Second Chinese Swiss Financial Round Table & Educational Pilot Programme. Beijing, September 2, 2015

Transcription

1 Second Chinese Swiss Financial Round Table & Educational Pilot Programme Session 2 2a: Best practices and new developments of Swiss Private Banks Beijing, September 2, 2015 Dr. Michael R. Reichenecker Swiss Finance Institute

2 Agenda Swiss financial center - Top destination for offshore Wealth Management - Growth of international market volume Net new assets - Development of total market volume - Decomposition of client origination - Sentiment within the European and Swiss financial sector Forces of challenge in the WM Industry - The next generation of clients - Disruptive technology and new business models - Clusters of innovation - Regulation - burden and strategic value Implication for success - Perception - Convert digital into a competitive advantage - Strengthen advisory capabilities - Segment-specific value proposition and coverage model - Stringent price realization in target client segments - Ability to measure and manage profitability - «Offshore revenue-margin» premium 2

3 Swiss financial center Top destination for offhore Wealth Management Total wealth booked in financial center, 2014 ($tn.) Success factors of the Swiss WM industry Stability In a politically and economically turbulent world, wealthy High Net Worth Individuals are looking more than ever for a SAFE HAVEN location for their assets Long standing tradition Our industries unique position owes privilege to a very long tradition, which dates back more than 200 years Quality of service Reliability, responsiveness, empathy, and assurance are all factors which are regularly stated when clients assess the quality of service of their wealth managers Competence and professionalism The generally high level of education of Swiss people makes it possible to serve very sophisticated (U)HNIW s 3

4 Swiss financial center Growth of international market volume

5 Swiss financial center Net new assets Competition among WM centers to acquire new assets (in USD billion and percentage change) Increase in competition from emerging offshore booking centres Decreasing net new assets levels - Reduction of the Swiss overall net new asset share - Reduction of the global net new asset base 5

6 Swiss financial center Development of total market volume Emerging trend to book onshore Increasing competition between international wealth management centers 6

7 Swiss financial center Decomposition of clients European clients still account for majority of assets booked Estimation of international client asset origination in Switzerland: 7

8 Swiss financial center Sentiment within the European and Swiss financial sector Despite weak economic outlook - financial performance expected to improve ROE growth expected to remain low 8 Source: EY European Banking Barometer 2015

9 Forces of challenge in the WM industry The next generation of clients Significant change in the European WM client base Tailored WM offerings required 9

10 Forces of challenge in the WM industry Disruptive technology and new business models Technology-driven business models attract new clients and assets in WM: - Automated discretionary mandate providers - Thematic or social trading platforms - Comprehensive wealth management - Non-financial services companies 10

11 Forces of challenge in the WM industry Clusters of innovation in Fintech 6 core functions of financial services: - Payments - Market provision - Investment management - Insurance - Deposits & Lending - Capital Raising 11 Clusters of innovation 11 Source: WEF 2015

12 Forces of challenge in the WM industry Regulation - burden and strategic value Suitability, conduct risk and cross-border issues main challenges Regulatory focus areas: - Client protection and conduct rules Requirement to prove that advice and product correspond to an individual investor s risk profile and investment objectives - Banning or limiting of retrocessions Massive impact on WM pricing models and profitability - Liquidity and capital requirements Reassessment of BM and cross-continental footprints 12 Source: UBS Annual Report 2014

13 Implication for success Perception Advisory process crucial for value proposition Implications - Convert digital into a competitive advantage - Strengthen advisory capabilities 13

14 Implication for success Convert digital into a competitive advantage Establish a true differentiating factor to enhace clients experience and loyalty: Provision of client-need oriented digital solutions improves information and product accessibility, lowers response times and minimizes errors. Increase the sales force effectiveness by providing information on products, clients and markets at any time: Mobile advisory tools, utilization of big data, automated market monitoring. Improve decision-making and reduce costs: Offensively push adoption of technology at selective client segments and let certain clients become self-directed for certain transactions. 14

15 Implication for success Strengthen advisory capabilities Better understand the client profile - Tailored advisory approach: goal- or liability-based advice to build up credibility Improve investment management and expertise - Strong macro and asset class expertise - Comprehensive analytical tools to model client- and portfolio-specific risk performance factors and sensitivities Make investment process more transparent - More information about the investment decision-making process and underlying principles Provide stronger investment solutions - Adapt investment approach from outperforming a benchmark to meeting predetermined milestones 15

16 Implication for success Segment-specific value proposition and coverage model Tailoring of segmented offerings into modules Coverage for each segment - Clear definition who interacts with the client for which needs at which time - RM client loadings, contact frequency, specialist involvement differ - Connection to digital channels: Interations with the client become both more efficient for the bank and more value-adding for the clients Well-structured advisory offerings increase and systematizes the frequency of interaction with the client 16

17 Implication for success Stringent price realization in target client segments Clients are less inclined to ask for discounts when the value proposition of the bank s services is evident Top offshore performers achieve above-average margins 17

18 Implication for success Ability to measure and manage profitability Top performing institutions established full transparency on costs to serve: Enables them to clearly prioritize activities and investments based on profitability 18

19 Implication for success «Offshore revenue-margin» premium Convergence of the average pre-tax profit margin 19

20 Conclusion Top performers: - High revenue per RM - Strong in acquiring new assets - Best-in-class revenue and cost margins - Lean organisation Key attributes: - Segment-specific value proposition and coverage models - Rigorous price realization in target client segments - Differentiated advisory offering - Focus on front-office excellence - Ability to measure and manage profitability 20

21 Your contact Dr. Michael R. Reichenecker Swiss Finance Institute Walchestrasse 9 CH-8006 Zürich SWITZERLAND Tel:

22 Appendix Sources BCG, Global Wealth Winning the Growth Game, BCG, Global Asset Management - Sparking Growth with Go-To-Market Excellence, Deloitte, The Deloitte Wealth Management Centre Ranking 2015, Deloitte, Efma, Wealth Management and Private Banking - Connecting with clients and reinventing the value proposition, EY, European Banking Barometer , KPMG, Clarity on Performance of Swiss Private Banking, McKinsey&Company, McKinsey Global Wealth Management Survey 2014, Oliver Wyman, J.P. Morgen Asset Management, The Future of European Wealth Management: Imperative for Success, Rochet, Jean-Charles, The extra cost of Swiss Banking Regulation, Swiss Finance Institute White paper, 2014 UBS, Annual Report 2015, World Economic Forum, The Future of Financial Services,