This interview with Ernst & Young examines whether private banks can take a strategic view of offering "perks" to clients. It examines the Asian market, although its significance is global.

Editor’s note: This interview with Steven
Seow, director, financial services, performance improvement, at Ernst &
Young, examines the question of whether private banks can take a strategic
view of offering “perks” to clients. The article looks at the Asian market,
although the relevance of the points made in the article are potentially global
in nature.

What is the general trend in offering such
perks and the rationale behind them?

As the competition in private banking
space grows rapidly, particularly in the Asian market, many traditional
"perks" offered to high-net worth clients are slowly becoming the
commonly expected norms, such as preferential rates/fees and personalised services
on related banking and investment products.

However, the rationales for offering such value-added
services are still relevant, which is to cultivate superior client experiences
and to develop long-lasting relationships. With such objectives, the wealth
managers should strategically focus on offering more targeted and
differentiated "perks" to their clients.

To be "targeted", the perks should be
customised to satisfy the specific client's or groups of clients' needs. For
example, life style events (such as wine-tasting, art auctions, golf events,
etc) that fit to the client's passion and interest is a good way to cultivate
more intimate and personal client relationships. At the same time, being
"targeted" also means exclusiveness, such that these perks should
only be offered to the "selected few" at one time.

In addition, the perks should also be
"differentiated". Making it more creative and interesting that the
clients would not see from another private bank, such perks would be more likely
to create a bigger impact on the client relationship and experiences.

Is it worth it?

From the high net worth clients' point of view,
especially for those in Asia, they would
generally value the exclusiveness and personal touch that comes with the perks.
The Asian rich also value the opportunities to network, to help them further
expand their business or career.

Though it might be difficult to quantify the exact
value of such perks to the banks, the values come from the deeper and more
personal relationships that the banks develop with the clients through such
perks. The banks normally look for an increase in the clients’ share of wallet,
and trusted advisors status among its clientele.

In addition, to assure the perks are “worth” the
investment, the banks will typically set criteria to select the target clients
based on their asset under management (AUM), their total net worth and / or the
revenue generated for the bank.

The softer side and benefits to the bank

Arguably, many of these "extra services"
offered to private clients are very important to develop stronger client
relationships. Through these perks, the clients get more personal with their
relationship managers, and that helps to build up more trust in the long term.
Some of these perks are also targeted to build more intimate bonding with the client’s
family, such as organising educational seminars for the clients’ children,
aimed to continue the client relationship to the next generation.

Can exclusive events cause unintended
problems?

It is important to create a sense of exclusiveness
among the high net worth individuals. This is partly the reason that many banks
segregate their clients into different tiers. As human beings, particularly the
Asian rich, they would often place higher value on things that cannot be
obtained easily and seek after things of such nature. As such, providing the exclusive
perks can be seen as a competitive advantage for the bank to increase their
share of wallets in existing client base and to acquire new clients.

On the other hand, it is important to maintain a
balanced relationship manager-client ratio, such that the relationship managers
would have similar amount of attention among clients under their care, and
clients within the same tier would not feel left out. The amount of attention
given to the client should also correspond to their total net worth/AUM /revenue
brings to the bank.

General pros and cons?
By investing in
these "extras", it helps the banks to build deeper and longer term
relationships with the clients, and the highly personal client interactions
would in turn cultivate better client experiences, and hopefully bring more
businesses to the bank in the future. It also helps the banks to create more
awareness among its clientele.

On the flip side, investing in such "perks"
may not give the immediate revenue to the banks, and it is difficult to assess
the return on such investments. It is also increasingly difficult to justify
such spending within the bank with the growing cost base. From the clients’
perspective, such perks are good, but they are still the “add-on” to the
quality of investment advice and investment performance, which are more
important considerations when evaluating their wealth managers.

Final comments?

In a nutshell, being exclusive and personal are
perhaps the most important when providing the "perks" to high net
worth clients.

The types of perks are varied: some banks in the past
have organised golf tournaments for their clients and invited renowned pros;
some offered wine tours in France
to their selected clients; some conducted regular seminars to provide financial
educations to the children of clients; and some host fine dining with
branded wine from their own vineyards. Many of these activities are well known
and highly regarded among the high net worth clients and in the wealth
management industry.

Through these activities, the banks leveraged on their
own expertise and influence in certain sectors, and combine that with their
financial expertise, to create very intimate relationships with their clients
in the process.