“Digitalisation is vitally important, but it is not a substitute for a relationship of trust.”
Photo: Lombard/Dominique Gaul
Like in all other business sectors, digitalisation is beginning to change the shape of the private banking world. So, is the race on to tech up? Jurgen Vanhoenacker, executive director at Lombard International Assurance, argues that trust must always come first.
An industry conference, organised by InFinance and hosted by the Hotel Royale on Tuesday 20 March 2018, was opened by Jonathan Prince, co-founder of Finologee, who remarked that private banking is an activity that is not “digi-averse”. Although he did admit that digitalisation will present new challenges to private bankers, demanding that they, “… create new business models and adopt new behaviour.”
Vanhoenacker, however, advised that private bankers examine their most fundamental behaviour first, then look to see where digitalisation could enhance their services to clients.
“Since 2008 assets under management in private banks in Luxembourg have increased by almost 40%,” Vanhoenacker began. “But other data reveals that the number of clients has decreased.” For him, this is not bad news for Luxembourg, but rather marks a paradigm shift in the type of private banking client Luxembourg is now attracting.
“This is a radical shift as it means that private banks in Luxembourg are dealing more and more with high, and ultra-high net worth clients and families [families with a net worth of more that €20m]. However, dealing with UHNW clients is not the same at dealing with affluent clients, their needs are much more complicated.”
Vanhoenacker identified three key areas of potential “asset leakage”:
“Research has shown a clear link between wealth and international mobility. This means that HNW clients, and their families, often move to a new country to work and live. This presents a challenge to private banks who are looking to keep assets on the balance sheet.”
“The HNW are also often presented with many investment opportunities that go beyond plain vanilla. If private bankers do not have experience in non-traditional investments, here again they risk losing clients assets.”
According to Vanhoenacker, the most important issue for HNW families is wealth transfer. “How they ensure their assets are passed on to the next generation.” In this case, he believes it is important for private banks to understand that, “You are not selling products to HNW families. You are in a situation where understanding their needs and building trust is crucial. HNW families need added value.”
In closing, Vanhoenacker said, “Digitalisation is vitally important, but it is not a substitute for a relationship of trust.”