European Private Banks Fail to Meet Clients' Service Expectations

London, June 23, 2003 — Many private bankers are spending too much time on internal administration and are failing to provide their clients with excellent service, according to research conducted by Reuters and Booz Allen Hamilton. The findings reveal that on average private bankers only spend between 5-10 hours a year with each client.

The research is based on in-depth interviews with 60 advisers from 27 private banks in the UK, Germany and Switzerland, plus 60 clients of private banks from the same three countries. It looks at how well these clients, high net worth individuals each with an average wealth of EUR 4.7m, view the service provided by their private bank.

In context of falling investment returns of the last three years, high net worth individuals have begun to question the value of their private banking relationships. The report looks at how clients' demands are changing, how private banks measure up today and the changes required in the private banking business model.

Private Clients Are Unhappy with Service

• Whilst some clients receive excellent service from their private bank, many clients are dissatisfied



• Many clients feel their banker does not understand their investment needs nor provides tailored advice. Particularly in Germany, some believe their bank is more focused on selling them generic, in-house products



• Clients are frustrated by the failure of their bank to get basics right. Areas for improvement highlighted by clients include: access to a competent and reliable point of contact, 100% correct transactions, easy to understand reporting, and more effective data capture to avoid constant repetition of basic information such as contact details



• Clients are looking for more from their bank. They want a 'trusted adviser' who can proactively provide a steady stream of personalised investment ideas. This contrasts with the current perception of the adviser who is seen as largely reactive and purely transactional

Fundamental Factors Inhibit Relationship Managers from Delivering Quality Service

• Advisers spend too much time on internal administration and not enough time with clients. Most relationship managers on average spend 25-60% of their time on internal administration, leaving only between 5-10 hours a year to spend with each client



• Advisers managing large numbers of clients (on average each deals with 150) are suffering from information overload, struggling to keep on top of the information they need to manage clients effectively



• It is becoming increasingly difficult for relationship managers to combine the roles of client handler and investment manager

Private Banks Need To Change Their Business Model

• The role of the private banking adviser needs to evolve if banks are to retain and grow their customer base. Banks need to support their advisers and allow them to become the 'trusted adviser' their clients are demanding



• Private banks must improve the value of their service through the development of advanced client risk profiling and tailoring of investment strategies, best of breed products, a pricing and incentive structure and an ongoing flow of new investment ideas



• More effective processes, client management and information filtering tools are required to enable relationship managers to spend more time with clients and less on administration



• Banks should transform the role of their advisers into that of 'trusted advisers' by focusing them on client management and supporting them with performance management systems which encourage more pro-active relationships with clients

For investors, the report provides a checklist to help them select and manage their private banker more effectively.

Alan Gemes, Senior Vice President at Booz Allen Hamilton, said: "Private banks are at an important fork in the road. Private clients are not satisfied with the service they are receiving and are beginning to reconsider their options. Banks that are prepared to face up to the challenges are likely to reap the rewards of enhanced client satisfaction, reduced client churn and increased referrals."

Steve Lipper, Global Director of Reuters Private Client Services, said: " The problems faced by the private banking industry are often attributed to market downturn, when in reality they are much more about how valued or not customers feel. Those who recognise this, and take action to enable their advisers to offer the personal and proactive service clients want, will become tomorrow's market leaders."