Swiss private banks have delivered sub-par performance, harming shareholder value. Future success depends on challenging the status quo with bold thinking. DISAPPOINTMENT AND MAJOR NEW CHALLENGES
Swiss wealth management (WM) has a long and proud tradition, but financial performance in recent past has been disappointing. While the Swiss Market Index has risen since the financial crisis, the shares of Swiss private banks (PB) have declined substantially. Despite many international clients still choosing Swiss banks as their advisor of choice during the crisis and strong new asset flows, fee and margin erosion and increased regulation have hurt profits. Cost-cutting has been met with limited success. And PBs face big new challenges. Big Techs, FinTechs and NeoBanks, with their instinctive understanding of millennials, are disrupting the industry with entirely new offerings and competing with them for the talent they need. Sustainable, socially responsible investing has also become vital. How can Swiss PBs respond? DELOITTE’S FIVE WINNING STRATEGIES FOR A SUCCESSFUL FUTURE ONE – Use M&A or Partnerships to Build on Core Strengths No single player can be best-in-class in everything. Each bank needs to determine where it excels and then strengthen that core offering and build scale. An option could be M&A or partnerships with large Asian or Latin American PBs, PB divisions of universal banks or insurance companies. With ecosystem partners, a broader set of high-value services can be shaped. And parts of the current plain vanilla investment management capabilities could be sold off. TWO – Find New Ways to Engage With Clients and Prospects As the world goes digital the challenge for wealth managers is to remain client-centric. PBs need to upgrade their digital marketing capabilities in order to connect with prospects more successfully. They can enhance their client connections with analytics-driven propositions, and partner with entirely new industries and sectors, such as luxury platforms. Client advisory, the core human element in WM, can also be digitally enhanced. The relationship managers of the future need to provide advice in a hybrid way, combining the best of human and machine elements, efficiently using integrated tools, analytical insights and streamlined ways of working. THREE – Focus on Innovation and R&D Banking and WM in particular are laggards in innovation. According to the EU’s Industrial R&D Investment Scoreboard, there are only 24 banks among the EU’s 1,000 largest R&D spending companies. PBs should be investing in digital innovations, such as co-browsing and advisory dashboards, in which bank staff can help clients explore options online. PBs need to become innovators. FOUR – Leverage the Cloud PBs are mostly stuck with legacy IT systems, which reduce their ability to innovate. Cloud-enabled organizations move away from a DIY-mentality towards embracing external providers with scalable, flexible, fast and cost-efficient services. Cloud services typically have the potential to reduce an organization’s IT costs. Non-core applications can be rationalized and streamlined. Overall, cloud technology would enable PBs to improve their agility, drive innovation and leverage industry-specific solutions. FIVE – «Platinum Standard» for Secrecy and Privacy The WM industry as a whole is expected to adhere to the highest global standards of diligence in combatting financial crime, terrorist financing and tax fraud. This duty partly contradicts the growing importance of privacy. Maintaining compliance with all regulations and making full use of digital innovations, while safeguarding clients’ privacy and personal data, will therefore be crucial. The current regulatory framework, where every bank has to find its own way through complex regulations, jeopardizes this. PBs should therefore engage with policy-makers to modernize Swiss bank secrecy as a catalyst for innovation. FIVE WINNING TRANSFORMATION STRATEGIES FOR SWISS PRIVATE BANKS
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