Pandemic’s Silver Lining – A Private Banking Perspective

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Pandemic’s Silver Lining – A Private Banking Perspective
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Despite the doom and gloom brought about by the coronavirus pandemic, individuals, as well as businesses are forging ahead to weather the current storm. More than six months into the crisis, many countries are still in the midst of an uphill battle to contain the impact of COVID-19.

There is no question that COVID-19 has triggered the worst global recession in decades. Contractions in vast majority of developed and emerging economies is expected, with labour productivity being predicted to take long-term damage.

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Just recently, World Bank’s Global Economic Outlook, which is spelled out in the June 2020 Global Economic Prospects, presents a sombre view on what lies ahead: “The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020, using market exchange rate weights—the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support. Over the longer horizon, the deep recessions triggered by the pandemic are expected to leave lasting scars through lower investment, an erosion of human capital through lost work and schooling, and fragmentation of global trade and supply linkages.”

On the ground, financial institutions are feeling the heat of a sluggish economy. In particular, private banking institutions are heavily impacted.

“The business disruption arising from COVID-19 has impacted all business sectors and private banking is no exception. Private banks had to implement work from home arrangements, introduce safe distancing measures, split teams and impose travel restrictions, in order to ensure the safety of employees and clients,” says EY’s Nam Soon Liew, Regional Managing Partner for ASEAN.

Accelerating Transformation

But while it is easy to find sources of unhappiness in this climate, the next 6-12 months could provide some semblance of hope within the private banking industry. In fact, the level of digital transformation happening right now cannot be understated. EY’s Nam Soon puts this into perspective.

“COVID-19 is accelerating the transformation in private banking. With further pressure on margins and managing costs, private banks that do not have a robust digital backbone, do not have strong online tools or are unable to leverage digital technologies, will not be agile enough to pivot to new client behaviours and preferences.

“The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020, using market exchange rate weights—the deepest global recession in decades.”

Stressing the importance of digital platforms, Nam Soon emphasised that “those private banks with digitally enabled delivery platforms and strong balance sheets could use the opportunity to extend business growth, acquire new customers, increase share of wallet and even look to acquire quality assets at attractive valuation multiples.”

Another key area of private banking operation that sees a bright spot of late is the onboarding of new clients. Because of the current circumstances, clients going through the onboarding process are now able to spend more time providing relevant documentation and source of funds. As a result, this part of the process is accelerated.

“For example, on boarding of new clients, obviously, is impacted. However, clients going through the onboarding process are now able to spend more time providing the relevant documentation and source of funds, and therefore this part of the process is accelerated.

Private Banking Innovation

It is true that necessity is the mother of innovation. In wealth management, this would typically imply a shift in business models, especially in the area of client engagement. Private bankers would be served well looking for opportunities to revisit their technological infrastructure that will help its Relationship Managers (RM) deepen its understanding of client’s needs, preferences and unique circumstances. Moreover, having a robust digital infrastructure helps strengthen a firm’s capability to identify new opportunities and grow existing ones. For example, beefing up cloud computing resources, social listening tools and cyber security protocols will not require much to execute but will return valuable strategic advantage in the long-term.

It is encouraging to note that the private banking industry, in general, is heading towards this direction. Nam Soon, who has been a keen observer of the evolution of private banking for a long time sees significant progress in this time of crisis.

“The pandemic has accelerated the adoption of digital and so private banks had to cater to clients’ demand to use online banking, video conference calls and WhatsApp/WeChat platforms for communication. More clients are also signing up to use digital advisory and robo-advisory services. We also see more live webinars on investment topics which, interestingly enough, is attracting larger audiences relative to physical seminars, in part due to greater convenience and the ability to host larger participants on a digital platform.

“Another positive development I observed is that many private banking clients now have more time for their RMs to engage them with more comprehensive and strategic discussions of their portfolios. Private banks that are further down the digitalisation journey now find that they can more rapidly deploy digital advisory and portfolio management tools to serve their clients,” says Nam Soon.

“Those private banks with digitally enabled delivery platforms and strong balance sheets could use the opportunity to extend business growth, acquire new customers, increase share of wallet and even look to acquire quality assets at attractive valuation multiples.”

Seeing the Silver Lining

In the final analysis, there is no doubt that this crisis can bring about positive change. For many, the catchphrase “never let a good crisis go to waste” embodies the approach that must be taken to ride out this storm. While it’s true that challenges abound, it is also true that there is an increasing number of first-time online clients. Transactions and services that are being delivered digitally are also on the rise. For Nam Soon, this could be the silver lining amidst the current pandemic as he observed that “the comfort level of clients served digitally has gone up significantly. Moving forward, this will surely help private banks lower their cost to serve and increase share of wallet for those private banks armed the right suite of omni-channel digital tools, products and platforms.”

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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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