What is the investment value chain for a private banking group?

We have defined three main pillars in the investment value chain: selection, construction and management. The selection pillar is where you decide whether you are offering discretionary portfolio management and/or advisory. This is also where you structure the investment universe dedicated to each type of investment, or globally for all investments. Finally, you must define the governance and structure - whether you manage the investment value chain at group or branch level, for example. The second pillar – construction- is where you built the structure: investment strategy, asset allocation, regulatory framework and so on. The final pillar, management, involves defining the life cycle of the assets, from analysis to simulation, rebalancing and reporting, which is a key takeaway from the survey – very few banks have dedicated automatised reporting.

 

What can banks do today to manage risks and generate opportunities in this field?

The aim of the survey was to benchmark European private banking groups in several jurisdictions across Europe. We have learnt that very often, banks have not aligned all their entities regarding process automation and centralisation, and the IT landscape. Others have built aligned models for each hub or geographical area, but none have managed it at a global level. However, they agree that aligning all group entities in terms of automation, centralisation and IT systems is a much more efficient way to work and a better way to serve the client. Once the alignment has been carried out, banks’ opportunity lies in their ability to find the right level of local flavour in the way they automate the processes. When working with a single universe, you can be sure of selecting the right product for your client in the system. Regarding construction, everything is on the shelf: for example, if a client is based in Luxembourg, with assets in Switzerland and investment in France, you will certainly already have a portfolio that works for them. Finally, using the same tools for management allows everyone to avoid e-mails and spreadsheets, since all information is already in the system - saving precious time and reducing costs.

What is the first step for a private banking group to improve its investment value chain?

There are two ways to approach implementation, of which the first is to simply look for synergies in the system. For this, you can use a bottom-up approach, checking the level of alignment and convergence of your system across all locations, aligning processes and adjusting governance. From this new organisation, you can rethink your offering to improve client satisfaction and your profitability. A second approach can start from the client’s perspective, with a rationalisation of the client offering before addressing the system.