Modern client advice should be individual, with solutions tailored to the personal needs of the customer. Digital tools such as robo advisor or chatbots (chat + (ro)bot) are the latest answers to these demands. Private banking should take this development seriously and exploit the opportunities it presents.

By Bruno Morel, CEO VP Bank Singapore Branch

In 1968, the automotive supplier Continental tested a self-propelled car for the first time to scientifically test tires as accurately as possible – as evenly as a human driver could not. Nowadays, autonomous cars are experiencing a real boom.

Modern banking institutions are currently experiencing a similar situation when it comes to customer advice and asset management. Here, too, certain tasks are to be performed «self-propelled».

Next Level of Interaction With the Customer

More and more often, service companies are offering communication via electronic channels such as chatbots or interactive agents. This is a software that converses with a person and is often designed to give the impression that the customer is talking to a friend. In banking, such chatbots help to manage money, remind people to pay a bill, or intelligently invest money.

Such chatbots are on the rise, as a study by Gartner, a U.S. market research and analysis company from Stanford (Connecticut), shows. By 2020, around 85 percent of all interactions between companies and customers will take place via chatbots, at least in part. The turnover with Robotic Process Automation (RPA) is expected to grow from 680 million dollars (2018) to 2.4 billion dollars in 2020.

Chatbots at Banks in the Starting Blocks

Chatbot technology is changing the way companies interact with their customers. A recent study by the University of St. Gallen in Switzerland and global consultancy PwC concluded that Swiss bank clients can imagine using chatbots for certain types of banking transactions.

However, the technology is still in its infancy and for the time being, is only used to answer standard questions. In addition, many customers are skeptical about discretion and confidential data.

After all, there is a big difference between a customer simply requesting general information and a customer obtaining confidential information about account balances and transactions in the protected area of e-banking. Nevertheless, it is probably less a question of whether chatbots will prevail in banks than of when they will.

The Answer in Private Banking: Hybrid Investment Advice

In private banking, too, much has become simpler and faster with digital tools, although the consequences are unlikely to be the same. The portfolio is increasingly controlled and steered by computers, comparable to self-propelled cars.

Predefined parameters and defined algorithms should be so safe that the portfolio reaches its goal without crashing into a wall.

Advice From Any Location

One strength is the ongoing risk monitoring of the portfolio. This is where the capabilities of artificial intelligence and the integration of digital innovations come into their own: important components of the investment business, such as parts of portfolio construction, risk management and automatic checking of portfolio conformity, can be carried out more efficiently and reliably.

At the consulting stage, client advisors take advantage of the strengths of such tools with tablets. Thanks to tablets, the advice can take place from any location and, thanks to user-friendly visualization, the client can immediately see how his portfolio could develop through minor adjustments. The rational calculations in the background merge thereby with the emotional decision bases of the customers.

The More Complex, the Less Virtual

However, customer service requirements are becoming more and more complex, products more diverse and advice more comprehensive. It is precisely here that the competence of the customer advisor plays a decisive role.

The more complex the services, the lower the potential for virtualization: this is the conclusion drawn by Teodoro Cocca, Professor of Wealth and Asset Management at the University of Linz/Austria in a study.

When Virtualization Reaches Its Limits

As soon as a client approaches a client advisor with a combination of tax, legal and financial issues, virtualization reaches its limits, as there is no algorithm for it. On the one hand, case-related solutions are required that could hardly be handled virtually in an efficient way.

On the other hand, a high degree of expertise is required for data input into a technical support tool alone. This means that the virtualization hurdle for private banks with complex customer requirements is much higher than for retail banks.

Conclusion

It is true that it is indispensable for banks to promote new technologies. At the same time, however, client advisors in private banking and wealth management should receive even more training – so that those problems and concerns that are more comprehensive and complex can be solved in a targeted and personal discussion.

VP Bank's hybrid investment advisory model is being promoted in a highly targeted and proven manner and has been enthusiastically received by both clients and advisors alike.

VP Bank Group
VP Bank Ltd was founded in 1956 and is one of the largest banks in Liechtenstein, with 933 employees at the end of 2018 (full-time equivalent 868). It currently has offices in Vaduz, Zurich, Luxembourg, Singapore, Hong Kong and Road Town on the British Virgin Islands. VP Bank Group offers bespoke asset management and investment consultancy for private individuals and intermediaries. Due to the open architecture, clients benefit from independent advice: The products and services of leading financial institutions as well as in-house investment solutions are included in client recommendations. VP Bank is listed on the Swiss stock exchange SIX, and has an «A» rating from Standard & Poor’s. The bank has a sound balance sheet and capital base. Its anchor shareholders take a long-term view, guaranteeing continuity, independence as well as sustainability.

VP Bank Singapore Branch
VP Bank Ltd Singapore Branch is a boutique private bank with a client-centric business philosophy and is the Asian branch of the Liechtenstein-based VP Bank Group with more than 70 employees. VP Bank Ltd Singapore Branch provides specialized wealth management solutions and family office services for high-net-worth clients and professional asset managers.
VP Bank Ltd Singapore Branch is dedicated to the protection and growth of clients’ wealth. The bank offers a holistic suite of services and advisory, not just in wealth management, but also in inheritance planning, structuring of trusts and foundations, as well as art and philanthropy. Apart from private wealth management, VP Bank Ltd Singapore Branch provides comprehensive services for asset managers and other financial intermediaries. The service offering comprises a trading platform, banking services including ebanking and mobile banking and operational support. Partnership arrangements with professionals include tailor-made investment advisory, discretionary management solutions, and custodian services.