Swiss private banking: putting the customer first

Service excellence is the answer to the growing challenges facing the industry.

The 2008 global financial crisis triggered what many see as the downfall of the once-mighty Swiss private bank. Political and regulatory pressures related to financial services and tax laws have diverted attention from core business and turned these prestigious institutions into bureaucratic labyrinths that have seen profitability steadily decline and bank secrecy die.

The two alleged culprits: regulations related to customers and financial services.

The resulting business consequences are increased costs, “clean-up” measures, updated compliance procedures, as well as the emergence of significant obstacles such as travel or sales restrictions, which have a profound impact on customer interactions.

These strategic threats are universally recognized and today most industry experts also agree on what needs to be done to keep Swiss private banks internationally competitive. Without the country’s traditional banking secrecy and with very similar overall investment performance, banks need to redefine their core competencies. However, two important challenges need to be addressed before the industry reveals its new shape: performance and value proposition.

The action involves a fundamental rethinking of the bank’s internal functioning, from its remuneration systems to its business travel policies, through the organization of the back office, to the choice of paper used. Historically, Swiss private banks have never had to keep an eye on their expenses, but with so many regulations to follow, structures must now control costs.

“We were not able to invest in the past, but Switzerland still has a lot to offer, because we have a stable country, exceptional professionalism, a good network of legal and tax advisors, as well as political stability”.

The value proposition, once centered on the infamous “banking secrecy”, must now evolve and improve at all touchpoints. Adding value is the only way forward, and in a globalized world where financial products and wealth planning services are fairly seamless, many believe that differentiation will have to come from brand value and experience.

Laurent Gagnebin, CEO of Rothschild Bank Switzerland and alumnus of EHL Hospitality Business School, strongly believes in the unique value of a customer-centric approach. He also believes that Swiss banks have rested on their laurels too long and need to be tougher on themselves.

Despite everything, he remains very optimistic and his predictions about the Swiss private bank are favorable: “We were not able to invest in the past, but Switzerland still has a lot to offer, because we have a stable country, exceptional professionalism, a good network of legal advisors and taxation, as well as political stability”.

When asked what the hospitality industry could bring to the Swiss private banking sector, Mr. Gagnebin emphasizes three elements: values, obsession with service quality and human resources. “You need to identify the customers you can best serve and focus on them. Every email, every call, every visit, every statement sent, every transaction, every execution delivered to a customer. Think about how you could improve it. And for the customer to feel comfortable enough to develop an emotional bond with the institution, banks must entrust the long-term customer relationship to relationship managers.”

For Serge Fehr, Head of Private & Wealth Management Clients at Credit Suisse SA, service excellence also represents “the answer to the growing difficulties facing the sector”. Bankers must “stop unilaterally deciding what is best for the customer”. Mr. Fehr believes that more consideration should be given to individuality and customization. While some customers may be satisfied with a fully automated experience, others prefer a “high touch” approach and a dedicated consultant. According to him, “whether the relationship is physical or digital, it is the definition of the service that matters. And the service must be exceptional.

Focusing on positive emotional triggers and the long-term interests of the client evokes the privileged relationship that bankers once had with clients (and often their families) during the early golden years of private banking. In many private banks today, there can be a disconnect between senior management and the relationship managers who deal with customers when trying to resolve regulatory and compliance issues. Customers inevitably feel this delay, which has a negative effect on employee and customer retention.

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