Bank clients’ hopes that their aims and aspirations are being shared by relationship managers have all too frequently been dashed. Which is why they are more than ever looking for advice from family offices, lawyers, and independent wealth managers, writes Peter Schmid in an essay for finews.first.


This article is published on finews.first, a forum for authors specialized in economic and financial topics.


finews.com recently reported that for decades, private bankers had been first point of contact for clients, but that this was less and less the case today. The development is closely linked to the falling degree of clients' trust as well as the reputation problems of many financial institutions.

Indeed, at banks, the next month and current quarter are always at the forefront of their attention. The entire sales and advisory organization are geared towards new clients and growth in revenue with the existing clientele, which ties up the best members of staff. The «normal» existing clientele by contrast all too often is getting scant attention.

«These experts are mainly available for the most important clients»

Investment specialists and relationship managers constantly get their targets raised for the acquisition of new clients, an increase in efficiency and the number of clients managed, further decreasing the amount of time an existing, «normal» client will get. The pressure sometimes is so overpowering that clients who don’t get in touch themselves are being ignored or only contacted when the bank urgently wants to sell a particular product.

And there’s another factor too: in past years, banks have tended to train generalists as relationship managers. They may be able to discuss any particular topic, but haven’t properly specialized in any field of expertise, such as portfolio management, pension provision, or the advisory on legal, tax or foundation issues. They may be able to get the help from an expert, but these are mainly available for the most important clients.

«Clients need the certainty that their interests and aims are congruent with those of their relationship managers»

Banks have recognized as much and are currently making a big effort in the training of advisers with certified programs. Many clients whom I've met over the past years want a main person of contact who is competent on most issues and who is able to resort to further experts quickly and unbureaucratically if need be.

Clients need the certainty that their interests and aims are congruent with those of their relationship managers. On the background of the developments, fewer and fewer clients keep faith in their relationship manager and instead seek help from family offices, lawyers and independent wealth managers.

«The bank is increasingly being reduced to the role of deposit and transaction bank»

They shield clients from the banks and make the bank exchangeable. Financial intermediaries very often renegotiate the terms which normally doesn’t bode well for the banks. They are increasingly reduced to the role of deposit and transaction bank, which obviously entails additional negative financial implications.

In addition to that, there’s a margin squeeze in banking that is increasing steadily. Which is due to the interest rate situation and the increasing regulation, among other things. But not only, because it is also partially self-inflicted: the newly involved financial intermediaries are taking a not insignificant share of the margin. And numerous banks still have a far too complicated structure and maintain unnecessarily expensive procedures.

Many banks also fail to adjust their (excessive) personnel and other costs to lower margins. Many wealth managers are focusing on the richest of all clients, the ultra-high-net-worth-individuals (UHNWI). But the margins are even lower in this business.

«The proposition of a cheaper offer coupled with at least an equal performance is catching the eye of many»

Basically, being successful in this segment is only possible for banks with a very strong balance sheet that they can put to use for the purpose; you also need a first-class risk management in place, that is linked to the services of the respective investment unit.

On this background, what often is being underestimated is the importance of the so-called high-net-worth-individuals (HNWI) with invested assets of between three and ten million francs. They don’t feel well looked after. That’s where the banks should take countermeasures.

In this segment there's a danger that clients are being lost to providers with a focused investment offering as well as excellent digital solutions. The proposal of a cheaper offer coupled with at least an equal performance is catching the eye of many.

«For many companies, it will be too late»

A clear strategic positioning is thus becoming all the more important. For many companies it will be too late: they will be taken over or have to give up their business. This won’t be any different in coming years.

Members of the board and executives are under pressure to come up with tough decisions in relation to strategy, presence on the market, services, critical size, logistics and risk management – and to implement those with all due consequence. From my experience, this often fails not because of the strategy but a less than consequent implementation.


Peter Schmid is a veteran senior executive, CEO and board member in the financial industry. He now works as an independent board member as well as an adviser to companies and rich citizens.


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