Online Services Can Differentiate But Won't Replace Personal Touch

Emma Rees 4 April 2008

Online Services Can Differentiate But Won't Replace Personal Touch

Although online services for clients have not traditionally figured high on the agenda of most private banks, it is fast becoming a differentiator for some firms.

Although online services for clients have not traditionally figured high on the agenda of most private banks, it is fast becoming a differentiator for some firms.

High net worth clients are increasingly turning to the Internet to manage their financial affairs, and having a sophisticated online offering to reach and serve their clients is moving up the agenda for private banks and wealth managers.

Firms need to consider online interaction with their clients on a variety of levels. Marketing is key as potential clients use Internet research as a point of comparison between different wealth management propositions.

“In some cases where a wealth management institution has a significantly advanced online proposition, the Internet can act as a strategic tool to develop a competitive advantage over rivals who may have a less sophisticated online proposition,” found a report by Datamonitor entitled The Case for Online Wealth Management.

According to the same report, an increasing number of high net worth individuals were turning to the Internet as a medium to communicate with their relationship manager, co-ordinate their investment plans and manage holdings and the overall structure of their portfolio.

As little as ten years ago, Internet usage in the UK was only just beginning to gain momentum. Only 7 per cent of a sample of wealthy individuals recently interviewed by Barclays Wealth had been using the Internet for more than a decade.

Cath Tillotson, head of research at Scorpio Partnership, confirms that today wealth management clients are expecting more sophisticated technology in their interactions with wealth managers, as increasingly they have made their own money rather than inherited it:

“This means they have come through retail banking and expect the same technology they have been used to. We are at a crossroads where most private banks do not have the online transactional capability. We are serving a generation who are selling their businesses and are used to people they can phone up and fix it for them. The younger generation who are coming through as the private banking clients in the next 5-10 years will expect exemplary technology and service.”

Firms are starting to take notice. PricewaterhouseCooper’s most recent bi-annual wealth management survey, conducted in 2007, reveals that the chief operating officers of wealth management firms believe that ebanking will be high up the agenda in three years’ time as the second most important IT objective.

One UK-based wealth management firm with a highly developed online offering is Credo which says its clients can gain an overall accurate view of their portfolio online any time of day, wherever they are in the world:

“Once, private banking services were terribly nineteenth century and clients could expect a handwritten statement perhaps a week after they asked for it,” says Stephen Davies. “Now the expectation is for immediacy and to know ‘how’s my wealth doing?’ in real time, not to rely on a quarterly statement.”

Mr Davies acknowledges that there are challenges to co-ordinating pricing feeds for different asset classes and investments in a client’s portfolio when some prices are available real time and some, like for property funds, are available less frequently: ”But in this day and age when you can build a car by computer, its not that hard,” he says.

He believes although clients want online reporting, the ability to transact online is less of an issue:

“Whilst it’s of course possible to provide an online dealing function, our clients want to discuss timing and talking things through with someone. Wealth managers can also add value in terms of their ability to buy cheaper and sell more expensively. This added value is easily worth the higher transaction cost,” he says.

Coutts says it was one of the first private banks to provide its clients with online services and now, with around one- third of its clients transacting online, it has a higher proportion of clients making use of online services than other private banks. However, it is keen to emphasise that it doesn’t push clients down the online route:

“It’s about providing clients with a choice as to how they want to transact, at a time convenient to them. We also provide a dedicated and trained telephone team of real people 24 hours a day 365 days a year to answer calls from clients,” says Alison Langton, head of product marketing for Coutts.

Coutts enables clients to access their current accounts online, as well as money market and currency accounts, and Coutts World and Gold Cards. Clients can view and make transactions, make chaps payments and telegraphic transfers.

Whilst investment portfolios aren’t yet available to view online, Coutts says it is focusing on developing its online offering in line with clients needs.

Mark Kibblewhite from Barclays Wealth which has recently revamped its site, says that clients like to have control and view their client reports, tax packs and so on whenever it's convenient for them:

"Most appreciate having a choice to do this online rather than receiving a tree through their letterbox," he says.

He says that the client base is broadly divided into two camps with regards to transactional capability:

"The first is made up of those who want as much online accessibility to their accounts as possible so they can access their affairs online at 2 a.m. when they're traveling, for example. This group does not just include younger clients as many retired people enjoy transacting online. The second camp are those who will always prefer to just pick up the phone and give verbal instructions."

Mr Kibblewhite says that one way in which wealth managers will differentiate themselves going forward is through technology. "This will really come into its own when clients can begin to customise their own reporting," he says.

"In the future, we will see more wealth managers invest time in technology to evaluate portfolio thinking and construction as it is likely to influence clients' choice of their wealth counterparty. Those providers that allow clients to have multiple contact points through one counterparty will start to win."

However, a developed online offering is no substitute for relationships and there will always be clients who would rather just pick up the phone to a private banker.

PwC’s research shows that the personal touch continues to be hugely important, and although ebanking does have a place, chief executives as well as relationship managers are also very aware that it is the personal relationships in wealth management that are an organisation’s big differentiator.

Citi Private Bank finds that due to the high value nature of its client base, as well as its low client to banker ratio, online wealth management is not a particular focus currently:

"Our service is best suited to clients with around £10 million. We therefore have a relatively small client to banker ratio to allow for communication which is tailored around the individual client and their specific requirements and preferences," says David Poole, business development director Citi Private Bank EMEA.

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