquier d’une des premières Banques Privées Suisses avec qui je déjeunais il y a une quinzaine de jours et dont, de par sa taille, j’aurais pu penser qu’elle était déjà passée à l’étape d’après.
Il semble que les plans défensifs sur la réduction des coûts, l’alignement réglementaire et l’évitement des risques soient encore les plus élevés dans l’ordre du jour des Comités de Direction.
Non pas qu’il ne faille pas s’en occuper, mais le drame est qu’il est pratiquement impossible pour les Dirigeants d’avoir le temps de penser à autre chose, comme les clients, les concurrents de la place Suisse, les places étrangères, son modèle d’affaires…
C’est un cercle vicieux ressemblant par certains égards à la roue du hamster.
L’approche client et entrepreneuriale est la clé pour voir la lumière au bout du tunnel et rendre le voyage plus mobilisateur, pour les employés comme pour les clients, et plus efficace en termes de ratio coûts/revenus pour les banques.
On peut travailler sur les coûts et les risques, on le doit (même par beau temps), mais on préférera s’assurer que les dirigeants qui mènent ces projets travaillent pour la satisfaction des clients et de l’entreprise, pas juste celle du régulateur.
C’est une question d’angle d’approche. Ce n’est pas l’un ou l’autre. C’est l’un ET l’autre.
Car le régulateur n’attend justement rien d’autre des banques que de travailler dans l’intérêt supérieur des clients
Pour l’été, ce billet est présenté sur Bilan.ch dans sa forme originale en anglais, en 4 parties, chaque mercredi. Comme d’habitude, vos commentaires sont les bienvenus.
March 2015, part 1
It is no news that major trends are affecting wealth management industry.
We have been talking about this for more than a decade in Switzerland.
But now it is happening, stronger and faster.
The financial crisis has been the trigger and everything which could have been prepared gently over 15 years is striking at the same time and within a few years, if not months.
Not just in Switzerland.
Tax dispute puts pressure on asset retention in offshore centers, pricing execution and costs to develop new services and/or to restructure.
Adapting to regulation is costly, time consuming and it prevents from thinking about anything else.
If it was not enough, Swiss players are threatened by strong Swiss franc coupled with debit interests who all together hurt their profitability and limit their maneuvering space.
Capital requirement to cope with risk is sky rocketing while cost/income ratio of some players approaches not-for-profit NGOs (average has increased to 80 basis points).
As a consequence, return on equity is expected to drop.
Financial markets helped to generate revenues from AuM growth and transactions.
But just a slight slow-down could really endanger many players because of costs incurred to quickly adapt.
Client trust is lowered, either because of declining players’ reputation, conflicts of interests with product business, or volatile markets. Consequently, clients double think before investing into financial markets.
Global wealth is still in expansion and this growth tends to accelerate (+14.6% in 2013 reported BCG – banks who grew less than that were actually losing ground).
But how much wealth is not in the hand of private bankers anymore but in real estate, art , etc.?
Additionally, as a consequence of changes in origin of wealth, entrepreneurial mindset and social giving spirit, we see more and more assets flying away to direct investments and philanthropy.
In its last research, Credit Suisse calculated that in Switzerland non-financial assets accounted for 44% in 2014 (growing from 38% in 2006).
Should private bankers build revenue streams from these trends too?
Or should it just be a free add-on to their standard services?
Banks and wealth managers are struck by disruptive technology at a time where their cost/income ratio is not at best to invest.
Initiatives such as Watson Artificial Intelligence project from IBM may well bring a revolution to Asset management and Advisory.
FinTech may change the way clients interact with their banker and the price they are willing to pay for value, especially in the commoditized transaction and custody fields.
Last but not least, digital age transforms clients DNA forever , simply because, in their day-to-day life, they can get everything, everywhere, anytime.
Furthermore, most innovative players make it easy and sometimes even free.
How long will it take before the new global, mobile, knowledgeable, time sensitive client says to his banker « why don’t you do that as well? ».
Service design and Design thinking put clients at the very beginning of new developments and private bankers should embrace this approach.
Fortunately, technology also brings opportunities such as better understanding of clients, multiple contacts points, data driven lead generation thanks to Big Data, as well as process streamlining and mass personalization.
In the world of trust and personal interactions by essence, some private banks like UBS and CS already developed such a technology infrastructure that it is even part of their commercial pitch!
In addition, they understand that technology should be customized to markets’ and clients’ needs: infrastructure is built globally, applications are developed locally; wise.
Technology is a major chance to cope with changes as long as you make it totally agile and transparent for clients and internal users.
It has the power to reconcile product centricity and client centricity.
Adapting is costly and time consuming.
But this is not the worst effect. The worst is what happens for clients, complexity which is created for them and for the bankers, both being transformed into administrative agents.
Unfortunately, current regulation trend works against what should be private bankers’ DNA: trustful advice.
Because regulators do not trust banks and want to avoid product mis–selling, they want to make sure Advisory will not be used against clients’ interests.
By enforcing the suitability concept, regulators transformed what used to be, and should become again, the unique selling proposition (USP) of a private bank, trustful advice, into a standardized offering.
How to differentiate and compete if your USP is a standard imposed to all payers?
In addition, implementing the Advisory model raises risks; because of consequent risk of non-compliance, one of the leading private banks is wondering whether they should really implement Advisory model in Europe and Switzerland, although this model was successful in Asia!
Compliance is an entry barrier but not a differentiator as such, except in the way you do it.
Do you create more complexity for your clients and people, or do you take this opportunity to adapt?
The only way to do it with differentiation in mind is to make sure risk people think in terms of clients’ satisfaction and not just regulators’.
If you truly serve clients needs well, you can get compliance for free
Is there another route for private banking than total commitment to clients’ needs?
An interesting approach is observable in the US to create an Advisory code of conduct.
Well balanced cost cutting (meaning that it should start by understanding costs at client, product and service level, and finish by protecting future growth), streamlining to reduce complexity, outsourcing, winding down, consolidation and exchange of markets, post-merger integration, revenue assurance and enhancement, pricing model definition and execution, raising the bar in sales culture and effectiveness, bridging the gap between technology trends, clients expectations, existing infrastructure and end-users knowledge, agile capabilities, talent attraction and training, compensation, are certainly the most important initiatives private banks could take to re-focus and develop their business.
Change is good, especially when you have no choice.
But it is so costly, risky and time consuming that you would rather have a vision and integrate more changes for the benefit of your clients and your business than just short term compliance.
Instead of making it a pain, you can make it a step forward, see major opportunities where others see threats and let paralyzed competitors floundering in your wake
In addition, you mobilize your people better than with rules and sticks.
A positive purpose that makes sense and shows the benefits is far much powerful and effective than a regulation which tells you what you can’t do.
This is another mindset which works absolutely well as long as ethics and integrity rank first in your applied values.
Finally, these trends force to recall the real question.
What is the mission as a bank in general and as a private banker in particular, where to compete, for which clients, against which competitors, is it affordable to be truly integrated and global or is it more profitable to focus on niches (markets, services, clients segments), is there a viable in–between position, do we have the volume for that, how to price, can we afford the cost, how to differentiate?
Because anyone can now access financial markets at the click of a button for 15 cents as opposed to 1.5%, because
financial technology can be better at portfolio management and monitoring than human beings, because trustful advice
becomes again the one and only unique selling proposition, because product push and client centricity are not
compatible, because regulators will not allow this combination anyway, we may well see disintermediation as we have
witnessed in travel industry.
Regulators in US and Europe already paved the way with clearly segregated license models.
Where do we go from there?
There is no single answer, as one should customize to banks situation and legacy.
However, a change in mindset is critical.
It would certainly help to think about what a banker is supposed to do and what private bankers were doing one or two hundred years ago (before enjoyable returns granted by banking secrecy and gate keeper position towards financial markets – all of them being no longer valuable).
It would help to review what is happening in different parts of the world and in different industries.
« Strange » innovators and new markets entrants should not be ignored or, worse, looked at in a complacent and condescending way, as they could become substitutes.
Most important of all, asking clients will bring the answer.
Ask what they have to say about them, you, your competitors.
Put clients’ interests first. Really.
Traditional differentiators are product and service innovation, operational excellence or client relationships.
In services industries, they are nearly mutually exclusive or at least strictly prioritized.
In wealth management, one cannot be average on these three dimensions anymore.
Investments to raise the bar everywhere would be huge.
Is it time to set priorities and align?