Bringing the Digital Revolution to Private Banking

Today’s wealthy investors are fully in tune with the digital revolution and the spectacular rise of social networking, but private bankers are not keeping up.

A universal belief among private banks that clients prefer and expect face-to-face interaction reveals that today’s wealth managers are out of touch with their client base.

The latest generation of ultra-high net worth individuals is increasingly digital savvy and present on social networks. Their preferences are evolving, and demand for meaningful interaction online is ever-growing. It has become imperative to converse with consumers on their own terms. This includes interaction on social media, through Facebook, Twitter, YouTube and Linkedin, and online through mobiles and iPads.

By integrating social media features, private bankers can reach out to new client bases at a low cost. However, while retail banks have ventured into this arena, with nearly 60 per cent of retail banking transactions now conducted online, private banks have been slow, reluctant to lose their marble halls of exclusivity.

A survey conducted by PwC last year revealed that those private banks failing to rise to the digital transformation will find themselves losing out to mass affluent services offered by retail banks, as traditional means of delivering services no longer provide the flexibility to react to market pressures quickly and efficiently.

According to Scorpio Partnership, more than 40 per cent of high net worth individuals under the age of 50 view social media as an important channel for communicating with their bank. Several wealth managers have recognised this trend.

“You need to be where your clients are, and they are all on social media,” says Bart-Jan Van Der Linde, head of communications for Société Générale Private Banking. “A lot of these sites have a high level of traffic, so it’s important for us to be there and capture a part of it. We also generate traffic for our own website and it’s an excellent way to give visibility to our expertise beyond our website.”

Mr Van Der Linde, however, admits that social media has not as yet been developed as a client tool for the bank. Though clients form a part of Société Générale’s external social media users, the priority channel remains the banker.

“Private banking in particular is a relatively conservative industry. Therefore, I believe many private banks should contain communication tools or client communications to the direct relationship between the banker and the client,” he says.

Yet the bank is active on social media, publishing its investment strategy every six weeks on its website and relaying the information via twitter, using other banking arms to re-tweet the information. Société Générale also posts information on Facebook, videos on YouTube, and podcasts on iTunes, which people can access through RSS (really simple syndication) feeds.

“The strategy is to give wider visibility to our expertise and generate traffic to our website by being where are audiences are,” says Mr Van Der Linde.

Wells Fargo, a pioneer in social media, actively works to engage with clients across multiple social platforms. A hugely popular initiative has been the online game, Stagecoach Island – targeted towards young people to help them learn about savings, managing money and budgeting – along with a blog and Facebook page, which has served as a platform to promote financial education and brand awareness for the bank for the past seven years, before being discontinued in March. Wells Fargo now focuses energy on its signature virtual financial education programme, Hands on Banking.

Social media provides a way to expand awareness of the bank’s planning capabilities and acts as a conduit of sharing latest research and market insights, says Renee Brown, marketing manager for Wells Fargo’s Wealth, Brokerage and Retirement division.

Nevertheless, Wells Fargo remains conservative in their approach, citing a study with clients last year, which did not find any differences in their satisfaction through the usage of social media. The bank found high net worth clients to be “passively active” in the area.

“Clients are using social media for research extensively, but have not yet started blogging or more proactive activities,” says Ms Brown. “The high net worth segment is at the very beginning of this learning curve and we expect them to be up that curve very quickly, since the pace of change has accelerated with technological advances.”

A survey by Assetinum, a Swiss consultancy, on the social media competence of 50 leading private banks found the majority of banks deal with social media inadequately, with amateurish social media strategies.

“For a surprisingly high amount of banks, a convincing social media strategy is still not distinguishable,” says Benjamin Manz, managing partner of

Mr Manz believes engaging in social networking provides various benefits to private banks, including reputation building and preservation. “Reputational risks can be avoided if banks are present on social media channels, such as Twitter and can respond quickly to quell rumours and accusations,” Mr Manz says.

Building brand awareness

Standard Chartered Private Bank currently enjoys the spill-over effects of the Standard Chartered Group’s social media engagement, an arrangement which allows the private bank to provide its input from the bank’s perspective.

The bank has embarked on a localised approach with social media accounts run from the UK, Singapore, UAE, Korea, India, South Korea and Hong Kong, to ensure conversations to audiences remain relevant. Such accounts include a Food Explorer Facebook page in India, which provides customers dining offers and deals, as well as several pages in the UAE, which have a strong follower base.

“One of the great advantages of social media is that it is possible to build a presence without making large financial outlays,” says Marged Lloyd, head of online communication for Standard Chartered.

The focus of the bank’s social media efforts concentrate mainly on building brand awareness and managing reputation, rather than generating revenue, says Ms Lloyd. “We see social networks as channels for talking to our customers, stakeholders and communities, so our primary investment has been towards freeing up staff time to enable our people to participate in these conversations.”

The implementation brought a challenge and compelled Standard Chartered to review how various internal teams work together across the globe and led to breaking down internal silos to ensure increased integration and cooperation. “As a consumer, when you speak to your bank through social media, you don’t care whether you’re speaking to customer service, human resources, marketing or communications,” Ms Lloyd says. “As far as you’re concerned, you’re simply talking to your bank. You expect them to give you the right answer quickly.”

In order to maintain the various social media profiles across the international network, Standard Chartered has worked with a number of digital agencies, based on the needs at the time. Though the majority of work has been managed in-house, the bank uses a range of monitoring tools, including Hootsuite, to keep abreast of what is being said and how well the bank’s content is being shared across social networks.

Several private banks, such as Northern Trust have also created intranets allowing clients of the bank, including wealthy families, to share experiences, thereby retaining exclusivity.

Measures such as these provide benefits to private banks, because they get credit for being the source of the network, feels Andrew Hogan, a partner at PwC. “A lot of customers have found satisfaction in it, saying this is something we value, this is something that differentiates our private bank from others,” he says.


Northern Trust strives to improve the social media process through training their employees. “We’ve held social media training courses led by internal subject matter experts and power users of social media and mobile technology at Northern Trust,” says Sheryl Larson, the bank’s director of digital markets.

Other banks, such as HSBC Private Bank, use social media tools and platforms to help teams collaborate across the globe, be it messaging tools or community platform. But as the bank still explores options for private banking clients, the voice of the private bank is disseminated through the retail bank.

“Private banking customers have potentially a higher degree of privacy and are not particularly active, whereas they might be participating on the retail bank’s communities or forums on gathering that information,” says a spokesperson from HSBC.

The bank, however, is working with technology providers across the mobile and ipad platforms, which comprise as the major tools of access for social networking. “Our customers ultimately want access to their portfolios and expertise that the bank holds in real-time. We have global views, so you are able to log in through mobiles and view your portfolio through multiple jurisdictions.”

As smartphones, tablets and digital devices have become common, private banks are expected to enter this space by their clients, who demand more information than the average investor and have greater access to the latest technological trends.

A survey by PwC found that nearly 50 percent of private banks expect to embrace mobile technologies by next year. Several private banks, such as Merrill Lynch, UBS and JP Morgan Chase have already distributed smartphone applications to their clients, but the apps remain restricted regionally.

Last year, Merrill Lynch Wealth Management launched applications for its Apple, Android and Blackberry smartphones, which enables clients to view portfolios and account activity and trade stocks, mutual funds and ETFs. The application also allows clients to read news and the bank’s latest research reports online.

JP Morgan has developed iPad and iPhone apps for its US clients, which have proven to be hugely popular, allowing clients to view account balances, investment positions and transactions. The application also allows them to transfer funds, pay bills and send wire transfers. However, investment positions need to be directed through client managers.


Despite such trends, Steffen Binder, managing director of MyPrivateBanking, a research organisation based in Switzerland, feels banking apps are grossly inadequate. A survey conducted by MyPrivateBanking last year revealed most private banking apps offered only basic functionality and little useful content. “There is a lack of brokerage and trading features, market and client information offered by these apps,” he says.

“Some banks, like Julius Baer, don’t even offer mobile apps. There are also few apps which have some entertainment value.”

The internet has not only revolutionised communication and interaction between providers and clients, but also their business models, according to Assetinum’s Mr Manz.

Client behaviour has also changed, as an internet savvy generation of investors demands more transparency in asset and wealth management and lower fees, as online businesses are less costly.

“We have to keep in mind that entire financial transactions now can be executed virtually, including advisory services, which can be bought online in new start-ups, such as Personal Capital, Yavalu, Simple or Wealthfront,” Mr Manz says.

He believes the goal is to integrate more IT processes and offer a one-stop solution that will encompass all kinds of financial software tools, such as gateways to cloud services and data centres.

“As the industry for clients is going more online and mobile, social and digital media fit well into these new models and can even serve as acquisition channels in the future,” adds Mr Manz.

Meanwhile, technology providers are rushing to develop products they feel will expedite the digital process. “We are working on an app to facilitate the personalisation of Facebook, so clients can filter the data they want to see,” says Michael Bakouris, chief operating officer at Profile Systems and Software.

47 per cent of ultra high net worth individuals are Facebook users, according to Spectrem

19 per cent of millionaires are on Linkedin, according to Spectrem

Staying safe

Security and privacy are major concerns in the digital sphere. “There are certain challenges facing highly regulated industries like ours. For example, you can’t offer financial advice in this space,” says Standard Chartered’s Ms Lloyd. “We also have to be careful when interacting with our customers through open social media channels — legally we cannot even acknowledge that somebody has an account with us.”

As a result, the bank often ends up having to direct customer enquiries to alternative channels, such as email and telephone. “This can prove to be a source of frustration to customers,” she says.

Mr Hogan of PwC feels a private bank is required to work around normal regular compliance standards that still apply, like data security and privacy. “In spite of constraints, there’s quite a lot of scope for private banks to be more creative in how they use social media tools and techniques to improve client experience.”

For application providers, security is a weak point. “Because you carry smartphones and tablets with you, there is a high security risk. For example, what if you leave your device in a taxi or a restaurant and it’s open?” asks Mr Binder at MyPrivateBanking.

He says saving usernames and passwords on apps is particularly dangerous, and many banks do not provide basic security mechanisms, such as erasing login credentials, using biometric verification and enabling standard SSL (secure socket layer) encryptions for all information and transactions withdrawn through these apps. Moreover, privacy issues are not transparent, Mr Binder says, which makes clients of private banks more nervous.

Steps to success

MyPrivateBanking Research recommends three important measures every bank needs to take:

• First, for each app, what is necessary is a clear definition of which client or user requirements it should satisfy and how the app is integrated with other apps and media channels

• Secondly, banking, brokerage, corporate information and a digital client magazine are must-haves for a banking app portfolio

• The third requirement is to concentrate efforts and to set priorities in app development so as to avoid work duplication, late deliveries and, over time, implementing a lot of mediocre apps instead of a few superior ones

Lagging behind

A survey by Assetinum found private banks lagging behind in social media. Out of a survey of 50 banks:

• Only 19 banks had a blog or chats with their clients on the website

• Only 22 banks had a website optimized for smartphones, with 14 banks not having a mobile app at all

• More than a third of banks did not have an active Facebook profile, including Goldman Sachs, which is invested in Facebook

• Though 42 banks have Twitter accounts, only 26 reacted actively to tweets

• Linkedin was found to merely serve human resources departments, with only 14 banks presenting additional content and just eight institutions cultivating interaction with Linkedin users

Source:  Professional Wealth Management

Posted by Steven Maimes, The Trust Advisor




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