Firms in the wealth industry like to say they are "client-centric". But how many of them really set high standards in making the interests of customers central to how they work?

The world’s major private banks are still falling short on their promise to put clients’ interests first, as a result of practices and internal barriers to progress, a study by consultancy firm Gulland Padfield says.

The report assesses the client focus of institutions in three “tiers”: (i) advanced - they have largely achieved client focus at an institution-wide level and can claim to be differentiated in the market from other banks in that respect (ii) transition – they have publicly launched initiatives to strengthen client focus, and, (iii) early stage – they haven’t yet announced or made significant changes to improve client focus.

None of the leading banks analysed in the report achieved tier one status. UBS, BNP Paribas and Citi lead the group with a series of bold initiatives placing them in tier two. The remaining private banks are rated currently as tier three, the report said.   

Asked why banks are not up to speed in making client concerns paramount, Gulland Padfield told this publication: "The need to be compliant and the need to deliver a favourable client experience are two forces pulling institutions in different, usually opposing directions. Of course banks should be compliant. It’s the law. But it’s the way banks are implementing compliance that is crucial to get right. At its worst, we’re seeing compliance procedures being rolled out inside banks that simply haven’t taken the usually negative (but occasionally positive) impact on the high net worth client into account.

"And as for pressure from shareholders, if a bank is really approaching the issue of client focus seriously, it will link improvements to tangible improvements to the revenues and margins of the business. The challenge with the whole client centricity debate is that too many people think it’s a nice to have rather than a route to greater profitability by aligning the business more closely to client met and unmet needs," the firm added.

The report is based on publicly-available information from 11 of the world’s top private banks including client-related statements made by their executive teams and aspects of leading banks’ client-facing activities in 2015 and the strategies they plan for 2016.    

The banks featured in the analysis are: UBS, Citi, Credit Suisse, Julius Baer, JP Morgan, Pictet, HSBC, BNP Paribas, RBC, Barclays and Merrill Lynch Bank of America.

“We conducted this study to see what banks still had to do to succeed in their publicly-stated aim to strengthen their ‘client focus’ and how far they have got in achieving that important goal. The conclusions are designed to be constructive both to those management teams who are taking steps to transform their business model around the client, and for regulators who share the mission with banks to make the private banking sector truly client-centric,” said James Edsberg, author and partner at Gulland Padfield.

The study examines 10 areas of client-facing activities by the major banks including their approach to client segmentation; the evolution of their client proposition and developments in their product offering to clients; changes in the priority on clients in different geographic regions in Asia, Latin America, US and Europe; brand positioning and market messages; client centric culture; client servicing frameworks, marketing mix and sales strategy.   

The report identifies four aspects which appear to hold many major private banks back from achieving greater client focus:

1. The client data gap
Many banks suffer from a weakness in the quality, depth and regularity of data and insights into the unmet needs and perceptions of HNW and UHNW clients of the standards of service the bank provides to them. Without this, a bank is obliged to rely on anecdotal or partial evidence about its clients and is poorly positioned to make the case internally for any change that is needed.

2. The compliance dilemma
As with all other financial institutions, private banks must satisfy compliance requirements while at the same time delivering a differentiated and high quality service experience to their clients. But, ironically, the implementation of many compliance processes by private banks often fails to take into account the negative impact on the client’s service experience that can be a consequence of tighter regulation. Resolving this dilemma inside banks, without compromising the need for regulatory compliance, is holding some back from improving client focus.

3. Prioritising technology investment
Decisions around how and when to upgrade a private bank’s technology platforms is also an area where the solutions are not built around an alignment to the bank’s business strategy nor its client strategy. The greater degree of client focus in designing and selecting the right digital aspects for a bank’s client service, the better the likely return on technology spend.

4. Leadership on the issue of client focus
To drive tangible and sustainable change, consistent and vocal leadership at a senior level to all levels of the institution about the importance of client focus is needed. Because of the often complex nature of client-orientated change, and the involvement of multiple internal stakeholders, banks need high quality talent and strong governance to achieve that change.