Alan Shields says effective client relationship management is the key to attracting and retaining high-net-worth clients.

Every six months, as part of the Australian Private Banking Council research program, we interview high-net-worth (HNW) individuals regarding their finances and relationships with financial service providers. One of the more striking themes of these interviews is the importance of the relationship manager in creating a positive experience for the client.

At its core, private banking is about tailoring services to individual client requirements. In doing so, a balance must be struck where the right amount of personal contact is delivered in the most optimal way by professional staff. This is highlighted by the fact that HNW individuals consistently cite service-related factors such as continuity of relationship management, lack of professionalism and poor relations with the relationship manager as key reasons for leaving a private bank.

With client retention being more cost-effective than acquisition, many private banks focus on client retention in a direct way – by attempting to head off potential attrition before it occurs, and getting the basics right. What private banks are increasingly realising is that the satisfaction, acquisition and retention of HNW clients are inextricably linked to the attraction and retention of talented staff. In the long term, private banks will need to concentrate on retaining key staff and develop strategies to grow and develop their people.

Exacerbating the importance of talent is the increasingly competitive private banking landscape in Australia. Before the GFC, Australia’s HNW population was one of the fastest-growing in the world, surpassing other affluent countries such as the US, UK and Germany. The fact that Australia has remained remarkably aloof from the impacts of the GFC will only serve to ensure steady increases in the number of HNW individuals in Australia. And for private banks looking to capitalise, this means hiring more staff to facilitate growth.

The big balancing act for private banks is to ensure that service quality does not diminish due to enlarged numbers of new staff and increased churn – as competitors look to poach. While there is not a huge amount of staff poaching here in Australia, it is on the increase and – as mentioned earlier – high turnover of relationship managers can cause client attrition.

In essence, what we have learned from our research is that retention of staff and retention of clients are one and the same issue.

But how can private banks tackle this? I believe that the answer lies first and foremost in development of talent. By offering staff a means of ongoing personal development, a private bank can ensure not only that staff feel rewarded and empowered, but that they develop the skills necessary to better service their clients. Of course, financial reward is an important criterion for talent retention and any research that suggests otherwise is incorrect.

The trick is to find the balance between development and remuneration and to back it up with a clearly defined strategy. A private bank’s direction, internal culture, investment in staff development and acquisition are all critical to success. It follows logically that staff turnover is lower in firms with a strong and committed strategy supported by a stable senior management team.

Some larger private banks have addressed talent development by setting up their own training programs and colleges for private bankers. For example, Citi has several programs worldwide that attract new recruits with excellent academic results from top universities. UBS and Credit Suisse have also established their own colleges for private bankers in Switzerland and Singapore, while other banks draw on their own graduate recruitment programs. This is all part of a plan to invest in staff training and foster loyalty among upcoming relationship managers and private bankers.

There are also cases of private banks recruiting from outside the industry. Over the past two years, the Australian private banks have used the relative advantage that the Australian economy has afforded by recruiting from overseas and from outside of conventional banking and finance circles.

So what does this mean for Australian private banks going forward? Although severe staff shortages and staff poaching are yet to happen in Australia, some private banks here have experienced high staff turnover in recent years – from client-facing relationship managers through to general managers and heads of the business. To control this, private banks will need to focus more on achieving internal stability, direction and cohesion. Investment in the training and development of staff – the most valuable asset of an organisation – goes hand in hand with achieving the ultimate goal of client satisfaction and retention.

Alan Shields is research director for Retail Finance Intelligence (RFI) –

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