Closing debate: Gazing back, looking forward

The closing debate in this year’s Euromoney global private banking and wealth management virtual event was notable on many levels. It was of course virtual – as almost every event has been in 2020. But that didn’t stop our experts from getting stuck into the issues facing every private bank and wealth management institution.

We kicked off with the issue of asset diversification. This has been a talking point all year, with relationship managers urging clients to diversify portfolios in these chaotic and uncertain times.

Mei Yufang, deputy general manager at China Construction Bank, says “rising global economic uncertainty means our clients tend to rely on asset allocation” to mitigate risk while maintaining wealth management goals.

Augusto Miranda, global head of private banking at Bradesco, says clients: “Are looking for more global diversification opportunities, including private equity and alternative investments.”

This is not just a direct reaction to a deadly pandemic but also to the related fear of years of low-to-no growth, as well as looming inflationary pressures in both developed and emerging economies.

Covid-19, the common factor in every economic and financial conversation of 2020, was a central talking point in the debate. The panel debated the challenges they faced this year, from how to communicate with clients, to the need to recruit new financial advisers and relationship managers.

Both issues are of paramount importance. Zoom calls are satisfactory, if not ideal, ways to provide existing high net-worth clients with world-class investment advice. Virtual webinars allow private banks to invite a wide range of experts to present their views on everything from policy changes after the US election to projections about the pandemic.

But there’s a limit to the efficacy of online communication. Private banks need to hire and relationship managers need to meet new clients in person. It’s not easy to win the trust of another person online or to get a real sense of whether you believe in them.

But the pandemic was far from the only subject covered in the closing debate. Panellists touched on compliance costs, which are rising for every wealth adviser, and on transparency, which is better in some markets than others.

Cybersecurity is on the minds of many, a fact that is unlikely to change. Pointing to his home market, Bradesco’s Miranda says Brazil faces: “A lot of cybersecurity attacks. We have extremely high levels of security and we are constantly introducing new features.”

Another talking point was the ability of relationship managers to communicate with the female high net-worth clients who constitute a growing share of every private bank’s client base.

Veronika Zhukova, managing director of Sber Private Banking, noted that many wealth management institutions are busy creating products tailored to the needs of women. It’s laudable – but is it the right approach? “Most of the time, women don’t want special products,” she says. Instead, “they want a different form of communication.”

Sustainability was another central tenet of the conversation. With regulators still working toward an agreed taxonomy for green bonds and loans, and the definitions and boundaries of sustainability still up for debate, this is an evolving subject.

Zhukova says that in environmental, social and governance (ESG) terms, the Russian bank is working hard to educate its high net-worth clients.

Emma Crystal, head of international wealth management, northern and western Europe, and head of sustainable client solutions at Credit Suisse, says her clients are: “More interested than ever in ensuring their portfolio considers ESG factors, not only in order to increase their impact but also in light of performance.

“A sustainably positioned portfolio places clients in good stead financially for both the medium and the long term, while also allowing them to focus on issues that concern them such as the environment,” she adds.

It’s a point thrown into sharp relief by Robert Gardner, director of investments at St James’s Place Wealth Management, who points to the fact that the average child born today is likely to reach its 100^th birthday.

With that in mind, it’s essential that we continue to work harder to ensure we don’t destroy the fabric of the only life-giving planet we know.

“What’s the point of having a million pounds or francs or dollars if the planet’s temperature has gone up by three degrees and London and Amsterdam are underwater?” he asks. Personal financial wellbeing is important, but he adds: “We also need a world worth living in.”