Coronavirus crisis to reshape private banks' digital offerings but also strengthen human voice

As investors panicked at the start of the coronavirus crisis, leading to huge stockmarket swings from early March 2020, the co-founder of software provider Finantix took to the ether to describe new ways of working, being established by private banks globally.

From the beginning of the webinar interview which PWM conducted with Alessandro Tonchia, listened to by a 160-strong live audience of private bankers and wealth consultants across Asia, Europe and the Americas, it became clear he was advocating a new, enhanced digital landscape. But a key feature of this landscape being that the human factor would not be replaced, but strengthened.

“From what we see, there is a bit of madness out there. Every client is calling their private bank, asking: ‘what should I do?’ So technology is key,” said Mr Tonchia. “It is very important to have a physical or digital channel to interact with clients, but even more important to know what to say to them, to have a clear view from the chief investment officer of where things are going.”

Also crucial to Finantix – and the private banks who collaborate with the technology specialists – is the ability of the wealth managers to justify their fees, often in the face of double digit losses over a short space. “Showing value these days is even more important than in the good times,” suggested Mr Tonchia.

Danger of new channels

Also crucial to the technological base line which private banks must lay down is the enforcement of basic cybersecurity, which can be easily compromised by adding new channels of communication during the crisis. Many advisers are working from home offices and communicating via WhatsApp and other “very insecure channels”, he revealed. “In the past, you had client portals and client apps, so one solution is to carry on using safe log-ins with multi-factor authentication.” He recommends bringing all operations back to the core, secure infrastructure, centred around the internal system.

Onboarding clients remotely – bearing in mind most private banks see the initial “honeymoon” period as the best time to establish a close client relationship – is also becoming a major issue during the coronavirus crisis.

“If the crisis continues for a long time, you will see wealth managers think much harder about how they can facilitate this remote onboarding experience,” said Mr Tonchia. 

Disappearing bells and whistles

“Coronavirus will change the dynamic of industry because the more lifestylish aspects – going to a fancy dinner or an invitation to the tennis tournament – all those bells and whistles will disappear.”

Private banks, in conjunction with their technology providers, must now concentrate on building “rich communication” with advisers remotely, allowing FX specialists and portfolio managers to join the digital conversation.

Even in good times, many private banks typically meet clients just once a year. “But you can have something now, which is a weekly check-in and daily exchange of relevant information. You can almost re-engineer the relationship for soft touches on a very frequent basis in a way to make the client feel that their banker is a trusted, timely proactive counterpart that can help them navigate the crisis,” he suggested.

Need for calming humans, not robots

Any moves toward a robo-advisory era are played down by Finantix. “In this time of uncertainty and volatility, you need a calming human voice,” said Mr Tonchia, with clients expecting to interact with a leader, who speaks regularly to central banks and government representatives, able to interpret political and policy developments, which can shape portfolios. Answers to these questions, he stresses, “cannot just be automated away”.

The quality of these chief investment officers will become a key differentiator for leading private banks, with the latest crisis fundamentally shifting the equation away from execution-only trades to advice-led private banking. “This is a time for leadership and guidance,” he suggests. “People will recognise you were there in a tough moment for them, which is why it’s worth paying fees [for discretionary mandates] even in the good times.”

The crisis may also trigger a renewed battle for custom between private banks. “Assets will not only be reduced because of the squeeze, but the market will become volatile in terms of allegiance to wealth management providers,” with the quality of digital platforms becoming a key factor for clients choosing managers.

Rich interactions at a distance

Answering a question from New York-based wealth marketing consultant April Rudin about addressing clients’ emotional needs, Mr Tonchia said: “Most intelligent providers in Europe are putting their resources into setting up collaborative platforms, to have rich interactions at a distance. At the end of this period, daily exchange of snippets of information will continue, even after the crisis, levelling the playing field at a higher level. You will still have fancy dinners. But meaningful discussions about portfolios and financial plans, market perspectives, all that conversational space will become digital to a very high degree.”

Detailing best practices in dealing with the most demanding clients, in answer to a question from former senior Citi banker Malik Sarwar, founder of the K2 Leaders consultancy in New York, Mr Tonchia again stressed the importance of regular contact.

“There is a risk that lack of face-to-face meetings will reduce communication at some level,” he said. “So you need to make digital communication as daily as possible, which is good risk mitigation for those clients coming up with reasonable or unreasonable complaints, so they don’t build up frustration and explode in a specific meeting. The more you communicate, the more you can set expectations, identify problems and solve them together. Proximity, proximity, proximity would be the three best practices I can think of.”

Most of the crisis-led changes Mr Tonchia describes will accelerate trends already prevalent in the private banking world and how banks react to the crisis may help define their offer.

“Now is the time to build the marketing story for the next cycle of selling,” said Mr Tonchia. Lessons learned from this crisis will be key discussion points when clients seek new wealth advisers, deployment of data proving particularly important.

Data-driven approach

“Any idea of segmentation is a bit problematic in wealth management,” he advised. “We need a data-driven approach of tracking previous investment history, which proposals you accepted or rejected and which research you are reading.”

This requires regular conversations on the perception of risk and a “rich picture” of the client’s qualitative and quant preferences. “These need to be more tailored and less clustered arbitrarily around gender, social status and profession, because those criteria don’t do much, especially in an environment like this. Your perception of risk becomes paramount, which us why you are paying 100 basis points and not 20, because you want private banks to personalise their services, making them real and timely, especially when crisis hits.”

The data-led offer allows private banks to make recommendations faster, with more affinity to client preferences, facilitating targeted messages and recommendations to clients. Machine learning can enable lead generation, client sourcing and compliance, while minimising reputational risk. This automation of many mundane tasks and preparatory work will aid decision making by allowing relationship managers to more effectively assess the impact of information, he says.

“In private banking, data and AI must be combined with human input, coming to the best division of labour for the bank’s operating model.” concluded Mr Tonchia. “The industry has been doing quite well globally for the last few years. But the conservative mindset in private banking means people don’t want to experiment too much or be confronted with dramatic need to change.”

While we should not expect any “quick fix”, today’s tragic events will certainly accelerate the rate of change in private banking.