A combination of killer apps, innovative platforms and digitally-savvy staff is redrawing the competitive landscape of private banking. But it is the presence or absence of a single, mysterious ingredient which often determines the success of any shift to a futuristic model.
We are talking once more about the unquantifiable, cultural elixir of private banking. Many relationship managers will join a particular firm because they see a “cultural fit”. Some banks are considered tight-knit and insular, others as international and outward looking, a third segment can be perceived as distribution houses or “product factories”, yet another may be innovative or data-led.
However we define this vital, final component, all 10 judges of PWM’s Wealth Tech Awards for 2021 are convinced that culture is key to transformation, although they typically have different views about its parameters and its very essence in the wealth management ecosystem.
The key to a successful digital transformation, suggests Mario Bassi, a former high-level Swiss banker now advising Asian wealth managers and family offices, is to build a culture around better outcomes for customers. “This culture,” he suggests, “can only be built and maintained with the ongoing consistent tone from the top.”
Moreover, a lack of common cultural values between bank and external technology vendor or consultant can seriously hinder any major transfiguration project, with a “mindset gap” often emerging between the creative innovation teams and the much larger IT divisions, which run the bank according to their own needs, treating any change initiative as a disruption of their own work.
Perhaps the biggest challenge is that digitally remoulding wealth management is no longer purely about a business case. Monitoring financial key performance indicators (KPIs) may achieve a short-term payback, but it is not consistent with a wholesale, cultural revolution.
“Technology is just an enabler, much more important are strategy, culture, leadership and mindset,” according to Urs Bolt, product manager for digital banking at the ti&m consultancy. Transformation must begin with a customer-centric bedrock, requiring a shift away from the bank-centric approach. A focus on products and services, driven by KPIs such as asset flows, profitability and fees, must give way to a customer-first view, necessitating an “inside-out” perspective.
Core data
But the one factor many cultural commentators often forget about when looking at how society and the banks within it are transforming is that of data. Our judges talk about a “data lake” which can easily turn into a “data swamp” if not properly curated by its bankers. This means building systems, cultures and practices in a way that data is always at the core, to enrich interactions between banker and client.
“Firms have always had a lot of this, but data was previously the by-product emitted through the exhaust,” rather than the numerical display used by the driver to boost the engine’s efficiency, says Alois Pirker, head of research at the Aite Group.
It is this cultural transformation from data emitter to data curator which is in turn shaping private banks’ digital rebuild.
“We will begin to see some incredible developments around data collection, curation and commercialisation inside the next 24-36 months as the innovation behind the scenes around this is gathering pace,” says Seb Dovey, an independent wealth consultant.
But this requires the precarious cultural shift which we have been discussing. The reality is that innovation needs leadership commitment, real risk-based funding support, dedicated personnel, and a confidence in embracing change through experimentation.
“Private banks need to think differently and appoint leaders that are typically from outside their traditional pools to drive through commercial innovation,” believes Mr Dovey. They may even need to be brave enough to think about “entrepreneurs-in-residence”, rather than traditional leaders. This necessitates a need to understand and trust the clientele with their willingness to accept that innovation is a good outcome for them.
At present, Mr Dovey gives the private banking industry just five out of 10 for its digital and cultural transformation scorecard. There is clearly a long journey ahead to digital excellence. But the score is way beyond the performance at the end of the last decade.
Common interest
In order to stay on this trajectory of cultural improvement, a cross-disciplinary partnership across industries must be encouraged. Common problems must be solved not only across an organisation, but across the industry and multiple industries of seemingly different activities and goals.
This will also enable banks to attract multidisciplinary, multi-industry talent to help collect, filter and analyse the vast reams of data which are currently overwhelming us.
We must not be frightened by this data. We should see it is a beautiful thing at the centre of everything we do, to be embraced, rather than just a shiny veneer, smeared on top of the technology platforms. Culturally we must all become data scientists. According to Citi’s CEO Jane Fraser, wealth management is no longer about ‘carpe diem’, or seizing the day. It is now about ‘carpe data’ or seizing the data.
We may not be able to touch this ingredient, but at least we now know what the missing link is in the cultural transformation – data is the new digital.
Visit PWM's dedicated microsite for extended coverage of PWM’s Wealth Tech Awards 2021
