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Digital tech can't quite replace the private banker - yet
DIGITAL is certainly apparent in our everyday lives, making it easier and faster than ever to connect and interact especially when it comes to transactions such as booking airline tickets and hotels, all the way to ordering groceries. In fact, some of us already have some machine interactions that mimic the conversations and actions that you would normally have with a human.
Case in point, you can ask Siri on the iPhone to tell you the latest stock quote on a company you are following or have Amazon's Alexa update and order from your grocery list. And as artificial intelligence continues to evolve by leaps and bounds every day, you can imagine a time when Siri might be able to suggest other more suitable stocks for you to hold or Alexa telling you to buy healthier grocery options.
As digital applications continue to be integrated in all that we do, there is much talk about how this could affect the financial adviser role and in the extreme case, possibly remove them altogether. So what is the impact on a very high-touch and personal business such as private banking where financial advisory is a key component of that relationship?
There are enough studies around that can show you that robo advisers don't have the cognitive biases that a human comes hard-wired with and that makes the latter prone to making sub-optimal decisions. Robo advisers can also recognise patterns quickly and in cases where fast communication is needed - such as in the instance of a market crash - the machine will certainly trump the pace of man every time. So why hasn't the industry made that significant step? Why are private banks still hiring staff like there is no tomorrow?
First of all, the talk about digital was really about a model aimed at retail banking which would remove or reduce the amount of time a client would interact with a banker in favour of interfacing with apps delivered via devices.
Second, the clients that are serviced in the ultra high net worth (UHNW) segment of the private banking business are simply more complex. The information that one needs to ensure that these clients are catered to appropriately takes time to surface.
In fact, it takes trust for all the relevant details to make themselves known, and trust, as we all know, takes time. It is something that cannot be rushed and the richness of that information/background comes as the relationship evolves between client and banker. The simple risk-tolerance questionnaires that normally serve as the basis for the robo advisers' "understanding" of the client is insufficient to get at the heart of understanding the client's needs and goals in the context of the complexity of his or her situation.
Despite the importance of human interaction and relationship building in the private banking business, there is still a place for digital support. The more powerful formula would be the complement of digital with the banker in service of the client - what you might call an optimal mix of technology coupled with the unique relationship between bankers, investment counsellors/specialists and clients.
If you were to examine the requirements of UHNW in the context of their private banking relationship, most require a substantial amount of tailored help and assistance. This is to be expected given the size of the relationships and the associated complexity and volume that comes with it.
However, in a world where service can be the swing vote, it would behoove you to offer best-in-class service, no matter how manual or laborious it can be. Much of this is in the form of cash management and as simple as each transaction could be, the client or the internal process, may require a number of labour-intensive and necessary steps in order to meet the needs/expectations of the client as well as to satisfy the checklist of rules that govern transactions within the process chain.
This is where digital has a place and can help to automate what are mainly simple steps in and of themselves but are time-consuming when there are, say, 10 simple steps in that one transaction.
The power of digital and its impact on data also have an important role in support of the banker and investment/product specialists. The collection, synthesis and analysis of market data combined with the information you would normally have on a client - his risk profile, trading patterns etc - could prove to be a powerful tool in arming the banker and the team with timely info and action steps to take to a client.
As technology continues to underpin all aspects of our lives, it can also be argued that some clients - who could range in their level of sophistication - may opt to have the choice of managing their account online or via some app minus any human interaction. This is something that private banks cannot ignore and thus, you will see, at least in the larger players, moves to optimise that blend of man and machine.
Although the application of digital technology can help to enhance the client experience, it can never take the place of human interaction and in the case of private banking, you are talking about the banker. After all, is a machine going to ask you the tough life questions? Maybe it can but how can it incorporate the nuances of the client that comes across during informal as well as intimate conversations that he or she has with their banker?
Conversations about money aren't only just about money. Even though a machine can strip away the emotion in decisions, it cannot provide peace of mind unless the emotional issues are addressed. And as far as I know, emotions are man-made - for now.
- The writer is Citi Private Bank Asia Pacific chief executive officer.