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Targeting the Private Banking Sweet Spot
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VRL turns Timetric
• Editorial Excellence
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• Risk assessments,
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About Us
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SOPRA BANKING SOFTWARE – Fast Facts
Sopra Banking Software is a world leader in banking software. The company was born in 2012 as the merger of ‘Sopra Group’s banking software unit’, ‘Callataÿ & Wouters’ and ‘Delta Informatique’. Sopra Banking Software’s comprehensive product range, offers an end-to-end coverage of bank operations and aims to help financial institutions become faster, leaner and more efficient.
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About me
Recent features on WM (available on PBI and BPA)• Taking the pain out of paperwork• Private banking 2022 – Moving towards an advisory fees• Changing investment paradigms• Changing skill profiles for private bankers • “Plug and pray” – Confessions of a technology vendor• 15 tips to build a successful private banking business• Outsourcing in private banking – a natural evolution• Empowering the relationship manager in the frontline
Recent research papers on WM: • Changing business models in PB• Evolving business models in Asian Wealth Management• Empowering the relationship manager in the frontline
Thomas ZinkAssociate editor/ content manager VRL Timetric
[email protected]+65 8272 3169
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Top 10 Asian Affluent Wealth Trends1. Competition – New banking players (domestic and foreign) and non-bank players
2. Onshore wealth – following liberalisation and political stability in emerging Asia
3. Customer stickiness - Asian clients are multibanked and price sensitive.
4. Cost and efficiency – Compliance is a key driver of growing cost-to-income ratios
5. Digitalisation - Clients are mobile and demand improved relationship manager (RM) availability, multi-channel banking, real-time information.
6. Commoditisation - Products are cascading downwards from private banking (PB) to affluent banking (AB) and retail banking (RB).
7. Quality of advice – Mature players try to position themselves as ‘trusted advisor’
8. Frontline productivity tools – Improve RM efficiency, harmonising advice and minimise compliance risk
9. Client ownership - Banks seek to seize control of client relationships from RM by improving management of customer information, tracking discussions, and team work
10. Value proposition - Wealth management in emerging Asia has to shift from red carpet banking towards a customer-centric private banking value proposition
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Key challenges in addressing the affluent segment in emerging Asia
Lacking value proposition• Little differentiation between PB and AB – mostly in form of red carpet proposition
competing on pricing, rewards, and vanilla services• Limited product availability due to regulatory constraints. Retail products dominate.• Lack of sophisticated services, such as succession planning, financial planning, tax
optimisation, trust and fiduciary, philanthropy.• Product-push mentality driven by remuneration and incentive structure focussed on
commissions, and product sales, new net money. Little focus on other KPIs.• Focus on execution-only with generic advice. Banks are loosing the advisory and
discretionary business to family offices, independent financial advisors (IFA), foreign banks
Human resources• Small talent pool, usually lacking experience, international certifications. • Poaching is a common method to acquire new customers.
Clients• Most HNW wealth moved offshore to SG and HK for asset diversification and illicit reasons.• Low investor education and focus on equity trading, term deposits and mutual funds.• Short-term, tactical investments. Asset allocation models are not deployed.
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The lower end of wealth spectrum
Thaila
nd
Philippi
nes
Indone
sia
Mala
ysia
Singapo
re0%
20%
40%
60%
80%
100%
10 12 16
33
32
0.6 0.7 1.2 3.2
43
<10000 10000-100000100000-1m >1m
Ad
ult
s in
%
Distribution of adults wealth range (USD)
Source: Credit Suisse Global Wealth Databook
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
25,452.0
6,582.5 4,907.0
5,964.41,247.0
1,890.0
387.2 301.0
574.91,704.0
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Affluent banking in Asia Pacific- A largely untouched territory
Banking penetration• Penetration of managed products in Asia’s
middle class stands at 5% of total financial assets on average compared with 15% in western countries. (Fitch)
• Less than 50% of the mass affluent formally manage their finances (budgeting, long-term planning or financial advisers. (Council of Financial Competition)
• Over 75% of the investment decisions are self-directed. (Scorpio)
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Banks still dominate the provision of financial advice to the affluent
Have you set up a relationship with any of the following types of firm?
Source: Scorpio Partnership: Future Priority Report (2012)
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Liberalisation and regulatory changeProduct availability• Indonesia: new products such as REITs, ETFs and index funds• Thailand: Opening to foreign products through Asean Trading Link• Philippines: Relaxation of REIT and ETF rules for domestic funds, new cross-selling
guidelines
Investor protection: Differentiation between retail and non-retail• Indonesia: Prudential Principles Regulation (2010) differentiation of investor sophistication.
Other features include KYC principles and product suitability• Philippines: Dispense the submission of product by product documentary requirements
Consolidation of regulatory supervision• Indonesia: Merge of regulatory bodies into a new super authority – FSA.
Protectionism:• Philippines: Raise of caps for foreign share owner ship in domestic corporates.• Indonesia: Introduction of cap on foreign share ownership in banks.• Malaysia plans relaxation of ownership caps for foreign banks
Islamic wealth management• Malaysia to enhance disclosure requirements in the Islamic capital market• Malaysia widens access for retail investors to bonds and Sukuks
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What makes a sustainable business model?
Automation& efficiency
Industrialisation of products
Digitalisation
Team work
Profitability management
Customer onboarding
Communication
Relevant research
Quality of advice
Transparency
Sustainability Reduce cost
(Re)Build trust
Source: Timetric
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How to improve quality of advice?
• Customer centricity– Custom-made products catering the client’s needs– Targeted and relevant research
• Training– Continuous training and certification of RMs– University degree in private banking?
• Teamwork– Generalist and specialists work in a team
• Clear KPIs and incentives– Align client interest with RM interest– Include KPIs such as client appraisal
• Tools and technology– Frontline tools allowing the RM to focus on customer, not administration– Alerts, reminders, project planning, task managers and single view of customer– Visualisation and simplification of information (product, KYC, research)– Data analytics and multivariate segmentation
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Homogenisation of advice
• ‘Bad advice’ is a key source of customer attrition and reputational risk– Banks try to homogenise their overall investment strategy to align frontline
advice, research and product development. In some banks this can almost be described as the industrialisation of advice and product manufacturing.
– This enables fast time-to-market for new products.
– Products are customised to customer needs and leveraging synergies across the bank
– If advice aligned is aligned with product development and research, the entire bank speaks with a single voice providing a more consistent and reliable client experience.
• This increases the quality of advice, shortens the product development process, and accelerates our ability to provide targeted research to customers and increases transparency.
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Dealing with increasing regulation efficiently
• Moving compliance towards the front-office (systems)– Frontline systems that integrate compliance checks, risk profiling, client
suitability, alerts, reminders, and task manager
– Standardisation of data entry and KYC
– Reducing the administrative hassle for the client and RM within the regulatory framework
• Automation and Straight-Through-Processing (STP)– Remove human intervention from the process architecture
– Increase frequency and accuracy of reporting and business intelligence (BI)
– Standardisation of data across bank, country, globally
• Banking in the “Age of the regulator”– There is no way around compliance
– Proactive is better than reactive
– Develop voluntary, yet progressive industry standards, practices and conducts
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Balancing client portfolio transparency with high-level security• Reputational risk, including data breaches is seen as one of the biggest
risks in private banking.• Recent incidents of data leaks and cyber attacks on financial organisations
have brought tighter risk management to the fore.• Data security threats from mobile and online leaks could increase by 60%
for financial firms, but less than half intend to upgrade their investment in security. (E&Y study, 2011)
Key issues:• No information from the service is stored on the computer, mobile.• Implement in new encryption techniques, stronger identity and access
management controls.• Security needs to be a joint effort between bank, technology provider,
regulator and customer.• Deal with the “Bring Your Own Device” challenge
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Digitalisation of the ‘client relationship’
Customers like digital and demand the convenience of interacting with the bank anytime, real-time and through a channel of their choice• While not all customers may be interested today, the next generation will demand a
comprehensive and functionality-rich digital multichannel capability bringing all channels together with:
– A common touch & feel and functionalities
– Access to the same information for clients, frontline, back office
– A real time capability
– A consistent experience across all channels
– Active and particularly interactive communication
• A higher degree of self-service providing access to products, advice and research as well as more efficient frontline technology, will likely maintain or improve service quality despite a growing number of customers per RM.
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Aligning technology priorities with customer needs• Most banks’ spending is influenced by strategic intent and profit-drivers. The
client however looks at it from the angle asking how technology benefits him:– How do you manage my money? – How do you manage risk? – Can you provide a banking experience that makes me feel good, that is simple and
that is transparent? – How can I reach my banker through a channel that is convenient to me?
• Key IT requirements in private banking:
– Scalability
– Automated regulatory and client reporting,
– Proactive advice across all asset classes,
– Efficiency and speed through straight-through processing,
– Consolidated single view of a customer across business lines, borders and banks.
• There is no golden bullet. Banks need to decide their business strategy based on client needs and align the IT strategy. The banks that have made the most significant progress are those that have aligned their business model with their clients’ needs.
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“In a modern PB, everything should be conceptualised for STP”• From product focus to process focus
– Straight-through processing
– Modularisation, centralisation and decentralisation
• Investment gears to the front-end– With regulation a key driver of cost, banks try to increase the efficiency in the
frontline, while downsizing middle and back office
– Information from the back office are pushed towards the frontline
– But the frontend can only be as good as the core system and data available in the back office
• Technology put larger banks at an advantage, but with better and more affordable off-the-shelf vendor solutions this gap is narrowing – Larger banks still benefit from synergies across business lines, such as
consolidation of operations or shared platforms
– IT outsourcing for new entrants and smaller players who do not seek differentiation (eg. platform sharing)
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Conclusion
1. Affluent banking in emerging Asia has huge potential and given the pace of these markets is a key building block for the onshore private banking business.
2. Banks in emerging Asia still struggle to build a private banking value proposition that goes beyond red carpet banking. With the liberalisation of regulation and foreign banks entering the landscape, domestic players will have to get moving.
3. Competition will move away from execution and products and move towards quality of advice.
4. Technology will be instrumental to build scale and deal with increasing regulatory requirements and changing customer demands and behaviour.
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Targeting the Private Banking Sweet Spot
Thomas ZinkAssociate Editor and Content Manager
VRL Timetric
E X C E L L E N C ED R I V I N G
Scaling Up your Wealth
Management Business
About Me
22
Anselm de SouzaManaging Director for Asia [email protected]
Spoken at:• VRL Wealth Management Round Table – Malaysia,
Indonesia• Wealth Management Round Table – Philippines• TOAP Convention – Philippines• Wealth Management Boot Camp – Philippines• Hubbis Wealth Management Forum – Malaysia,
Indonesia
Key Developments in Asian Private Wealth industry
Growth Challenges to the Asian WM Market
A fully integrated front-to-back approach to scaling up the WM business
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Agenda
Changing Environment in Asia : Demographics
“ The Future belongs to those who prepare for it today” – Malcom X
Asian entrepreneurs
are contributing over 70% of
HNWi
Well Informed, Opinionated and
Transactional
Technically Savvy High level of
mobility
New ways to communicate and interact with their Relationship Mgrs
Younger investors – 41% of HNWI
are 45 years and younger
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Changing Environment in Asia : Offshore vs Onshore
Outlook
• Better Economies
• Improved Product & Services
• Improved Regulation & Efforts
Tax & Regulatory Compliance
• Cross-border Taxation
• Disclosure/ reporting standards
• Changes in Capital and liquidity requirements
• FATCA
Financial Crime Prevention
• Know Your Customers procedures/anti-money laundering
• Risk management systems
Key Developments in Asian Private Wealth industry
Growth Challenges to the Asian WM Market
A fully integrated front-to-back approach to scaling up the WM business
26
Agenda
Common challenges in Wealth Management
Managing risk?
Facing regulatory changes?
Knowing and serving my client?
Streamlining operations?
Aligning Technology priorities with client needs
Conceptualising for STP
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Key Focus for Today
Client Servicing : Person to person vs Automation
29
Source: Gartner
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Clients get what they want, how they want it
• Identify and tailor segment of clients
Client Relationship Officer
Client Relationship Officer Call
Centre
Call Centre
InternetInternet
otherother
Re
tail B
an
kin
gR
eta
il Ba
nk
ing
Products & Channels
TRADITIONAL MODELOrganisation-Centric
Dis
co
un
t Bro
ke
rag
eD
isc
ou
nt B
rok
era
ge
Fu
ll-Se
rvic
e
Bro
ke
rag
eF
ull-S
erv
ice
B
rok
era
ge
Inv
es
tme
nt
Ma
na
ge
me
nt
Inv
es
tme
nt
Ma
na
ge
me
nt
Priv
ate
Ba
nk
ing
Priv
ate
Ba
nk
ing
Tru
st a
nd
fidu
cia
ry
se
rvic
es
Tru
st a
nd
fidu
cia
ry
se
rvic
es
TrustsTrusts
Advisory Advisory BankingBanking
Mutual Funds
Mutual Funds
Products
MultiChannels Insurance/
Pensions
Insurance/Pensions
NEW MODEL Client-Centric
Integrated service around Client segmentssupported by a dedicated access and service approach
Clients get what organisations want to sell themClients get what they want, delivered how they want it and at an acceptable priceRe
sult
Typical Situation
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Relationship & Portfolio Managers
Deposits
Trust
Treasury
Credits
External ProvidersSystems
External Asset
Managers
Other Product
Providers
Stock Brokers
Internal Dept/ Systems
Manual / Semi Manual• Client On Boarding• Order Management• Portfolio Management• Collateral Management• Corporate Action• Settlement
• Client• Broker• custodian
InefficienciesConfidentiality
ErrorsMisappropriation
ComplianceRisk
Reputational Risk
Back Office / Ledger Systems
Client Support Unit & Operations
The Top 3
32
Customers
Return of Investments (yield)Better customer reportsSecured Transactions
Management
Increased revenue & marginsImproving skill sets of peopleManaging Compliance & Risk issues
PB/WM Head
Understanding clients needsTalent ManagementFluent Delivery & Operational efficiency
Issues Faced
Manual processes & Inadequate systemsTalent & staffing Adoption of new regulatory and compliance
Key Developments in Asian private banking industry
Growth Challenges to the Asian WM Market
A fully integrated front-to-back approach to scaling up the WM business
33
Agenda
Wealth Management Drivers and Challenges
34 - 34 -
Financial Accounting
Product and operationsmanagement
Risk Management
Clientsandchannels
Mass Affluent/
High Net Worth
Client retention or increase through excellence in service
Concentrate on Core Business
Product differentiation and short time to market
KYC, build client segmentation
Aggregated client reporting
Product efficiency: processing mass affluent but also individual elite
Wide functional coverage
Automating processes, moving processes back into core systems
Self-service e-platforms
Lower TCO Supporting
growth through increasing efficiency
Scale costs to activity
Growing corporate reporting
Growing significance of regulation (FATCA, MiFID, KYC, AML…)
Guarantee client confidentiality
IT Management
Product scaling and incremental approach to additional functions or tools
Cope with limited IT Resources
Remote access for Wealth Managers
COO, Head of Operations
CFO Risk Manager
Sales Manager, Wealth Manager CIO
Clients
Main source : PWC - Global Private Banking/Wealth Management Survey 2007: Executive Summary
Wealth Management Solution answers to Drivers and Challenges
35 - 35 -
Differentiators Best practices on Operational Efficiency & Compliance
Financial Accounting
Product and operationsmanagement
Risk Management
Clientsandchannels
COO, Head of Operations
CFO Risk Manager
Clients
360° view of clients assets and operations
Multi-channel inquiries and updates by Managers and Clients
Flexible solution, configurable for Mass and Individual
Comprehensive KYC info
Efficiency by flexible Model Portfolio, Autom. Order Alloc., Portfolio Constrains, …
Wide multi-functional WM and banking functions
Single Input, efficient controls, integrated STP front to back
E-channels with customer self servicing
Integrated Front to Back Office, to reduce TCO (licenses, interfaces costs, …)
Complete activity and profitability reporting
Built-in compliance (business as usual for editor)
Segregation of client info access
IT Management
CIO
Sound future-proof IT solution,
E-channels for Wealth Managers on front-to-back info
Sales Manager, Wealth Manager
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Right Infrastructure?
Private and Wealth Management Systems
Maximum process automation
Flexibility
ReportingClients
RegulationTariffs
Wide functional coverageClients, Order Mngt, Accounting, CA
Specialized functions Constraints, Alerts, Allocated orders…
+
Short Time to Market
Solution Overview
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Operations &Customer Servicing Teams
Relationship & Portfolio Managers
PNB Bank’s Internal Systems
SOPRA BANKING FOR WEALTH MANAGEMENT
Portfolios & Assets Management
Securities
Multiple Order Generation
Portfolio Constraints
Portfolio Performance
Portfolio Reporting
Model Portfolio
Order Mgt Settlement Platform
Custody Corporate Actions Mgt
Generic and analytics
Compliance reporting Reference Data Risk Mgt Communication Accounting
Financial data providers Markets & Exchanges CustodiansAuthorities
Deposits
Trust
Treasury
Credits
Internal Dept/ Systems
External Asset
Managers
Other Product
Providers
Stock Brokers
External Providers/ Systems
Private Banking Customers
A Wealth Management Solution to Upscale your Business
Business solution based on Ready-to-use set of features:
Specialised Wealth ManagementCombined with standard banking Functions
Integrated Front to Back
High flexibility but quick usability
Customer differentiation and Best practices in internal processes
THANK YOU !
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