Global private banking debate: Trust, scale and security key factors in a digital world

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By:
Elliot Wilson
Published on:

Meeting the needs of high net-worth families is more challenging and fascinating than ever. Private banks are investing in new forms of digital communication, catering to clients’ philanthropic demands, boosting fee transparency and finding ways to attract and retain the best young talent.

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Learn about the debate participants

EXECUTIVE SUMMARY

• The shift toward digital communication continues, with virtual reality emerging as a vital tool, but many HNWs still like to talk with advisers face to face

• Private banks that are not using multiple channels to interact with clients will be left behind

• Scale and trust remain vital factors: without both factors in place, a private bank is not going to survive long

• Private banks are becoming adept at catering to the evolving philanthropic ideals and demands of clients

• Young private banking talent is more entrepreneurial than ever, keen to take risks and to make a difference with their employer

• Wealth in a digital world is still attracted to financial hubs with strong governance and transparency

• Private banks and wealth advisers that explain hidden costs to clients and work to reduce them are more likely to benefit than those that do not

Elliot Wilson, Euromoney: What are the biggest challenges and the greatest opportunities facing private banks today? 

Augusto Miranda, Bradesco Private Bank (AM, BPB) Emerging markets face high levels of volatility, which directly impact diversification. Brazil in particular in recent years has had to deal with, at times, 14% interest rates – and, while they are currently in the mid-single digits, it does affect how we interact with customers. 

On the geopolitical front, we see rising trade tensions, and on the domestic front, we have the economy warming up again and a new round of elections; so our focus is on dealing with the challenges we face and serving our customers effectively during this very volatile moment.

Mouhammed Choukeir, Kleinwort Hambros (MC, KH) Interest rates being as low as they are in the developed world and with inflation in many markets at between 2% and 4%, clients invested in interest-bearing instruments have been suffering from a deterioration of their purchasing power. This is the main challenge that clients and organizations like ours face. A client might look at the 10-year equity bull run – equity up-cycles usually last five years – and ask how long it’s likely to continue and whether they want to be taking equity risk at this juncture. At the same time, being a financial provider is more complex than ever, so clients are increasingly demanding simplicity. Delivering simplicity will be key to clients in the coming years.

Veronika Zhukova, Sberbank Private Banking (VZ, SPB) Moscow these days is a huge global village, filled with people from all over the world, so global trends affect us and the decisions our clients make about how they fill and balance their portfolios. Some of our clients think in the short term rather than the long term, especially when it comes to Russian instruments. In turbulence, the key is simplicity. Our role as an institution is to invest in our clients’ education. They are obviously very good at building their own business, but it is our job too to help them build their wealth. And knowing what is happening across markets at home and abroad makes us relevant and ensures that we are best placed to help clients hand their wealth down from generation to generation. 

Euromoney: What is the first question that new or existing clients ask you when you meet?

Lei Wang, China Merchants Bank (LW, CMB) The first question our clients often ask is how they can better understand and predict ongoing changes, global trends and the local business environment in China. In China, regulations are rising, the economy is getting more mature, while on the other hand they are concerned about the impact that a trade war with the US might have on the international situation and on their assets and businesses. Fortunately, there are a lot of opportunities in this regard. Our clients are looking for good investment opportunities and, as a still fast-growing and developing country, China has plenty of these opportunities. 

AM, BPB In emerging markets it’s a continual learning process for customers. Again, in Brazil, many people are used to very high interest rates, so the need for diversification a couple of years ago wasn’t so great. Right now, with 6% rates and inflation under control, things are changing. And that helps both us and the customer, and helps the market to get more sophisticated. 

Euromoney: Is educating clients – and yourselves – more important than ever before?

MC, KH Education has always been a central and important part of our fiduciary duty. As guardians of wealth, it’s vital that clients fully understand the risks and opportunities they face. What perhaps we’re seeing as a result of digital players and robo-advisers is a higher level of awareness among clients in terms of what’s available – that doesn’t negate the fact that as a trusted adviser you have to help them navigate different opportunities. Education these days is about navigating options rather than just going through them one by one as there’s a lot of information out there about investments in London or Brazil or China. Helping clients navigate that complexity is vital. 


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Veronika Zhukova, adviser, Sberbank Private Banking


VZ, SPB We ran a recent survey in which our private banking clients were asked what came to mind first when they were asked about wealth. The results were surprising: they didn’t think immediately about investment strategies but focused on more down-to-earth practicalities. For our part, we ensure that we have not just the best instruments in our armoury, the best access to global products and the best expertise – which is vital, and without which we would not be providing any value – but also that we are building an end-to-end ecosystem that solves the basic needs of clients. 

Even if a client is wealthy, they still have differing needs. A Russian client may focus more on managing their wealth at home rather than buying property in France. It’s about making everything end to end, ensuring we can help a client to, say, open an account abroad, find a good property agent and locate the best tax advice. Finding the right partners around the world and creating strong bonds with them ensures we remain a vital and valuable part of the education process. 

LW, CMB We focus a lot on improving our service capabilities and on customer management, and we seek every opportunity to improve our ability to serve our clients to the best of our ability, and to move with the times. We are developing fast and effectively, we are quick learners and our clients are learning with us. 

MC, KH An interesting dynamic we see is that wealth generated, say, 30 or 50 years ago was typically created by captains of industry, while these days it’s more often led by tech titans. Huge technology-related wealth is being generated around the world now, and there is huge competition when it comes to managing that wealth. As a result, you need to think about how you interact with each client. In the past, you typically had lots of face-to-face meetings, but today you have to be multi-channel in how you interact with clients. If you don’t, you’re going to get left behind. 

Euromoney: What role does technology play in the work you do – and does the growth of digital platforms and new forms of communication make the human touch less or more important than before? 

VZ, SPB As a group, we invest a lot in technology: in building our digital platforms, in robotics and exploring artificial intelligence, and in building our own internal fintech incubator. Sberbank is well known in Russia as a leader in financial technology. We recently held a working group with another division where we looked at new forms of technology, such as blockchain, and explored how to exploit opportunities for our benefit and for the benefit of our clients. 

What is important is using technology to make us stronger when it comes to the quality of our investment advice. How can we use algorithms to aid our front line, present the best information to clients and deal with clients in a crisp and very professional way? Technology has helped to make us stronger rather than simply replacing human interaction. 

We also invest a lot in our people. With the rise of technology, quality human interaction is becoming more important than ever – there is much that you can do with machines and algorithms and real-time data, but you still need people to crunch data and to deal directly with clients. 

AM, BPB Our clients want a combination of the human touch – really good face-to-face, high-quality financial advice, discussing their ambitions and needs and portfolios – mixed with the ability, which they increasingly want and need, to communicate with us digitally over any one or more of several platforms. 

MC, KH It’s helpful to draw on an aviation analogy. Improvements in technology and navigation and weather systems mean planes can do more on their own – and the same is true with us. A lot of what we do can be automated, with algorithms used to assess clients’ risk appetites. But clients still want a pilot and co-pilot in the cockpit. Technology can do many things, but when things get complicated – when you do something that requires an unconventional approach – that’s when you want some human interaction that can draw on gained experience and expertise. So while technology makes flying safer, you do need someone to fly and land the plane. 


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Lei Wang, assistant general manager of private banking at China Merchants Bank


LW, CMB We use technology constantly, investing in it to better communicate with our clients and to improve our internal operations. However, the human-to-human interaction with our clients, the ability to serve them face to face, this aspect of what we do as a provider and as an industry – this can never be replaced. Two days ago we got the results of an internal customer survey that showed that in China, trust was the most important factor for customers. 

Euromoney: What was most interesting conclusion in your survey?

LW, CMB We found that customers wanted to be respected and esteemed. The financial industry particularly at the private banking level has come a long way in a very short period of time, but in the end clients want the personal, human touch. Retail banking customers may be happy with convenient, digital, standardized services, but new-wealth HNWs and UHNWs, who might have flown for hours to see you; they want to be treated accordingly.

Euromoney: How do you anticipate the demands and needs of clients that may have flown across several time zones – or around the world – to meet you?

MC, KH If you have a client coming from a certain country who has made their money in a specific industry, there is the temptation to stereotype. You might assume that because they’ve made their money in technology in a frontier market with high inflation and 12% interest rates, they will covet double-digit returns and be attracted to an aggressive risk-bearing investment strategy. But then you might meet them and discover that they desire a low-risk and conservative strategy, so really the best thing to do is not to make any assumptions. 

It’s better to have a conversation, to discuss their life goals and ask what they want to achieve with their wealth. They may say: ‘I seek wealth preservation or diversification’. Or they may be highly focused on one sector in one market. Either way, it’s better to talk. I am curious to hear everyone’s view when it comes to London. Our clients are multi-family offices who come from all over world to visit this financial hub, and I wonder if the view of the stability of the City as a financial centre has changed after the Brexit vote. 

VZ, SPB If you read news at the moment, you might get the impression that Russian wealth and business is pulling out of London. That’s not how we see it. London remains a vital financial hub, particularly for the children of wealthy families who study here and build their future aspirations around being global citizens. In this sense, London is still very high on their list.

AM, BPB For us, the focus is on ensuring we can cover our customers professionally out of our many hubs. Many Brazilians are more likely to visit New York, given the similar time zone, but many of our clients are elsewhere too, allowing us to serve them out of our offices in the likes of London, Luxembourg and Asia. 

LW, CMB It’s the same in China. Our clients think about diversification a lot. They pay attention to what is going on in the likes of London, where finance is the key industry, and in the US, which is another key target destination for our clients. We look at global investment opportunities of course, but before identifying a strategy for them, we need to talk with them, intuit their needs and work out how to understand and satisfy their changing demands. 

Euromoney: Do younger generations use new forms of digital communication to interact with wealth advisers? Is a favoured method of communication emerging?

AM, BPB It’s a mix to be honest. If you look at the younger, so-called digital generation, they are always online and by and large they prefer to communicate via email and other digital means. But humans are never going to be replaced entirely, particularly in emerging markets where there is so much volatility, where wealth is being created across the kaleidoscope of the economy from technology to industry to agriculture, and where the market is changing so quickly. There is a shift toward digital banking, but many customers still prefer to meet and talk face to face. 


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Mouhammed Choukeir, chief investment officer for Kleinwort Hambros


MC, KH If you ask the leaders of fintech how important physical interaction is, they would say one of biggest challenges they face is that their customers want to be able to phone them and meet and speak with them personally. So their business models are being transformed by hiring advisers or partnering up with institutions – bulge-bracket financial institutions or private banks like ours – to deal with the human aspects of delivering products and services and good advice. Even fintech giants and disruptors are trying to learn how to better deliver human interaction and service. 

VZ, SPB Poland is a market with one of highest global rates of digital banking penetration. Take mBank, which was formed as a fully digital bank, and which later introduced physical branches as they realized that even retail clients needed a place to go and talk with an expert. For our part, our aim is to make available all channels of communication and to let clients choose how they want to interact with us. So the priority is to be an omni-channel financial provider, where we might start a conversation on one channel and finish on another. 

We recently reviewed our client base, as we are growing very fast, and we are keen to understand what is happening and where growth is taking place. We look at the family as a whole when it comes to communication. In our HNW families, 35% of the group is typically comprised of children, with 45% made up of spouses and parents, so we are seeing clients bring their children in early and educating them, which helps us determine how to communicate with the next generation. 

It’s a big learning curve for us as many of the services we provide didn’t exist in Russia 30 years ago. And the average age of HNW and UHNW clients in Russia is around 50, so they are typically young, strong, energetic and full of ideas about how to invest and progress in their business. So we aren’t seeing the transition of wealth from the first to the second generation happen quite yet. 

LW, CMB In China we observe a similar trend with clients, where the second generation in a family is more likely to want to communicate with us using multiple channels. When we look at private banking, we know we need to diversify our methods of communication. I spent some time earlier this year in Silicon Valley, observing their great digital companies and seeing how they interacted digitally but also how they were improving their human interaction.

Euromoney: China Merchants Bank is based in Shenzhen, near to great digital firms like Tencent and Huawei. Are they providing a useful lesson to you – and vice versa?

LW, CMB Companies like Huawei and Tencent are busy introducing new products to us, just as we are helping them understand and improve their internal financial risk management processes. It’s a two-way street. There are things we can learn from each other. 

Euromoney: How is philanthropy changing how you interact with clients?

MC, KH We recently asked our clients how they would like to be charitable with their wealth, and effectively stripped it down to two options. Did they want to set up their own charity or would they prefer to donate to an existing cause or charity? The majority chose the latter option and the reason is that setting up a charity is a highly involved process, burdened by regulations and involving lots of oversight. I recently found that two thirds of people living in the UK make regular charitable donations, so this is quite a charitable nation. HNW and UHNW families donate and give, but they do so through existing charities, and who they give to is driven by their personal values and appetites. 

VZ, SPB When Russian people reach a certain level of business or age or wealth, they start thinking about how to influence the infrastructure or the overall situation in the country. In most cases they choose to build their own endowments, which have only legally existed onshore since 2007. Clients typically build charities that relate to something they value – it could be education or sport or health and they are typically proactive rather than reactive. Most of our clients prefer to build their own charities in order to be able to exert more control over how their money is spent and in order to be able to change the environment. 

Euromoney: Is that an issue of trust or control, of wanting to control the outcome?

VZ, SPB These are people who made their own wealth, so they are active by nature and once they find something that inspires them they want to continue and to make it happen proactively rather than follow the general flow. 

LW, CMB Our clients place great importance in wanting to invest in areas or sectors that have most directly impacted their lives. If they didn’t complete their education, they often want to put some of their wealth to work in educational charities. 


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Augusto Miranda, director, Bradesco Private Bank


AM, BPB It can be complex in Brazil to set up your own charity, so again it really depends. Some HNWs and UHNWs want to build their own charities while others just want to donate, so we are somewhere in the middle. 

MC, KH In the UK, a developed country, the biggest recipient of charitable donations is health, followed by education. Often, when an individual has been affected negatively by their health, their family is keen to give to and to be attached to one of those good causes. The affluent and wealthy parts of society can send their kids to good schools – that’s not a problem, they can control that – but one’s health can often be out of one’s control.

Euromoney: In the modern age, when wealth is so spread out, do we need financial hubs? 

LW, CMB Over the past 10 years, private banking in China has really taken off. We now have more than 90 private banking centres inside China, covering most of the provinces and major cities, as well as overseas branches in Hong Kong, Singapore, Los Angeles and New York. We are in the final throes of opening a London branch, with Sydney following soon after, so our global picture is being slowly filled in. 

From the perspective of our clients, we see significant changes ahead. Twice a year we publish a report for our private banking clients, which helps us identify changes in the market in how HNW clients use professional institutions to manage and grow their wealth, and how they want their portfolios to be invested around the world. Our processes are becoming increasingly sophisticated and complex.

Euromoney: How successful have these new offshore private banking centres been for you? 

LW, CMB The new branches allow us to provide clients with a global perspective on their investments and portfolios. It’s a long-term investment for us. We will not see immediate financial gains or returns – the aim is to build a successful private bank that our clients really trust and that will be around for a long time. 

Euromoney: Will financial hubs exist in 20 years’ time. Will a London or a Singapore remain an essential part of the private banking and financial landscape? 

MC, KH If you go back into the history of managing wealth, you find that what clients have always wanted when it comes to a financial hub is proximity and security. If you go back to the 14th century, Europe’s royalty would often bury their jewels underground where it was close to them and accessible yet also secure. In a world where money is more digital, a lot of a family’s wealth will still be located typically in their close proximity and secured by dint of being put to work in a well-known financial hub with strong governance and transparency. We live in a globalized world, but families still covet strong governance at the institutional and regulatory level, and you find that in the best financial hubs.

Euromoney: Are you still focused on growing your physical presence as a private bank? 

VZ, SPB Around half of the total wealth of Russian HNWs is held abroad. The reasons for that are many, but it’s also because clients are becoming more global in terms of their investments and their family needs, and they want to be more mobile and less tied to a specific location. We need to be able to provide these opportunities to clients. It’s a ‘must’ in the current regulatory environment, and depending on how a client’s wealth is structured and where it is located – say, the UK or Switzerland or continental Europe – it requires us to register it and administer it in different ways. In that sense we have to be where the client is and where their interests are. 

Yes, the world is more global in the sense that your clients can invest in other markets without you needing to be physically present there, but if you want to serve your clients, you need to choose markets you want to concentrate on as a private bank and to build a branch or a hub office there. 

Euromoney: How do you decide if you need to expand into a new market or if it is OK to serve clients from an existing office in, say, London or Luxembourg? 

AM, BPB We are focused on Brazil. Our institution has been around for 75 years, serving clients domestically but also expanding globally to ensure that we are wherever our clients need us to be. We are in Europe and the US, but we are still looking, as maybe tomorrow Brazilian people will have different needs, forcing us to explore new geographies and markets.

Euromoney: Is it becoming harder to find, hire and retain the best private banking talent? 

MC, KH The working places of today are very different to five years ago, let alone 10 or 20 years. Some firms have introduced unlimited vacations, allowing employees to take as much holiday as they like. But instead of taking a lot of holiday, they found that most people actually took less, which might be counterintuitive. One of the things we find with new-generation financial talent is that they want to take more risks, to be more entrepreneurial in large or small institutions – ‘intrapreneurial’ is the new phrase. And it’s amazing how many people want to work in a large institution but also want to take on more risk, to work on a startup, something that is more disruptive. Large organizations will benefit from attracting and hiring that kind of talent. 

VZ, SPB In my view the younger generation wants more responsibility and a greater say in being involved in the bigger scheme of things. Ten or 20 years ago graduates might have wanted to join a large institution, then systematically grow their skill base. The new generation of graduates wants immediately to be part of the bigger picture; providing that opportunity – by letting them be engaged in decision making and shaping strategy and building customer journeys – is a really good way of engaging employees. 

Sberbank is one of Russia’s biggest companies and employers, and we have a lot of development programmes, so regardless of your age or position or function, you will be offered a wide range of different learning opportunities, whether that means online learning opportunities or doing an MBA or engaging in new programmes. Our new hires are constantly learning new things. 

Euromoney: Do you offer that in reaction to demand?

VZ, SPB The overall group has a greater commitment to corporate and social responsibility than ever before. If you are a leading financial institution, you have to move the market if you want to remain number one. Likewise, Sberbank does a lot of programmes that are not related to their employees. We recently launched ‘School 21’, a fully digital school open to anyone aged 18 to 35. They need only to fill out a form online and they can take part in classes that help them to code and build and hone their digital skills. That increases the skill level of younger people and creates a positive buzz around our name in the market. 

Euromoney: There are so many new forms of digital communication. How do you decide which ones you need to interact with clients and which ones you don’t?

MC, KH Social media went through a big surge and is still growing in some areas but in others it is retrenching. Some people are leaving social media, partly due to trust and how their data is used, but also because we get bored as humans and want the next new thing. The next new communication tool will not be apps but virtual reality, where we communicate with each other using headsets. Virtual conferences allow you to meet with colleagues, and it’s like they are in the room with you. If clients want the human touch but don’t have to fly to you to see you, that’s perfect.

AM, BPB One of most important things is connectivity. Markets these days are very interconnected, ensuring that Brazilian HNWs can put their money to work globally, just as foreign investors can put their capital to work far more easily in Brazil. What we try to do is to give market access to clients. The future is access – and we can give access through domestic products abroad or directly abroad depending on our clients’ needs. And that comes back the point that technology is the biggest investment that private banks can make. It’s what we’re all focused on. 

VZ, SPB With the development of the internet and the internet of things, information and data has become kind of flat. The future of AR will seriously influence all sectors. Before my arrival in London, I discussed this with my team and while we cannot predict perfectly how technology will influence and affect the financial sector, we do know it will continue to transform every sector, including private banking. 

One of the biggest challenges in this process is privacy, an issue that private banking clients pay a lot of attention to. The question is how we can combine modern technology with privacy protection. We are really giving this serious consideration and we are following global developments in this regard.

Euromoney: Yet we all still fly around the world for a one-on-one meeting. Technology hasn’t changed the need for some face-to-face meetings – yet. 

MC, KH True, technology hasn’t quite got there yet, but it’s moving at a very quick pace. At the 2018 football World Cup in Russia, people talked about video assistant referee technology, but the biggest revolution was being able to watch football matches in the comfort of your own home by downloading the app and popping on a VR headset. That’s the wave of the future. And so too in our industry, where we will be able to meet clients face to face, as it were, using technology and VR platforms. 

Euromoney: Russia’s enormous scale, spanning 11 time zones, would seem to make it a perfect place in which to put virtual reality to work when interacting with clients.

VZ, SPB This is an ongoing and changing process, but we can only guess what the world will look like in terms of technology and communication in five or 10 years’ time. It’s the responsibility of all institutions not to be satisfied with what they have but to challenge themselves daily, as if they didn’t exist before, and to look forward to new trends, to see if you can learn from them and to adopt them in daily life. It’s also very important not to bet on one horse but to invest in different technology platforms, to connect to partners, to build your networks, to explore new forms of technology and communication and to see which ones work. 

Euromoney: What about privacy and regulatory challenges? When you communicate with clients in other time zones or markets using VR, does that affect how you operate and what information you need to impart?

MC, KH There is a lot of cynicism around technology security – and for good reason given recent hacking cases – but steps are being taken to remedy that. Increasingly, it’s more secure to transfer money using technology than it is using conventional, physical means, by carrying cash to a bank branch. At the end of the day, we are in the business of providing trust to clients. If they don’t trust us, our business model has gone out of the window, all of us. And trust comes with security, so it’s essential that we maintain a high level of security in what we do for clients – and we would never put that at risk at any cost. 

VZ, SPB In the long run this is our core product offering. We can’t make mistakes here as it’s where the trust is. The question is how we can best optimize our processes and invest in technology and our business model. When we look at our operations, we divide them into three categories: the things we can’t afford to fail at; the areas we need to change going forward; and the things we need to challenge ourselves in by getting into a disruptive mindset. 

AM, BPB I completely agree, and maybe the future of our industry is a mixture of old-fashioned face-to-face personal banking and ensuring that we are able to interact with customers through virtual reality and other digital platforms. We are hugely geographically dispersed, with more than 5,000 branches and 14 private banking offices, and so sometimes a wealthy client is happy talking over the telephone and on other occasions he is content to do a video conference, linking to our offices in São Paulo or London. So it’s a combination of factors. I think this is the name of the game for the future: combining traditional ways with new technology. 

Euromoney: Again, does that change how you think about what information you need to present to clients and how it is communicated?

MC, KH Put yourself in the position of a client and ask them what they want and need. What is good information for them to have? Explaining to them the transparency around the risks of a proposal or service – the potential risks and returns, and the implications if things don’t go to plan – to us that’s good business as it puts us in the client’s shoes and them in ours. And that approach aligns with how regulators want things. They want you to serve clients in their best interests. If you adopt that mentality and approach in your business model, you are able to deliver across many jurisdictions – and there is a lot of commonality in what clients want in many jurisdictions. 

What you can do with digital platforms is to relay certain information to clients who want to work that way. But communication isn’t the end of the story. You need to educate too, to spend time with clients to understand if they are truly comfortable with the information you’ve provided. That’s the role of bankers in our industry. 

Euromoney: Kleinwort Hambros as a name has been around since the 18th century, often serving the same families for many generations. What lessons can younger private banks learn from you?

MC, KH It’s about building trust. The reason you are able to survive as a private bank with multi-generational families is because you are able to build that trust so when wealth is transferred from one generation to the next, older family members can tell their offspring: ‘This is an institution that looked after us in times good and bad, so I trust them to be able to do the same for you’. That is how trust is passed down generation by generation. 

And, like any institution that has been around for a long time, the trick is to evolve. You cannot continue to do the same thing and survive in an ever-changing world. Kleinwort has survived so long because it has been able to change, so now we are investing actively in digital platforms and in the way we look at products and services. 

Clients are increasingly aware of the value they derive from good advice, so total transparency around the costs they incur, as part of their financial solutions, is paramount. All financial services include hidden costs that are paid to administrators and stock exchanges and custodians and middlemen, layering fees on fees on fees. One of the best ways to change that is to be transparent about everything, to show customers what they are charged and to work with everyone in the supply chain to reduce those costs.

Euromoney: What is the best way to cut costs for clients and be more transparent?

VZ, SPB The private banking environment is changing and regulations are rising everywhere. If you look at industry margins, they are declining in Europe, and there is a fight on how to attract and retain the best clients. Running a private bank is an expensive venture; challenges include identifying opportunities for future growth, given that greater transparency crimps margins and cost-to-income ratios are on the rise. In Russia, our private banking business is growing at a double-digit rate, but we still face the same problems as everyone, notably rising regulations, pressure on the business and the challenge of identifying new growth opportunities. 

MC, KH The wealth management business is still growing at a healthy pace, driven partly by new wealth generation and partly by rising markets. We see growth at quite attractive figures even in western economies, where growth is 2% or less but wealth is typically expanding at 5% plus. Yes, margins are being compressed, which presents a challenge for private banks. But it’s also about delivering value. Our clients are used to paying for value, so as a private bank you have to demonstrate that you can deliver that value. 

Another angle is scale: we see this in the wealth and asset industry, where the focus is on creating scalable platforms, so if you have less than $1 billion under management, you’re too small to survive in wealth management because of all the operational costs. Once you get north of $10 billion in AuM, you can start to deliver value to your clients and shareholders.

AM, BPB Our aim is on having very clear, transparent conversations with customers. Brazil is not a very complex market, so our focus is to serve our private banking customers in the most effective and professional way possible.

MC, KH In the same way you can show an existing client how their portfolio has performed, you can do the same now for new prospective clients by showing them what the costs and expenses were in the past year or recent years for a client in a similar risk profile. By being totally transparent and showing a potential client all of our costs and the third-party costs, we can demonstrate the value they are getting from us. 

Another focus of ours is to be totally honest and transparent about periods where our efforts haven’t quite worked out. I also sit as a trustee on the other side of the table, asking wealth managers about the money they manage for a trust, and in those situations I want to know what went wrong, what they did about it, how they responded and if they were proactive in telling us. That helps clients understand what they are getting into and it helps us build an honest relationship. And an honest relationship has to start on day one. 

Euromoney: In a market where scale is more important than ever and competition is growing every year, how do you remain valuable to clients? 

MC, KH We’ve done a lot of work in the last year, talking to clients, explaining our value proposition and asking clients what they value about us, and it came down to one thing: our know-how. Clients are attracted to our ability to deliver solutions, the expertise within our firm, our ability to structure global wealth and that we are always available for them at any time and able to navigate them through problems. Finally, they covet the security we provide. We have been around a long time, supported by a parent that is well capitalized and who will be around for a long time. 

AM, BPB Long-term relationships – it’s the most important factor for everyone in this industry, for the customer and for the provider. We are a 75-year-old company and we got here because we place so much emphasis on the long-term relationships we have with our clients. One of our secrets is to follow the life cycles of our customers as they grow, say from a small company, starting out in one of our branches, to their development as maybe a major corporate leader. It happens all the time – he grows, we follow. And company owners will stick with us. They’ll say: ‘You believed in me; we grew together.’ This is how relationships are built and why the best ones last. 

VZ, SPB Every year we engage with clients, gain their feedback on how we serve them, look at where the best potential areas for growth lie for us and identify better end-to-end solutions. There are still growing pains in Russia, particularly regarding what the right level of service is. But the key is trust, and through all the years, through the up-cycles and down-cycles, the currency and financial crises, clients have stuck with the financial provider they feel they can trust. In a market like ours, trust is paramount and, while expertise is vital, the trust our clients place in our institution and our ability to serve them is invaluable. 

LW, CMB We are still learning about private banking, but every day we get better at attracting and retaining our clients and understanding their needs. Building personal relationships is a very important and long-term process, and they rely and depend on the service and help of our highly trained in-house personnel. We pay great attention to building up our team. It’s not an easy nut to crack: we don’t have a great pool of talent at home, so we spend a lot of time and money on training and retraining our managers, which helps us to grow with our clients. 


Global private banking debate participants

Mouhammed-Choukeir-SG-160x186
Mouhammed Choukeir (MC) is chief investment officer for Kleinwort Hambros. He heads the firm’s investment management unit, leading a team of experienced strategists and portfolio managers, and co-chairs the Global Investment Committee for Société Générale, Kleinwort Hambros’ parent company.


Augusto-Miranda-Bradesco-160x186
Augusto Miranda (AM), director, Bradesco Private Bank, is based in São Paulo. He started as a treasury analyst, assuming different positions throughout his career in various financial services companies. His 20-year career spans a variety of regional and global roles in equities, wealth management and derivatives.


Lei-Wang-CMB-160x186
Lei Wang (LW) is assistant general manager of private banking at China Merchants Bank. She has 22 years of experience in the banking sector. She was one of the first generation of senior financial executives in China to devote herself fully to private banking and wealth management, and is one of the domestic industry’s foremost pioneers and innovators.


Veronika-Zhukova-Sberbank-160x186
Veronika Zhukova (VZ), adviser, Sberbank Private Banking, has worked with high and ultra-high net-worth clients in Russia, Europe and the UK. She started her career at Citi, helping the US lender create Russia’s first mass affluent index, before moving to join the Russian banking firm.


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