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The new generation of Private Banking

Together with the erosion of banking secrecy, regulatory changes have increased the pressure on asset managers’ profit margins.  As a consequence, these institutions have been forced to look for ways to improve their value proposition.In this context, various technological advances directly designed for private wealth management have emerged. These new tools suggest scenarios in which financial institutions can distinguish themselves using technology.  While one cannot underestimate the importance a relationship manager plays in creating customer satisfaction, their performance is only as good as the tools available to them.

Customers have become accustomed to having a multitude of online services available in their everyday lives; they expect to see the status of their investments in real time, preferably on their mobile tablet.  This trend is creating the conditions to rethink the interaction between relationship manager and investors.  For example, by allowing the customer to examine the important events related to their account (such as the performance of their portfolio) before each appointment, the manager significantly reduces the need to explain past information to the customer and can dedicate more time to the real issues that the customer has.  This creates a more useful report for the customer because it enables him to clearly visualize the opportunities and risks associated with his investments.  As a result, the customer has a better understanding of the ins and outs of his decisions, and he accepts the consequences of those decisions more readily. This transparent approach to account management can strengthen the trust in the manager-customer relationship.

When the Risk becomes tangible
With the increase in market volatility, and the need to generate absolute returns after taxes, customers expect to get evidence of a systematic process aimed at reducing their risk.  Given the abstract nature of the notion of risk and the complexity of the quantitative models that they involve, it is essential to use intuitive settings and scenarios to get investor’s buy-in on the investment decisions.

One method is to establish a set of factors that are meaningful to the investor, such as GDP growth, inflation or the price of oil.  These factors should include all the variables that the investor wishes to be exposed to and those against which he wishes to hedge himself.  Based on these elements, the portfolio optimization tool BlackSwan Financial Platform creates the conditions for an interactive discussion of the options available to the customer using a set of intuitive indicators which one can use to observe the impact on the portfolio in real time.  The main advantage of this type of analysis is that it enables the construction of a portfolio that matches the client’s strategic concerns and particular hedging requirements.  In addition, it provides a better understanding of how a portfolio is composed.  Thus, the act of investing is no longer to buy products or to comply with a predetermined asset allocation, but rather to have exposure to risks for which the investor wishes to be rewarded.

It is obvious that in order for the Swiss financial industry to maintain its global standing, it must compensate one way or another for the loss of the competitive advantage that it formerly enjoyed from its banking secrecy.  As we have shown, opportunities exist: by arming themselves with effective tools, Swiss asset managers can build a solid reputation through their superior management of risk.