Digitization’s impact on private banking and beyond
Veronika Zhukova, managing director, head of financial products and innovations at Sber Private Banking, discusses the importance of digital innovation and how the bank is helping clients understand the value of ESG investment.
Recently we have been investigating how different customer segments use digital banking technology.
Among mass market clients, adoption is not very high, with just under one third using these platforms regularly. Among more affluent clients, usage is much higher – more than 75% of this group conduct five or more transactions a month via Sberbank Online, our digital bank application that has won a number of national and international awards.
It might be expected that use of digital channels would be lower in the private banking segment, but in fact about 70% of these clients use digital tools regularly. In terms of investment planning and strategy, there is a growing demand to be able to access information and conduct portfolio analysis online.
External research has found that a majority of high net-worth clients want a hybrid relationship with their investment banker, where they can access more information online. They still need an expert to make sense of the numbers, but they also need financial data to be available through different channels.
This is particularly important for us as our typical client has a relationship with three banks, of which at least one is based outside Russia. There is therefore huge demand to manage and understand total wealth across banks and conduct analysis across multiple platforms, so we have partnered with a Swiss fintech to provide our clients with complex reporting through a single interface.
Easy access to data
Digital services strengthen client relationships because the client can get access to data more easily, facilitating a more meaningful conversation. Without digital tools, preparing an investment proposal is a much more time-consuming process owing to the sheer volume of data involved.
We have made a considerable investment over the last few years in a platform that acts as a partner for investment advisors and consultants to build a proposition to manage portfolios. This enables investment advisors to spend more time with their clients and really get to understand their needs – a vital development at a time when clients increasingly expect a ‘phygital’ relationship with their bank.
Sber Private Banking has also made a sizeable commitment to environmental, social and governance (ESG) issues, as evidenced in our introduction of strategies such as the Women Impact Europe Index, the Foodtech Index and the Circular Economy Index.
ESG is a term used mainly for investments, but if we talk about sustainable consumption and sustainable investment and marry all the different aspects together it becomes even more interesting. We have a number of projects in the pipeline for next year that will help our clients understand their ESG footprint and we also see a great deal of potential in thematic investments – investments in the things clients understand and believe in.
Of course, the economic argument for ESG investment is that it can help clients beat the market. There is a great deal of research that indicates investing sustainably contributes to higher returns, and we are very pleased to see that our indexes are outperforming their benchmarks.
In Russia, we are just beginning to see this trend in responsible investment – and obviously not all our clients even understand the term. So we are educating our frontline people to have meaningful discussions with clients about these investments, to help them understand the clients’ inner beliefs and motivations and the areas they are passionate about, because that is a good way to build a connection and identify investment opportunities that match this passion.
Demonstrating ESG options
We are not positioning our ESG strategies as the only way to invest, but rather as a satellite strategy. This makes it easier for clients to try, and once they see the result it opens the door to a broader conversation.
We see a major role for banks and investment companies in education – for example, we are planning to introduce an ESG portfolio score. So far, we are looking at thematic investment and the client footprint and we have ESG ratings for instruments, so when we prepare a proposal for a client we can say whether these instruments have a high or a low ESG score.
What we don’t see yet is the total portfolio score. However, we plan to introduce this in 2021, so clients can have a snapshot of the current rating of their portfolio and how we can help them increase this score.