Private Banking: Our local Context

As a continuation from last week’s article in which I introduced the concept of Private Banking and the objectives of a private bank, in this week’s article the focus is on our local context.

Private Banking: Our local Context

As a continuation from last week’s article in which I introduced the concept of Private Banking and the objectives of a private bank, in this week’s article the   focus is on our local context. First, like most of our colleagues worldwide, it is important to note that private banking is offered as part of retail banking. Only a few banks exist as pure private banks or at least as a complete segment and not a part of the retail banking offering.

The same is the case even with the Holy Grail of private banking being Switzerland. The last 10 years have been difficult for private banks. First, there was the financial crisis, which damaged trust between clients and banks generally. Then came the cross-border tax issue, sounding the death knell for bank–client confidentiality and with it the promise of complete discretion. We have also seen many of the private banks of the world getting absorbed by major banks as their operating models had become too expensive to maintain over time. Offering banking is cost-effective, but unless managed and prioritised really well, this model has a number of limitations and disadvantages, more especially to private banking clients.

The main objective of private banking is to provide a more personalised level of service to wealthy clients than is available to typical customers at a commercial bank. Private banking then gets offered at the back of the retail banking strategy and   this has proven in a number of instances to dilute the private banking model, thus taking away quantum value from clients.  Retail banking is a numbers game with large a customer base and more products per customer (vertical sales index) because it is typically about volumes in order to improve the bottom line.

By contrast, from the cradle private banking has always been about meticulous attention to customers, their portfolio goals and a continuous mission to know and understand customers deeply. It is with the understanding of these   goals and the lifestyle of a client, and those important to him/her that enables you as a relationship manager or private banker together with your supporting cast to then play the role of a key maker and open doors. A relationship manager having way too many   clients in a portfolio, for example, will always lead to a disconnect between the client and him/her. The client won’t get the attention from the relationship manager and the relationship won’t be able to give any. For clients, the most common discontent today is lack of attention, consideration and care from their bankers.

In private banking, growth will only come from an in-depth understanding of what really matters for the client and being able to deliver accordingly or beyond. Therefore, it is necessary for banks to clearly identify and to focus on leveraging their unique selling points while continuously placing the clients at the centre of the reflection. A report published by KPMG in conjunction with the University of St. Callen titled “Clarity on Transformation in Private Banking” touches on five aspects needed by private banks to transform. I will discuss some in parrarell reality to our local context.

Value Proposition and Branding

Products and Services offered to private banking clients cannot be generic products offered by all banks and to mass retail clients.  Private banking clients will always want more relevant products and services to support their journey, so their chosen bank needs to help in creating more wealth or the preserving of it. Solutions such as Active Investments Advisory, Robo-advisory, Action (not reaction) Relationship Management, Discretionary Portfolio Management, Fiduciary Services, Tax Advisory and even Investment Research should at least be standard offerings.

 

Clients

Do we really know our clients? Most private banks don’t. More work and investment in the areas of Client Data Analytics should go hand in hand with upskilling and training of private bankers.  Critical puzzles such as lifestyle choices, demographics, psychographics, spending habits and modes of transacting should be the north stars and clues in guiding us to serve and understand clients better.

People and Culture

Without a doubt, this will be a big winner for most banks, especially in Botswana. Naturally, most banks take excellent salespeople and promote them (not transform) to relationship management positions. A lot should be invested in the training and development of private bankers in line with the needs of a private banking customer. Relationship Management is a different ball game altogether that when done right, sales just come and the happy client is even more than willing to give you access to his power circle. Private banking relationships cannot be transactional. This is a cardinal sin. The client cannot become important only when they have the potential to boost your sales performance.   Recruitment of the right breed and calibre is essential.

Other aspects of the transformational agenda include Core Business Processes, Operational Infrastructure and Technology, Organisational Structure, Governance, and Risk Controls. These are more internal and will be better answered by one having appreciated the transformational agenda and what it aims to achieve and in support of the strategy that a bank is pursuing.

In closing, words of Sun Tzu (The Art of War): Know thyself, Know thy enemy. The bank executives should be asking themselves the following question regarding their private banking offering:

  • Is our future looking bright in private banking?
  • Do we want to stay the way we are?
  • Can we afford to stay the way we are?
  • Alternatively, if changes are needed what do we change and why?
  • Will the transformation bring renewal and growth. If so, how?

Category

Name of The Bank

Country of Origin

Best Private Bank

Standard Bank

South Africa

Best Private Bank for Entrepreneurs

Guaranty Trust Bank

Nigeria

Best Private Bank for  Business Owners

ABSA Bank

South Africa

Excellence in Crisis: Client Services

SBM Bank

Mauritius

Source: Global Finance

Mr Gomolemo Kololo Manake

Twitter- #rremanake

LinkedIn- Gomolemo Kololo Manake

e- mail: Gomolemo.manake@icloud.com