By Christophe Brisson, Assistant General Manager for Europe and Head of Capital Private Banking Product Line. He joined Capital Banking Solution Monaco (formerly Tekline) as MD Europe in 2005 to develop its Banking Front-Office product line. He has over 20 years of experience in the software industry.
Private Bankers and Wealth Managers, who work exclusively with high net worth clients, have always been the connoisseurs of customer service. By definition their job is to provide “private,” exclusive services to their clients by understanding and catering to their needs.
A traditionally lucrative market, high profitability comes from growing the assets, particularly with existing customers, and maintaining low capital expenditures. However in more recent years government regulations have impacted that model by bringing about significant operational spend on the administration and compliance of these regulations. As an example, within Private Banking, European regulations have increased the average cost of customer management by 20-30%.
In this article we explore how many of these regulations, such as Anti-Money Laundering (AML) and the Foreign Account Tax Compliance Act (FATCA), can in fact be an opportunity for the banker. They impose a need to know more about the customer and therefore empower private bankers to be more efficient, provide better customer service and propose more services tailored for the customer’s needs. In the past bankers would handle the financial transaction without knowing anything about the customer and in fact the customer was not inclined or agreeable to answering too many questions beyond the financial details. They could take their business elsewhere.
Today however, within Europe and the US, one cannot open an account without expecting to answer more personal questions. The banker needs to ask these questions in order to protect the bank from risk of reputation and penalties for being out of compliance. For example, today if a cash transaction is earmarked for a car, it is essential to call the client and discuss whether the car was indeed purchased. If there is a transfer of money associated with terrorist activities or tax evasion the bank will be directly responsible and their image will be costly to repair. A number of big banks such as JP Morgan Chase and HSBC are now making compliance their number one problem to solve after being faced with compliance settlements in the billions over inadequate controls. According to the Association of Certified Anti-Money Laundering Specialists, the sanctions violations settlements reached a high of $3.5 billion in 2012.
Asking these questions is a good opportunity for the private banker to develop a stronger relationship with their clients. They have a limited number of clients and they now will reach out and call each client directly to discuss transactions or gather information – such as asking about a recent purchase of art or gathering details about the client’s children. However based on this information the private banker is able to propose new services specific to the client’s interests, helping to retain and grow the assets with each individual customer. Today it is essential for a private banker to keep the customer they have in order to bring in revenue for the bank.
Capital Banking Solutions, provider of end-to-end banking software, caters to the needs of smaller private banks located in some of the premier private banking centers of the world such as Monaco and Switzerland. As compared to the big banks, these businesses are equally impacted by the cost of regulations but are less equipped to overcome any infractions. That is why Capital Banking Solutions is delivering a product, Capital Private Banking, which empowers better controls on regulations such as AML, scoring of a customer, sophisticated reporting and taking action on KYC information. Capital Private Banking helps to transform a cost for the bank into an opportunity. With integrated modules for both Compliance and CRM, all customer information – a 360 degree view – is available in one click. So the client gains not just a CRM but the overall management of the account and the compliance issues. While a banker is dealing with regulation information they will enrich their information about the customer and then can tailor marketing campaigns and alerts in order to propose new services to the customer.
Additionally due to the upcoming deadlines associated with FATCA compliance, customers are currently focused on implementing Capital Banking Solutions’ FATCA module which includes information gathering of all the data necessary to identify US entities, generating automatic alerts and workflow between the Compliance Officer and the Relationship Manager, maintaining an audit trail and providing the necessary reporting to authorities including the withholding tax calculation. As with AML this has created another expense for the banks but will also create another opportunity to collect unique information about the client and propose creative services tailored to their needs.