The corona crisis is a jolt to the wealth management industry. For more innovative private banks, the pandemic represents a historic opportunity. Eight scenarios.
The prospects for Swiss private banks – which cater to the financial affairs of wealthy clientele – were dire before the coronavirus pandemic hit. Sandwiched between big universal banks and a growing chorus of promising start-ups, they are finding it nigh impossible to win new clients and to keep up with necessary investments and new offerings.
The outbreak of COVID-19 or coronavirus will only step up the inevitable transformation in the private banking industry – and leave a few which lose out behind: given collapsing margins and growing costs, this crisis is likely to wipe out a few private banks.
But those prepared to genuinely break with past patterns and use the hour of crisis constructively may belong to the virus crisis winners. finews.com on what wealth managers can learn from the pandemic.
1. Home Office is a Thing
We’re still just getting to know this new work environment, but it’s already clear that «WFH» or working from home is here to stay: it is efficient, cheaper, and more flexibly structured. Getting employees with the discipline to work remotely is only a question of time – and mastering it will be a valuable future skill. Conversely, private banks will need to integrate this type of work into their business model if they want to retain top talent.
2. Totally Digital
Corona has already proven it: digital contact with clients is a reality – inevitably. Countless clients have dusted off or upgraded their digital banking tools since they can no longer see their private banker face-to-face. Even when the crisis passes, digital interaction is here to stay – it’s practical, efficient, and inexpensive. Private banks which can’t handle that will disappear.
3. Data is the Key
Private banks have collected their client data somewhat haphazardly in the past. Part of this was due to banking secrecy, when many clients wanted the opposite of transparency. That era is definitely over: banks which want to address their clients in a more focused and targeted way thanks to artificial intelligence need data specialists to mine this 21st century gold. Banks who haven’t recognized the power of data will languish after the crisis.
4. Crisis Shifts Priorities
Our crisis-defined experiences will pave the way for new values as well. Especially the sought-after younger generation – tomorrow’s clients – will value sustainability, humility, and modesty. For money managers, investments with a social value or impact can’t be empty marketing promises anymore after the crisis: they represent a real need to reject excess and mindless waste. Private banks which fail to embed these values into their business models don’t stand a chance with their clientele.
5. Investments – Another Way
When these values begin seeping through (see point 4), investment advisors will have to review their approach. Tomorrow’s clients – those scarred by the century’s biggest crash – will want to see more sense from their investments. Simply investing in return-heavy stocks or complex financial products they many not understand will no longer cut it: thematic investments will hold sway, especially those with persuasive, conscientious ideas for society. This means new, more multi-faceted investment specialists – without them, private banks won’t have a leg to stand on.
6. Predict Crises
The global developments of recent months illustrate how little we know: who would have predicted the coronavirus’ severity? Or that wide swaths of the population will work from home for weeks and months? Or the 1987 stock-market crash? But many facts were already in the public domain: they simply needed to be recognized and combined. This requires experts or rather expert teams. In so far as private banks want to take on the new investment paradigm (see point 5), research departments in financial services will need to start thinking more holistically – and not from commission to commission.
7. Education Matters
The coronavirus pandemic will pass, but life and work will never be the same. Bankers won’t be able to avoid continuing, interdisciplinary, and lifelong education. Private banks willing to facilitate this learning process are in good shape to attract top talent.
8. Next Generation CEOs
The post-crisis era calls for a new type of leader: the next generation CEO. These aren’t starts like Pictet banker Boris Collardi or UBS’ Iqbal Khan: reincarnations of a foregone era which leaned heavily on metrics like lending to boost revenue. The crisis will bring to the surface a host of new, battle-tested names who understand the new priorities and can embody the new era – digital, innovative, sustainable, and credible. The rest is gravy.
“Citing proven CEO names and putting them in the past in times of crisis is too easy to do. Let us not forget the builders of the banks of our modern world and trust them to anticipate and learn from critical situations that they can go through. The points raised are interesting however no touch of novelty was mentioned. Pity. The world evolves and learns from its obstacles. We all do it every day as CEO’s and it will last. Transformation and adaptation are not always synonymous with radical upheavals.” – Carlos Khoury