Five steps a private bank should take today

The business environment, as well as the regulatory outlook, are bringing numerous challenges to private banking executives in the decade ahead.



Patrik Spiller - Partner - Swiss Wealth Management Industry, Strategy & Analytics Leader - Deloitte

Stefan Bucherer - Senior Manager - S&BD banking offering lead - Deloitte

Pascal Martino - Partner - Banking Leader and Deloitte Digital Leader - Deloitte

Erika Bourguet - Director - Strategy Regulatory & Corporate Finance - Deloitte

Published on 10 September 2019

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The business environment, as well as the regulatory outlook, are bringing numerous challenges to private banking executives in the decade ahead.

During our recent sessions with executives from leading private banks to discuss the future of private banking, we identified key challenges and uncertainties such as the impact of new technologies on client interactions and the transformation of the value chain whose consequences could be critical for the shape of the wealth management industry.

Dealing with those uncertainties requires new ways of strategy definition and a different organisational mind-set. However, irrespective of a bank’s future beliefs, executives should adopt five key recommendations now to stay competitive.

Clarify key beliefs and strategic focus

Today, many private banks are stuck in the middle. They are too big to focus on the needs of a niche client segment that values a highly personal touch, but too small to enjoy the benefits of scale from focus on a single product group, country, or client type–which in our experience kicks in at only above €100 billion of assets under management (AuM). However some very successful players have found a niche and achieved impressive returns for their shareholders and clients by focusing on select markets and client segments defined by needs, not assets.

Private banks should seek to answer the following questions. What should be our purpose and ambition in the business of wealth management?

What distinctive capabilities could we leverage to become the best–even if this is not in our core business today? How could we use these capabilities to create a unique value proposition for our selected market? What economic drivers do we need to focus on for the execution of our strategy?

The choices should be made according to the bank’s key beliefs about how the future will evolve. To deal with uncertainty, private banks should also define contingent strategies that can be deployed if the future develops differently from expected.

Learn to partner in the ecosystem

Digital technologies are creating an exponentially growing number of options for creating value for clients, and no single firm can cover all these options. So every private bank needs to determine what value it can deliver on its own, what value it can deliver by cooperating with ecosystem partners, and what value it should choose not to provide but leave to others. As opportunities emerge, decision-making should not be static and collaborations with ecosystem partners need to evolve.

Working within ecosystems is different from sourcing services along the value chain: it involves dealing with partners on an equal footing and identifying win-win business models. Technologies such as API-based platforms for increasing connectivity or cloud services to provide scalability are enablers

for efficient collaboration. In addition, ecosystems are complex multidimensional networks, and experimentation is key to success–thus, private banks should seek to create or join a minimum viable ecosystem and also recognize that they can be players in several different ecosystems simultaneously.
So, who might private banks partner with? This depends on the core needs of clients. These may include more obvious examples such as insurance companies, asset managers, and fund platforms, but also less obvious ones such as hospitals, luxury stores, supercar dealers, and hospitality services.
Last but not least, private banks need to accept that in many cases being a niche player and joining an ecosystem is a more realistic (and less risky) option than becoming the orchestrator of an ecosystem.

Focus relentlessly on client experience

Many banks have started to define client and/or employee journeys to bring the client experience to new levels by focusing on the delivery of exceptional service in moments that matter. Human-centered design of products and services can make a huge difference from a client perspective, without necessarily incurring additional costs. The starting point, however, is a deep understanding of clients and their needs.

The needs of private banking clients can be vastly different, depending on age, occupation, family situation, domicile, available time, type of assets, and so on. But, do private banks currently make sufficient use of all available information to give advice specific to the needs of their clients? The key to this type of deep understanding is the availability, accessibility, and validity of (internal and external) data–maintained and analyzed in full accordance with data protection laws. The first step, therefore, is to have a data strategy.

Empower your relationship managers

In response to new technology, changing client expectations, and increasing pressure on margins, the relationship manager of the future will need to be more versatile and proactive than today. We believe that tomorrow’s relationship manager should be able to form a community of clients in the digital and the real world and to build a strong individual brand. Private banks should empower their relationship managers by providing integrated tools, analytical insights, and streamlined ways of working which reduce the administrative burden. One of the challenges for private banks is how to foster an entrepreneurial mind-set among its relationship managers, while maintaining rigorous cost- and risk-awareness.

Increase organizational adaptability

In an age of uncertainty and rapid change, traditional management systems, structures, and talent strategies tend to become outdated. Many organizations have therefore started to become more adaptable by taking action on five different layers: the ecosystem, the organization, the team, the leader, and the individual. Some banks have started to organize their teams according to aspects of the customer experience (e.g., “I can easily reconcile my plan for retiring in financial comfort”) across functional silos and including both internal and external staff. Others are using informal structures to conduct network assessments to guide organization design. Experience shows that these changes are best implemented incrementally, to discover what works for a particular organization. For example, a private bank could introduce a mission team to serve a specific sub-set of clients, such as entrepreneurs. This multi-disciplinary team might comprise relationship managers, investment

specialists, corporate financing experts, external tax experts, operations specialist, and compliance experts. To increase the speed of delivering value to the client, these teams might employ agile methods based on iterative development, teamwork, distributed accountability, and accepted standard project procedures.

These five recommendations form a basis for private banks to prepare themselves for the future. But, it is not necessary for private banks to initiate all of them together. Private banks should move forward taking one small step at a time, gaining experience with new ways of working and developing greater clarity about its own business model. This should prevent the danger of trying to achieve too much in too little time, and also the risk of stagnation in the business from denying the need for any change.


What are the five things private banks should do today?

  • Set their ambition based on their key beliefs about the future and define contingent strategies
  • Cooperate with ecosystem partners to benefit from specific competencies and capabilities
  • Focus on relevant client experience by leveraging data management
  • Empower relationship managers with tools and insight to maximize their efficiency
  • Establish an adaptable organization to drive change and deal with uncertainty.

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