Alan Shields examines the importance of the relationship manager in creating a positive experience for clients.
During the course of a 12-month period, Retail Finance Intelligence (RFi) talks with 1000 high-net-worth (HNW) individuals about their private banking/wealth management relationships, exploring their personal investment goals, risk appetite and financial sophistication. Each time that we conduct our analysis, one of the more striking themes of the interviews is the importance of the relationship manager in creating a positive private banking experience for the client.
In the last issue of Professional Planner, I spoke about “onboarding”; so I thought it appropriate this time to talk about the ongoing relationship, provided through the relationship manager.
At its core, private banking refers to servicing HNW individuals with various financial and investment needs. The essence of private banking involves tailoring services to individual client requirements, discretion, the right amount of personal contact, and portfolio performance. More importantly, private banking has become synonymous with optimal service and professionalism of staff.
Interviewees are most likely to cite service-related factors – such as the lack of staff professionalism and poor relationship with the relationship manager – as key reasons for leaving a private bank. Over the years, private banks have concentrated largely on their retention strategies for clients by getting the basics right, such as service quality and relationship management. The problem is that once HNW clients become dissatisfied and leave an institution, they rarely come back and are likely to spread negative word-of-mouth among their friends and family.
‘The essence of private banking involves tailoring services to individual clients’
Ensuring client satisfaction and winning the loyalty of the client can lead to valuable referrals. These referrals can be made passively – by waiting for clients to tell friends and colleagues – or by actively seeking referrals from clients. It is encouraging to learn that almost two-thirds of private banking clients have previously made referrals; and more importantly, the majority of them made referrals because they felt their private banks were providing them good service and advice – not because they were prompted to do so by their private bank.
While the satisfaction, acquisition and retention of HNW clients continue to be key issues for most private banks, a cyclical issue relates to attracting and keeping talented staff. In the long term, private banks will need to concentrate on retaining key staff and develop strategies to grow their graduates and other new entrants. Acquiring and retaining talented staff is important in an increasingly competitive private banking landscape. In addition, the HNW population in Australia and elsewhere around the world is expected to see significant increases in the coming years.
What is not commonly known is that Australia’s wealth market is one of the fastest growing in the world, surpassing other affluent countries such as the US, UK and Germany. So as private banks and wealth managers grow, one of the most pressing issues will be to ensure that service quality does not diminish due to stretched staff numbers. While there are not many instances of staff poaching here in Australia – relative to other markets – high turnover of relationship managers and advisers has caused human resources problems for some private banks. To control this, institutions are increasingly looking at a multi-person relationship model to encourage clients to stay with an institution – even if one of their relationship managers leaves.
But not every HNW individual is open to the idea of multiple relationship managers. This is particularly the case for those clients who are accustomed to having a single dedicated point of contact and expect this one-to-one service to be convenient. Despite this, there is still potential for private banks to pursue a multi-person relationship model – especially if this is to be executed well. The important thing to remember is that while some clients strongly prefer a single contact, others may prefer communication with up to four advisers who specialise in different fields.
Elsewhere around the world, particularly in North America and Asia, a shortage of talented staff, and poaching of staff, have been rife. Talented private bankers have been lured by extremely high salaries, leading to problems such as spiralling wages, unsustainable cost pressures for the hiring firm, lack of continuity, client losses and overall dissatisfaction among existing clients. These are significant issues that could critically hamper an institution’s long-term capability and growth.
Many global private banks are taking measures to combat staff shortages and to keep their key staff on board. Financial reward is but one important criterion. 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 set up their own training programs and college 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 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. Barclays set up an aggressive recruitment program called Embark, which seeks to take on people from outside of conventional banking and finance circles. Barclays Wealth attracts individuals from industries where client management is a key component, including management consultancy, law and accountancy.
