2. Let the Bank do Beta
In addition to lower margins and digital transformation, relationship managers much too focused on clients’ core assets are taking undue risk in terms of client losses and damage of relationships.
Firstly, expected returns from global markets are generally expected to decrease across the board in the backdrop of lower interest rates and slowing growth. Secondly, fears of a financial crisis are rising due to the significant convergence of high-risk events like U.S.- China tensions or the pandemic. And in the event of a serious meltdown, core assets in funds and mandates will be much easier to sell compared to individual holdings.
Private bankers still placing emphasis on these core assets will find that in the best-case scenario, they will be thanklessly responsible for modest returns. But in the worst-case scenario, they could find themselves in uncomfortable situations explaining why they were unable to exit low margin positions with hefty losses. Bankers should instead focus on areas that can generate real alpha such as alternatives or even structured products.
3. Less Farming, More Hunting
For bankers that wish to heed the advice of shifting attention away from core assets but lack access to ultra-high net worth (UHNW) clients for large ticket products like alternatives, the simple solution is to concentrate on acquisition.
Fortunately, digital transformation efforts have benefitted not only private bankers focused on providing advice and promoting solutions (farmers) but also those that are focused on new clients and assets (hunters).
New capabilities, such as secure communication platforms for instant messaging and document sharing or usage of biometric data for identity verification, are making account opening increasingly easy and scalable.
