The coronavirus pandemic is a harsh wake-up call for any firm about how crucial it is to have a solid continuity business plan in place, where a work from home strategy, supported by robust technology, plays a central role.
Governments have enforced lockdown measures on entire populations, in a bid to contain the spread of the deadly virus. Around the world, several tens of millions of people are confined to their homes, or in self-quarantine, and working remotely.
In private banking, the unprecedented, large-scale emergency is clearly set to accelerate the trend towards digitalisation, which is still in the early stages in the sector, while forcing firms to review their strategies and business models.
Unlike companies providing tangible goods and services, wealth managers can, in theory, provide most of their services remotely, and respond to customer needs anytime and anywhere. Wealthy clients are in fact mobile and global, and the current huge spikes in volatility and violent sell-offs, combined with restrictions to meet face-to-face, amplify customers’ needs to communicate with their private bankers at the touch of a button, to seek advice, while keeping abreast with market developments.
Today, traditional private banking service models and business continuity plans are seriously being put to the test.
Contingency plans generally involve moving typical office-bound functions, such as back and middle office operations, including compliance and risk management, to alternative sites. But moving staff performing such business critical functions to a different location is unlikely to be the solution during an epidemic.
Limits and technical issues have been emerging. One of the banks in Switzerland had to call part of its employees back to their offices, as they could not operate effectively from their homes, reports Urs Bolt, wealthtech adviser, based in Zurich.
“Banks will be forced to rethink their service models. Not only will they need to upgrade their technology platforms, but they will also need to review their processes and collaboration models,” he says.
Private bankers, on the other hand, have always spent part of their day outside the office, meeting clients. But for too long private banks have relied on their relationship managers to be the conduit of service, letting digital services play second fiddle, explains Alois Pirker, research director at Boston-based research and advisory firm Aite Group.
“Those firms that predominantly rely on in-person meetings may not be able to serve their clients right now. I would expect this current crisis to be a boost for digital transformation projects,” he adds.
Yet, while all wealth managers are acutely aware of the importance of acquiring digital capabilities and are taking action, according to a recent global study conducted by Aite Group in association with Refinitiv, nearly 50 per cent of firms are only 'partly satisfied' or 'not all satisfied' with their current digital offering.
This Covid-19 outbreak highlights the critical importance of having a solid digital platform for wealth management firms. Meaningful digital engagement allows clients to feel close to their bank and their advisers, even if in-person meetings are not possible. “Firms that have implemented strong digital platforms already will weather this crisis much better than firms that rely on the traditional service model,” predicts Mr Pirker.
Private banks in Asia, which have already faced epidemics in the past, such as Sars in 2003, may be more prepared to face the crisis than their counterparts in Europe.
At the time of the Sars outbreak, private banks in Asia “had to improvise to stay afloat”, says Mario Bassi, Australia-based wealth management adviser, who was then working for a global bank in Singapore. But Asian private banks seem to have learned their lesson, and have taken necessary steps to face emergencies of this type, while also meeting client demand for digital services.
“Potentially, in private banking hubs outside Asia, such as Europe, this outbreak has created a real burning platform which has accelerated the trend towards a digitally enabled operating model,” he believes.
Digital rise
Continued investments in digitalising processes across the front, middle and back-end, and innovation in ‘state-of-the-art’ digital tools seem to have paid off at DBS, the Singapore-based bank. Engagement with clients through digital channels has surged since the start of the outbreak, states Sim S Lim, group head of Consumer Banking and Wealth Management at DBS Bank in Singapore. Average log-ins per client for the DBS iWealth platform, which provides an ‘always-on’ avenue for clients to monitor and manage their portfolios digitally, has risen by more than 30 per cent since the start of the year. Through the app, clients can “deep dive” into their portfolio performance and holdings, and take immediate investment decisions anywhere and anytime, and have direct access to more than 150 banking, wealth management and investment services.
Serving clients effectively is especially key in such times of uncertainty, when clients seek ease of access to their portfolios and reassurance that their relationship managers are on-hand for timely advice, he adds. It is also paramount to keep clients updated and offer them timely and relevant insights from the chief investment office.
“Panic and misinformation can be rife at such times. We believe it’s especially important to help our clients stay calm and well-informed during this period, and aim to be quick and transparent in our communications.”
Similarly, despite movement restrictions imposed by the outbreak, private bankers have been able to track clients’ portfolios, perform reviews and provide advice, while working remotely or on the go, thanks to dedicated portfolio management tools and apps.
Stringent system health checks on the back-end infrastructure, to ensure robustness of digital services and tools, are also key, as more clients and relationship managers have come to embrace the value of digital solutions and flexible working.
The crisis has driven relationship managers to make a greater use of audio and video channels and other digital tools to engage with clients, while clients are more motivated to take on a do-it-yourself approach to carry out basic transactions, leaving conversations with their RMs for more strategic purposes. Discussions on wealth and succession planning have increased lately. “The epidemic has prompted deeper focus on ensuring one’s family, assets and legacy stay in good hands for the long-term regardless of external shocks,” reports Mr Lim.
In China, where the coronavirus outbreak originated, the emergency has further accelerated the transformation of client service models. Since the start of the epidemic, the development of digital services, such as video and teleconferencing, has greatly advanced, observes Xuxian Dai, general manager of Industrial Bank private banking.
Digital services are likely to become the “new routine” in the future, as they are “fast, effective and cost saving”, whilst “traditional offline one-to-one, face-to-face” service models will continue to exist, observes Mr Xuxian.
The crisis has also triggered some soul searching within top management. “The situation urges us to reflect systematically on how to further speed up the transition from offline to online wealth management business and further accelerate the construction of open banking,” he adds. This includes enriching customer service functions through mobile banking apps, and establishing more channels for online communication.
Mr Xuxian expects this will drive higher adoption of “proactive one-to-one services, which can help private bankers better keep in touch with clients and meet their needs, as well as lowering service cost”. Regulatory requirements may need to adjust to the new reality of online channels, he adds.
During the outbreak, when working from home, private bankers at China Merchant Bank used the phone and the app, WeChat, to keep in touch with customers, with transactions made on the telephone, online banking and other digital channels. “The outbreak will greatly promote the digitalisation of China's private banking business, and all institutions are aware of the importance of information technology and fintech to private banking,” states Yi Zhen, senior marketing manager, private banking, at China Merchants Bank.
But even in China, the epidemic has exposed deficiencies of business continuity plans. Many banks experimented with allowing employees to work from home, but the most difficult problems to solve were business confidentiality, data security, and the stability of remote office systems, especially for corporate business, reports Zhengwei Lu, chief economist of Industrial Bank and HuaFu Securities.
Traditional bank stress tests have generally been around IT systems, but the virus outbreak has highlighted the importance of having backup office space and a solid work at home strategy for employees, to ensure the continuity of business operations, he explains.
To ensure the “smooth running” of its core business, Industrial bank has classified activities by level of confidentiality. Those with a low level of confidentiality are handled through telecommuting, while for high confidentiality activities the bank relies on backup office space. This enables the institution to keep its staff scattered and avoid the risk of imported infection.
Legacy
The key question on everyone’s mind is whether the coronavirus outbreak, which is currently paralysing economies and people’s lives, will create lasting change to society, in the way we work and live.
In wealth management, face-to-face meetings held at private banks’ sleek offices, furnished with mahogany tables and wood paneled doors, will always remain valuable channels for client engagement. But the outbreak has certainly shed light on how technology can and should complement traditional client service models, enabling private bankers to serve customers effectively, regardless of location or emergencies.
“While the need and use of digital tools may fade, once the Covid-19 situation normalises, we can expect the industry to move towards a new norm, where banks and clients alike come to learn, adopt and embrace the benefits that technology has to offer,” states DBS Bank’s Mr Lim.
The current crisis will “mercilessly” expose areas in key processes, such as client onboarding or client servicing, that are not fully system-based and where manual process is still common, believes Aite Group’s Mr Pirker. “Some of these processes will not be able to be completed altogether if staff is not in the office, while others will just take longer to complete. I do expect private banks to come out of this crisis with a laundry list of process improvements that need to be addressed as soon as possible,” he says.
It is likely that the coronavirus will create a new work standard, from which it will be difficult to retreat, believes New York- based April Rudin, founder of brand marketing and consulting firm Rudin Group. “Firms will have pushback from employees who wish to work from home.” Constructive personal contact can be developed through digital channels, she adds, and digital offers a variety of client communications channels, and enables firms to customise the client experience.
Looking forward, private banks will have to give their wealth advisers the possibility to use alternative social media channels, such as WhatsApp, which is the most popular messenger app globally, or the Instant Bloomberg messaging tool, which is very popular among professional investors, ventures wealthTech adviser Mr Bolt.
For some organisations, the realisation that business can be done very effectively with limited face-to-face contact may provide “a jump-start” for their digital journey, states Sharmil Patwa, founder at Opus Una Financial Services Consulting. He warns that for digital-only players, the biggest challenge is communicating in a way that is personalised, as currently, the majority lack the ability to do this.
Personal interactions will always be an important part of business, but digital engagement will be a much greater focus for firms going forward, adds Aite Group’s Mr Pirker. “The smooth integration of both service models with each other is of critical importance and very hard to get right, though.”
Working from home
Firms that already have a work at home strategy in place, and are in the position to scale it up as quickly as possible, are in the best position to protect their staff and businesses in this global pandemic, believes Brendan Kiely, co-founder of Thinscale Technology. The Dublin-based technology company has designed a software that can very rapidly, and at scale, “turn a personal PC into a clean corporate machine”, which can be used on any Windows device.
In the current crisis, several companies are trying to set up their work-at-home strategy overnight, “but it is like trying to board up your windows in the middle of a hurricane,” he warns.
In a post Covid-19 scenario, a robust and scalable business continuity plan, with a work at home component, is going to be a key competitive advantage for companies. “Market analysts will want to see proven, robust and scalable business continuity plans in place. It won’t be possible to achieve that without work at home programmes.”
In addition to technology, people and processes are key aspects to take into account when implementing a work at home strategy.
Evidence suggests that work productivity goes up when working from home, but the right supports need to be in place and be well executed.
A robust work at home strategy implies a combination of trusting the employee, but also the ability to measure their productivity and targets, both in real time and on a daily or monthly basis.
Moreover, it is about implementing a shift of corporate culture and management style. “The crisis will be catalyst for a corporate culture shift, which is already happening to meet client demand for flexibility,” adds Mr Kiely.
Studies show that people working from home are more productive, in part because they spend less time commuting, and also because they are more satisfied. Moreover, costs are lower, as face-to-face meetings can be replaced by video conferences. The reduction of travel and long-haul flights means lower carbon emissions, which is a bonus for the environment.
In person meetings can be left to strategic client discussions. And while there is evidence that internal meetings offer little value, it is important that firms provide opportunities for employees to communicate on a daily basis, and to meet.
Guidelines must be also given to employees about how to set up a work at home office, which needs to meet certain standards, and how to step up self discipline. Also, senior managers have to recognise that some people are very social and will find it difficult to adapt, while others will prefer it.
A shift in corporate culture requires that the top management ‘walks the talk’ and provides guidance to employees in a more uncertain future, “where flexibility is key for survival”, adds wealthtech adviser Mr Bolt. This requires a new sense of ‘customer first’ culture. “Among other new practices, virtual banking will become the new normal.”
Many incumbent businesses in banking will not be able to keep up with technological progress. So it is critical they focus on their core functions, while partnering with third-parties to offer new value-added products and services.
Such a new service model requires a flexible technology platform and service architecture, which enable the integration of new financial services and complementary products. In the age of open banking, such new services can be integrated with application programming interfaces. This is already implemented by big tech-platforms, including financial services providers such as Ant Financial, part of Alibaba, or PingAn and Tencent, with WeBank. These platforms will further increase customer expectations, and set new service standards for private banks.
