Rethinking the Advisory offer, a stake of commercial & operational efficiency for Private Banking actors

Historically built around “Execution Only” & “Discretionary Portfolio Management” services, the business model of Private Banking actors has known a revolution with the increased regulation framing the provision of investment advice. In fact, actors have been led to massively invest in the structuring of an intermediary offer, the “Advisory” service, to institutionalize this activity so far realized in a non-structured and non-contracted way. In a very competitive environment and in a context of strong pressure on profitability, Private Banks have to review their Advisory offer to demonstrate its value to ever more demanding clients while optimizing a service model highly resource intensive.

Private banks should question the fundamentals of their Advisory offer, in order to clarify their ambitions with a view to commercial efficiency

In the face of increased competition to attract high-potential clients, the latter have considerable leeway in selecting the partner who will accompany them in their projects. One of the key factors of success in attracting this public lies in the ability of Private Banks to propose a coherent offer between the right level of services and associated fees. In order to do so, several dimensions need to be addressed in order to specify the constituent elements of the Advisory offer.

The client and the understanding of his needs, a central element to consider. Beyond the necessary collection of regulatory elements (particularly related to knowledge of investment products), this exercise enables Private Banking actors to capture the interests, themes and values that resonate with this clientele. In this perspective, it is essential to have an identified customer journey with structured touch points to transmit and capture information that will be used to refine the offer to meet clients’ needs.

The review of services offered within the Advisory offer, a vector of value creation. The multiplicity of offers available on the market, but also different services available within a single institution, can sometimes generate confusion for clients when selecting their partner. The review of the offer, from clarification to rationalization, will enable Private Banking actors to position their offer within a very competitive market.

The evaluation of the pricing model, an exercise often perceived as painful but essential. In addition to the necessary adjustment between the offer and the associated services, a work has to be done on the pricing policy and its application, particularly with regard to the various exemptions granted. This evaluation will enable Private Banks to reach the target profitability threshold with regard to the associated service cost.

Digital tools, an accelerator to further personalize the offer. Digitalization, coupled with the increasing democratization of its use, has led to the emergence of numerous tools that allow, for example, to capture client needs more precisely to transform them into commercial opportunities. The contribution of these tools will enable Private Banking actors to provide tailor-made advice and thus make it a differentiating element of their offer.

Private banks need to adapt their organizational and operational model in line with their Advisory offer to become more efficient

In recent years, Private Banking actors have made numerous investments to give substance to their offer, such as strengthening their research teams and creating ecosystems of experts (investment specialists, wealth engineers) to support the banker. In a context of pressure on profitability, several levers of action are available to Private Banks to adapt their organizational and operational model and thus increase the profitability of their Advisory offer.

The first imperative is to determine the cost of service of the offering to ensure the consistency & appropriateness of the service model. 

• The difficulty of measuring the cost of service is a subject widely shared by Private Banking players, particularly concerning the proper allocation of indirect costs related to the Advisory ecosystem.
• Subsequently, this cost of service must be compared with the Advisory offer and its depth to ensure that the model & associated costs are consistent.

The second imperative is to further structure all activities along the Advisory value chain, while working on organizational elements to increase efficiency.

• One of the efficiency levers lies in the review and optimization of the processes dedicated to Advisory. For example, we can mention the collection of client needs (investment themes, frequency, and preferred communication channels) through questionnaires, the structuring of this data with a view to its commercial exploitation, or the alignment of processes with a view to efficiency (prospecting, construction of investment proposals, client interactions).
• One of the other levers is the improvement of governance in all its dimensions such as, for example, the clarification of authorized deviations in terms of service level. In addition, pockets of efficiency lie in the identification and sharing of best practices between teams, but also through the review and recognition of performance indicators.

The third imperative concerns the tools that must support the banker in his core activity but also bring operational efficiency.

• In addition to defining the right monitoring indicators, the availability of tools dedicated to the Advisory offer must facilitate the management of the activity while freeing the banker from administrative tasks so that he can concentrate on developing his portfolio.
• In addition, the deployment of tools should generate additional efficiency gains thanks to greater automation of processes such as the generation and sending of investment proposals, regulatory compliance, and the monitoring of marketing campaigns.

Finally, the implementation of these changes will necessarily involve a change management support, not only for the sales teams but also for all the stakeholders involved in the value chain. Indeed, Private Banking actors will only reap the rewards of their transformation if their teams have a good grasp of the adjusted Advisory offer and the accordingly adapted operational model. 

A structured and results-oriented approach

The success of the rethinking the Advisory offer, which should lead to an increase in its profitability while continuously improving the relevance of advice provided to clients, will depend on the proper use of all the levers of action. In the long term, these levers must enable tangible results to be obtained, both from a commercial point of view and in terms of operational efficiency.

To achieve this, it is necessary to adopt a structured approach in 4 steps: