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EXCLUSIVE INTERVIEW: Treating Client "Perks" As A Strategic Private Banking Issue

Chrissy Coleman

20 May 2013

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.