Market Insight - My View: The changing face of the financial industry
Andreas Feller, Head of Private Banking Zurich, Eastern Switzerland, and ultra-high net worth individuals at the Swiss private banking group Julius Baer, discusses thematic investing, digital disruption, and why women are an increasingly important segment for the wealth management industry
Businesses today are facing a choice: adapt to changing consumer expectations or risk becoming irrelevant. As recently as 20 years ago, manufacturers and service providers controlled what was available on the market. They created the products and consumers snapped them up. However, in the last decade or so, that dynamic has changed. Thanks to an increasingly border-free environment, relative geopolitical stability, and the rapid rise of the internet, the world opened up in a way that we had not experienced before. Supported by advances in technology and by cheap logistics, companies started to go global and the workforce became mobile. At the same time, consumers began to openly compare products and services online from a wide range of national and international providers, putting the consumer firmly in the driving seat. Companies who were not—and are not—prepared to listen to their customers will inevitably struggle.
Financial service providers are no different. Today, clients are able to pick and choose the products they want from a growing number of providers. It is clear if you want to remain in business over the coming decades as a bank, providing services and solutions driven by client needs is not only advantageous but necessary. One example of how client needs are driving new offerings can be seen in the growing availability of thematic investing solutions. More and more people want to understand what they are investing in, and with thematic investing—and also sustainable or impact investing—clients are quickly and easily able to grasp the implications of their investments, without needing an in-depth understanding of a traditional macro picture.
There are many ways to approach thematic investing; Julius Baer's Next Generation investment philosophy tracks shifts in consumer spending and capital expenditure to identify structural growth areas, mapping its research to five themes: Arising Asia, Digital Disruption, Energy Transition, Feeding the World, and Shifting Lifestyles. It is a risk-adjusted, long-term structural approach to thematic investing that looks to identify the trends that will shape our world in the future and the companies best positioned to capitalise on the opportunities those trends create.
One of the most interesting themes for me is digital disruption. Digital disruption is having a significant impact on every aspect of our lives—from the way we communicate, consume, and travel to the way we do business. The trend away from hardware towards software is allowing established industries to be disrupted by new, outside players often with very little—if any—experience in the industry they are disrupting. This can be seen in the financial industry too with the rise of fintech and robo-advisers. While much has been made of these developments, I believe the financial industry—private banking in particular—will remain a people business. There are certainly repetitive, administrative tasks that should be automated, but the time spent with the client should not be compromised. Here we can learn important lessons from other industries, such as hospitality and health care, which are leading the way in understanding the needs of their clients; even with the most efficient infrastructure in place, they cannot provide the required level of service without investing in human relationships. The same is true for private banking. My view is clients will want to do business with the bank which has the most time available for them and that best understands their needs.
In the past, many in the financial industry did not ask about the specific needs of their clients, focusing instead on risk profiles. We are now in a transition period as changing investor demographics coupled with shifting consumer patterns are forcing a rethink of the traditional approach to the client relationship.
According to a study by EY, global female income and wealth is growing faster than ever before, making women an increasingly important segment for the wealth management industry.
Julius Baer has always followed a client-centric business model and is committed to providing services based on a profound knowledge of our clients. With these new developments in mind, it is clear investing in a better understanding of how to meet the needs of the growing female client segment will be key going forward. We have therefore commissioned a joint study with Campden Wealth to identify the needs and expectations of female investors, and will use the findings to further improve the service we offer.
Continually adapting and improving our service is paramount at Julius Baer. This approach has enabled us to stay at the forefront of the wealth management industry for more than 125 years. As we once again head towards more uncertain times globally, our commitment to anticipating and embracing change for the good of our clients is becoming more important than ever.
