Here, Jacqui Brabazon, Global Head of Marketing & Philanthropy, Standard Chartered Private Bank, takes a closer look at the importance of developing relationships with entrepreneurs, and discusses how private banks can achieve this.

Private banks have a long history of supporting entrepreneurs across the world from all backgrounds and sectors. Why is this?

In a Standard Chartered Private Bank survey, we found that an entrepreneur’s net worth was twice that of a non-entrepreneur and their average income was 40 per cent higher. In developing economies, small and medium-sized enterprises are a crucial source of urban employment and economic growth. For example, in China, SMEs contribute to 75 per cent of urban employment and 60 per cent of GDP. Compelling reasons for private banks to want to work with entrepreneurs, but how in tune are they both with each others’ needs and perspectives? 

For a relationship to be successful in the long term, it is critical that it is fostered early: entrepreneurs have been found to remain loyal to their main bank. In order to engage early, it is essential to understand the varied profiles of these individuals.  The Futurewealth Survey 2010 conducted by Scorpio Partnership, in conjunction with Standard Chartered Private Bank, provides some interesting insights on entrepreneurs. They: 

·         are likely to be ambitious, and “agents of change”;

·         have a strong desire to do what they enjoy for a living and attain financial security in the process but without sacrificing their family;

·         feel their barriers to success are time and work commitments;

·         view the ability to participate in philanthropy as a measure of success; and  

·         consider themselves business savvy, but not when it comes to their personal wealth.

While considering these traits however, it is important to remember that ultimately, entrepreneurs are still individuals – with individual needs, ambitions and motivations. So treating them as a segment of one is imperative. 

To do this, fostering the relationship early is again the key. Developing an appreciation of not just their personal goals, but also their business ones, and sharing the pain in getting there, requires a private bank to look across their organisation to deliver more than just the traditional private banking services. Bridging this gap is imperative. As the Entrepreneurs’ Organization Indicator, (quarterly research carried out on entrepreneurs, to view click here), suggests, entrepreneurs are more likely to go to business partners and associates than to private banks for financial advice. Private banks need to actively demonstrate the value they can add to both the individual and the business. Only by doing that will you become a trusted and respected advisor. 

Pankaj Chowdhary is director and CEO of Reliance Fibres, which he set up himself in 2004, and is the recent winner of the inaugural Entrepreneurs’ Organization UK and Standard Chartered Private Bank’s Entrepreneur All Rounder Awards. According to Pankaj, there is a common perception amongst entrepreneurs that some private banks are not interested until you have made it. “The private bank needs to make the entrepreneur understand why we need them and what they can offer. The reality is that for many entrepreneurs, the business and the entrepreneur are one and the same thing, and the entity often has no spare cash in the SME stage. So the perception is, why do I need a private bank when my company is struggling for cash?”

One solution he suggests is for private banks to offer business credit lines through commercial business channels, but still show entrepreneurs the value in separating their personal wealth from their business. “Some entrepreneurs don’t effectively manage their portfolios, either because they don’t have time or because they think the cash is better in the business. If the entrepreneur feels there is financial security on the commercial banking side of the business, they will start thinking more about managing their private wealth, and may be glad to have somebody, such as a private bank, manage this for them.”

He adds that entrepreneurs tend to take risks in their business dealings, but are less sure of themselves when it comes to their personal finances. Private banks should be aware of this, and structure their services around the growth of personal wealth and separation from the business.

As we all know, entrepreneurs do not stand still. Their needs change as their businesses grow. Having the capability to serve these changing business and personal needs can make all the difference and allow a private bank to retain a client over the long term. From a banking perspective, this can mean providing retail, business and private banking services, and offering a seamless transition.

In terms of meeting the needs of entrepreneurs, Pankaj ranks cultural awareness, international reach and philanthropic services the most highly. “Culture has more to do with it than anything else. It may be highly inappropriate for a private bank to ask an entrepreneur in India what his or her exit strategy is, but it may be an honour being asked that question in the West. When it comes to the transfer of capital, having banking capabilities in more than one country, and being able to manage finances in more than one currency is very important.”

In essence, entrepreneurs are a key market for private banks, but it would appear that there needs to be more mutual understanding and better communication from the outset between both parties to foster and develop a long and fruitful relationship.