Interview with Luc Leclere, Director Private Banking at BNP Paribas Fortis (2/2)
Even after the biggest crisis since the 1930s, the population of High Net Worth Individuals reaches a new top each year. But while private banking's customer base grows, regulation and competition present serious challenges to the industry. In this context, Luc Leclere, Director Private Banking at BNP Paribas Fortis, took the time to share his insights with Sia Partners on the Belgian private banking industry.
SIA: Do you agree that this shift towards "client centric" model is in line with what is happening in retail banking, moving from a product to a more services oriented approach?
L. Leclere: Indeed, but of course you need products in the end. It is rather bringing the right solution to the right customer at the right moment, where I deliberately focus on solution and not on product. Especially in a world where we are operating under very difficult macro-economic circumstances, causing a client's position to deteriorate rather than to move forward when putting everything on cash. Despite the difficult market climate, we need to offer proper and sound end-to-end solutions towards our clients.
SIA: In line with the tendency of focusing on estate planning and similar services, we notice the emergence of "family offices". Do you agree that we are heading to more competition in this area?
L. Leclere: Even today with the set-up of our Patrimonial Balance, we are already moving in that direction by pulling the conversation very wide open towards the client. It is very important to understand that next to the transmission and transfer of capital, many people are seeking today for professional advice regarding the financial management of their assets. Basically said, a lot of people are asking themselves what to do with their money in order to end up worse. It seems like an easy question, however the answer is not always that simple. On estate planning side, we have around fifty tax specialists in house, which is a considerable amount. On investment side, we have in Belgium around 150 people at our disposal who constantly are engaged in offering support to our private bankers and clients regarding equity management. In the past, you had either discretionary management or either advisory management, mostly available in only one form. Nowadays, you often have clients which prefer to have both, where one part of their assets is managed by the bank and another part is managed on own basis or in consultation. So our offers have become very tailor-made, of course in relation to the total capital. In this context, you notice that there is a high demand for it and that many clients come to the bank to seek this professional advice.
SIA: This means that your customer relationship managers need to have a stronger technical background. As this is true for every private bank, can we speak of a war on talent in today's market?
L. Leclere: From the moment you're looking for high-qualified profiles, it is always difficult to find that one in a million' profile at the right time. Alongside the implementation of the new offer, we invested intensively in the training of our people, although it consists of one of the easiest savings in times of crisis. All our 420 private bankers have been through a certification trajectory of about 17 days. At the end of this trajectory it was compulsory to pass a test with a business case to maintain one's function within the Private Bank. Today we are in a phase where we are trying to keep our employees up to date on certain themes such as estate planning. Our employees value this and it helps us to keep an edge on our competitors.
SIA: We have talked about investing in both customer relationship and employee training, how does the rising pressure on realizing cost savings figure in all of this?
L. Leclere: You have to display entrepreneurship in these kinds of decisions and take into account all possible means within your reach. We have an advantage that we are building a private bank within an international group. This gives rise to important economies of scale, which allows us to spread investments, such as implementation of MIFID II, over a large customer base. Every entity has of course its own juridical entity and platforms, but there is a sharing of best practices across the Group.
Secondly, you really have to be obsessed with creating value for the client. As you create value, you will generate income through the right pricing level with a positive impact on your cost-to-income ratio.
Finally, technology is also crucial to keep ahead. If you look at what's happening in retail banking, you see that new technology, like the electronic wallet for instance, is a way to develop a clear advantage in terms of market share. You have to anticipate to the fact that the way clients interact with their bank is changing. So investment in technology is also an important factor in gaining in efficiency.
SIA: Technology, especially through a multi-channel approach, is indeed a focal point of retail banks today. What is your view on the added value of technology in Private Banking then?
L. Leclere: You need a solution tailored to every type of customer. When wealth is transferred from one generation to the other, your customer base grows younger. They will want to interact differently with their private bank than the generation before them. We focus on customers with wealth starting from €250.000 because we want to identify people with a private banking potential early on. We have a very broad network so we can start guiding customers in building up their wealth as early as possible. In this segment you encounter young entrepreneurs whose time is absorbed by their company and are often abroad on business. These customers expect that their banker is available at all times, so you need modern technology to bring the right message in a timely way to them.
SIA: In what way will new regulatory initiatives, such as MiFid II, Basel III and FATCA, impact day-to-day business?
L. Leclere:There is always an impact from new regulations; the implementation in itself already gives rise to additional costs. On the other hand, customers expect transparency from their bank. Aspects such as transparency and availability have been included in our strategic plan, so it is our will to invest in this. We believe that regulations are in the first place in the best interest of our clients, and that there is a need to regulate the market with regard to that.
SIA: In conclusion, how do you think that the Belgian Private Banking market will evolve?
L. Leclere: If I look at the road we have travelled with our private bank from 2008 till now, I think we have realized a remarkable trajectory. We have the trust from our clients; our assets under management have risen from € 46 billion to € 60 billion. We operate in a difficult market, from a macro-economic and financial point of view. A lot of people are looking for professional advice; we are continuously challenged to be more professional tomorrow than we were today. This is an important challenge for our people, who need to find solutions that are compliant to the regulatory framework and match the expectations of our clients. Nonetheless, I expect to see a positive evolution in our sector in the coming years.