Lessons Learned | Analytical Diaries

Tales from the down side – lessons for your strategy

Juli 13, 2009 in Financial Services, Private Banking

Recent Reuter news show that the Bank of America has become the largest Wealth Manager globally, leaving UBS to tackle its tremendous outflows on second place. The former strength of a centrally led UBS power-house is becoming one of it´s achilles heels during crisis-management times. More fragment and de-centralized leadership styles have proven more resistant in volatile and frightened market and client environments. Balancing a strong central vision with a autonomous local or regional execution will remain a key differentiator for Private Banking during the coming years.

While UBS always thrilled and excelled on the strong central leadership and the adhering culture of its far fetched Wealth Management franchise, this ideal growth behavior has proven poisonous during the crisis. Other more de-centrally or even chaotically organized banks have been able to remain with their known way of doing business (“just do whatever you think is the right thing to do”). UBS staff has largely played the deer staring into fast approach headlights (“guide us management, tell us what to do”). This tendency also shows itself within the timing required for the current announcements to further management levels.

Three lessons learned for the upcoming strategy sessions sure to be hosted across all Private Banks and Wealth Managers over the coming months could be as follows:

Test your strategy for cycle resistance
UBS clearly followed an expansive growth strategy for the last few years and also still had the experience of missing a trend engrained within its corporate DNA. Neither front nor mid-office staff were prepared for the economic down-turn, the way how they would need to interact with their trusting clients and how pro-actively communication in turbulent times needs to flow from the bank to the client. Since growth targets were valued higher than profitability targets there was an echo effect still at work a long time after the crisis set on.
The client pays your profits, but can pay back as well
Recent studies have shown the relation between revenues generated from fees made transparent to the customer and such that have originated indirectly from provisions, kick-backs and the like. Most European banks have a ration of lower than 40% of revenues generated from direct and transparent fees. While this fact was always hinted at, the recent market effects let clients feel as if they were cheated. A prominent yet young German Private Bank (Quirin Bank) offers a purely and 100% consulting based fee structure. All indirect revenues are attributed back to the client – they have managed to manage profitable even throughout the recent turmoils.
Be brave and don´t just re-do same-old, same-old
Customers and partners are weary and pay an even closer look towards new and upcoming offerings. While independent and fee-based wealth management may gain in importance they still represent a minor share in the overall business. Additional services might also help to gain back client trust or to retain the clients still loyal to your firm. Offering key client services (like pro-active portfolio management) to all segments can be one step into a more active and (again) trusting relationship. Playing with open cards along the fee and risk analysis of each and every portfolio can be another.

Be aware that the current scrutiny of regulators and independent consumer watch organizations will not be over soon. And try to make this a positive element of your new and upcoming strategy – don´t comply but generate a new level of bravery – but this time for your clients, not your balance sheet.

Rating: 0.0/5 (0 votes cast)

Rating: 0 (from 0 votes)