Dossier

Private banking/Wealth management

In a changing world, empathy is key.

The private banking market is in flux—new structures are emerging, digitalization is progressing rapidly and customer-driven innovations are transforming parts of the industry
Empathy is the new key requirement for private banking players—understanding and engaging with customers on an emotional level is an essential ingredient in a successful strategy
The days of static planning and traditional development techniques are numbered—today’s wealth managers need an agile approach across all their activities

If you work in the field of private banking, you could be forgiven for feeling occasionally that just when you line yourself up in the perfect position to score a goal, somebody moves the goalposts. The market is nothing if not elusive, and anyone brave enough to take on the competition must keep their ear firmly to the ground, listening carefully for any signs of upcoming seismic shifts.

Intensive research by zeb over recent years has led us to a number of key findings about the market, in which we include banking and investment services provided to both high net worth individuals (HNWIs) and ultra high net worth individuals (UHNWIs), and also services for bordering sections of the market that may move into these groups over time. What are our key insights into the market? And what do those insights imply for companies working in the market?

First, the market is clearly in flux, with old structures falling away and new structures emerging. Digital transformation is shaking the world of private banking to its very core, with innovations and new technologies appearing on the scene almost daily. This has left many private bankers and wealth managers scratching their heads. Looking to what is happening in technology-forward Asia can often provide clues about what lies around the corner for Europe, and zeb has carried out large-scale surveys of industry insiders in Singapore and mainland China to this end. We discuss our findings in our core study What’s next for private banking? In the study, Nick Hungerford, founder and former CEO of online investment management company Nutmeg, makes the argument that doing nothing is no longer an option for companies: “The drive for innovation will come—and it will come from customers.”

Second, understanding what clients need is critically important. It is no longer enough to offer the latest technology to affluent clients; the industry needs to offer empathy, too. Robo-advisors have a role to play in wealth management but the days of human interaction are far from over. Lifestyle platforms have mastered the art of engaging with customers on an emotional level, and this enables them to achieve a winning combination of reach and customer loyalty. Private banking players should emulate this when developing their own platforms—a development that many see as imminent, as we discuss, for example, in our 2018 study of private banking in Germany.

"Research by zeb shows that wealthy individuals have three fundamental types of needs: functional, personal and - most of all - emotional. So the more empathy you show, the greater your chances of winning and retaining customers."

Axel Sarnitz, Partner, zeb

Third, players must become truly agile. Rather than employing a static planning and execution process they must move toward a dynamic environment, one in which business requirements and solutions evolve hand-in-hand through collaborative efforts between service providers and end users. As highlighted in an interview with Thomas Allemann, Head of Digitalization at Credit Suisse’s International Wealth Management division, published in our core study "Private banking in a digital world", this means placing a focus on “adaptive planning, evolutionary development, early delivery and continual improvement.”

What are the implications of these findings for the players in the market—the asset managers themselves? How can they define a distinctive strategy for themselves that will set them apart from the competition and keep them on the road to success?

We present our recommendations for European market players in our 2019 European Asset Management Study, based on a major survey of asset managers with a strong European footprint and data from Morningstar. We argue that asset managers who cannot win through economies of scale must focus on areas where they can generate competitive advantages. They must professionalize distribution and sales management and adapt their distribution channels in line with digital customer needs. They should review their pricing, making sure that it is closely correlated to the value generated for clients. They should reduce their costs and develop digital solutions. And finally, they should aim to take data management to the next level: A clear data strategy from storage to analytics can boost their performance right along the value chain, from portfolio and risk management to distribution.

How can wealth managers develop this rare combination of tech-savviness, empathy, agility and a truly distinctive strategy?

While the burden here is clearly on the market players themselves, they will not be able to hone their skills without a solid understanding of the market dynamics and the options for players, such as that provided by zeb in our many publications and interviews.