Private banking moves from paper trails to personalised service

Social restrictions and remote working imposed by the Covid-19 pandemic have certainly accelerated the much needed digitalisation journey in private banking, but the process had been many years in the making. 

Technology has radically changed the nature of the adviser-client relationship over the last two decades, pushing it increasingly online, allowing private banks to deliver a highly customised service to clients, anytime and anywhere, with mobile apps now the norm. 

Leveraging customer data enables advisers, equipped with iPads, to gain greater understanding of client goals and aspirations, increasing efficiency and productivity. 

At the same time, clients of all ages are increasingly more comfortable receiving wealth management services and advice digitally, but expect their experience with private banks to be as seamless and intuitive as other areas of their lives. 

“Clients want to be able to log in to an easy-to-navigate client portal and check their investments at home or on the go, from anywhere, at any time,” says Mark Trousdale, head of business development Emea at InvestCloud. 

“This is both enabling and creating the potential for much more engaged clients. But equally, expectations are significantly heightened among end clients. They expect the facility and low-friction experience they have come to enjoy with many consumer technology applications, so the pressure is certainly on the industry to deliver digital results.”

Transformed relationships

Tech’s biggest benefit for private clients has been the near ubiquitous access to information about portfolios and investment advisers, believes Doug Fritz, founder and CEO of San Francisco-based wealth technology strategy firm F2 Strategy. 

“It’s hard to remember, but 10 years ago, most clients had to wait for the quarter-end to receive a mailed, paper statement that told them the story of their returns, then they had to call and schedule a phone or in-person conversation to discuss it. All that can be done on their phones now.”

In the past, wealth managers “would never have dreamed” of having clients enter their own data, believed to be in sharp contrast with the private banking ‘white glove’ service. Today, banks strive to meet client demand for more self-service functionality. With regulators increasingly tightening controls and enhancing protection for clients, advisers must spend far more time working with internal compliance and operations teams. 

“Many used Excel workbooks to manage client portfolios and manually entered trades, when needed, into archaic platforms. Today, compliance and operational functions are automated or outsourced to other firms, leaving advisers to increase numbers of clients managed, while deepening their relationships,” adds Mr Fritz. 

Beyond portfolio management, the impact of technology spans the entire lifecycle of client adviser relationships, starting with identifying prospects with sophisticated wealth management needs, explains Andrew Catterall, head of digital data transformation at JP Morgan International Private Bank. Traditionally, this required manual research, whereas today advisers access databases and targeted digital promotions. 

While face-to-face meetings remain critical for long-term success, research shows most clients now prefer a mix of virtual and periodic in-person meetings. 

Many other critical steps in the prospect-to-client journey, such as onboarding, which required face-to-face meetings, have been supplanted with digital mechanisms for document verification, signatures and multi-factor authentication.

Moreover, developments in computing power, data storage costs and artificial intelligence techniques provide advisers with greater access to data analysis, resulting in more customised portfolios for clients. “Advisers are increasingly supported with powerful tools that can analyse trends and spot opportunities for tailored advice by modelling/simulating impacts on existing portfolios,” says Mr Catterall.

They also provide real time monitoring of position updates for live pricing and alerts, calculate performance, attribution and risk analytics allowing advisers to explain drivers of portfolios returns. This boosts transparency and client trust, increasingly important with exponential growth of the product palette for ultra-high net worth clients, who enjoy greater access to private equity, structured products, venture capital and hedge funds.

At the same time, there has been a reduction in “utility tasks” for bankers, either because clients are now more likely to self-service when it comes to payments, checking balances, transactions and performance, especially following the pandemic, or because of internal automation. And as straight-through processing (STP) and automation increase, such tasks will decrease further, predicts Mr Catterall.  

Raising the bar

In the past, legacy technology forced firms to build many manual processes to support client journeys from end to end, while modern solutions have tightly integrated experiences and STP utilising embedded workflows, states David Schug, vice president, new business development at SEI Wealth Platform.

“With less automation, every layer of client support was more labour intensive and required far more administration assistance and oversight,” says Mr Schug. “Now we have a wealth of tools at our fingertips, allowing instant access and oversight of data to inform private bankers, and providing a hugely enhanced experience for the servicing firm and client.”

Improved technology and tools have also meant the end of the nine to five working day, with the industry now working on a 24/7, 365 days a year basis in an environment competing for attention with Netflix and Amazon, alongside financial services rivals. “Technology has transformed the life of a private banker, removing processes, enabling access and analysis of data and alleviating processing delays. But this is still a journey and there is much more which technology can and will enable,” he says, predicting the emergence of more personalised, connected experiences.

“Ubiquitous advances in technology have fundamentally raised the bar in terms of how, and how often, clients expect to engage, while at the same time, making it easier for us to tap into new digital tools to better connect with, and inform them,” says Eve Varner, head of advice enablement for wealth and investment management at Wells Fargo. “We live in a world where our clients are increasingly diverse in terms of their goals and priorities, approach to investing, and to communicating.” 

The focus going forward, she says, is to take advantage of emerging technologies embracing intelligent mobile experiences and financial planning software, “to recognise and respond to that diversity and effect a deliberate shift from static, scheduled transactional guidance, to continuous, on-demand and personalised advice”. 

Speeding up

Wealthy clients also show a growing desire to understand the environmental, social, and governance (ESG) impact of their portfolios to make investment decisions better aligned with goals, leading private banks to offer ad-hoc platforms, often partnering with fintechs.

“Gone are the days when clients were interested in a packaged product that private bankers said was great for them,” said Kelli Keough, head of digital and client solutions at JPMorgan Chase, speaking at the recent virtual FT wealth management summit. “Instead, people expect to have more choice and products to align with their values.” 

As well as purchasing UK digital wealth manager Nutmeg, JP Morgan Chase recently acquired OpenInvest, a fintech helping advisers customise and report on values-based investments. Other private banks are also focusing on this space, with BNP Paribas encouraging clients to reallocate portfolios to sustainable investments through its myImpact platform, while also looking outside to reinforce the digital ecosystem.

“Partnering with fintechs and start-ups has been part of our strategy for a few years, as an important accelerator of digital transformation,” said Mariam Rassai, head of client experience at BNP Paribas Wealth Management, also speaking at the FT summit. These range from enablers facilitating processes such as e-signatures, to fintechs such as PaxFamilia, which provides clients with a ‘digital family office service’ to extend the bank’s value proposition.

This sense of growing client expectations creates a great opportunity for fintechs to work more closely with wealth managers, “Unlike some nascent providers, traditional private banks have very strong balance sheets and access to significant distribution in terms of retail and institutional investors,” says Mo Mirza, CFO at open banking fintech TrueLayer.”

This means there is more of an opportunity to accelerate digitalisation over the coming years.”

Data science

Further profound changes in wealth management are likely to occur during the next decade. “Technology and data will foster the entry of new players with a more niche value proposition,” expects Victor Allende, director of CaixaBank Private Banking. “But increasing competition will push traditional providers to offer more open and technological services, improving client engagement.” 

Sophisticated algorithms and modelling will allow for greater service customisation, as big data and AI continue to play a key role in wealth management. But the application of these techniques will go well beyond the tailoring of investment solutions to match the risk appetite of clients, believes Mr Allende, who credits big data, AI and machine learning techniques with allowing effective segmentation of customers and design of personalised value propositions.

 “Their greatest future potential,” he says, “lies in delivering more traditional services that rely on deep understanding of individual circumstances and needs, such as intergenerational wealth transfers, succession planning, and other life events.” 

AI and big data are described as “key drivers of the fourth industrial revolution” by Sim S Lim, group head of consumer banking and wealth management at DBS Bank in Singapore, who advocates the building of “intelligent capabilities” by engineers rather than bankers. 

This involves combining predictive analytics, AI and machine learning technologies to transform data into “relevant, intuitive, and hyper-personalised insights for every individual client”, seeking to “take the hassle and complexity out of banking”.

The goal of this process is empowering customers to better manage their money, by alerting them to investment opportunities, providing guidance for financial planning, or notifying them of unusual activities and blind spots in their accounts. Once predictive technology for intelligent banking is entrenched in advisers’ front line tools, it allows amalgamation of customers’ data in one place for relationship managers. Converting data into insights then enables advisers to have a more engaging conversation with customers, boosting productivity. 

“The best thing that happened to the banking industry is the rivalry from fintechs. They have forced us to rethink how we work and regulate ourselves,” says Mr Lim, believing inspiration from tech giants has elevated innovation and client service to new levels. “We have no choice but to adapt, or we are dinosaurs and we are finished.”

But the road to more effective deployment of data science in wealth management is likely to be a bumpy one, with vast amounts of high-quality data needed for models to be correctly tailored for target markets. “This is still far, far away for most firms right now,” believes strategic consultant Mr Fritz. Firms need clean, centralised, well-structured and managed data to produce reliable insights, but apart from the larger, more sophisticated wealth firms, most mid and small firms have yet to organise or centralise this data. 

“Very few of these new AI/ machine learning/data science tools will work, if firms have no data to feed them,” says Mr Fritz. “This will increase the gap between the technology ‘haves’ and the ‘have-nots’ in the next five years.”