The wealth management industry, long a bastion of traditional banking practices, is changing fast. Technology and data are driving new products and services for a new generation of private banking clients; demand for products that incorporate environmental, social and governance (ESG) criteria is driving new product development, and clients are looking for a combination of personalised services with the tools to make independent investment decisions.
Leading with technology
If you advise and conduct financial planning, the result should be high diversification and a position consistent with clients’ long-term objectives.
For CaixaBank – Spain’s largest retail bank – technology is a key differentiator in private banking and wealth management. The bank believes that, while detailed understanding of clients’ needs has always been important, the advent of big data and artificial intelligence (AI) is a step-change for the industry. Sophisticated algorithms and modelling allow for greater service-customisation; data-led personalisation is more effective than the traditional segmentation based on assets, or professions, or gender, or age; and a combination of technology-driven customer segmentation with manager specialisation makes customer interaction more efficient, delivering investment solutions to match clients’ risk appetite.
In the future, these technologies will also transform the delivery of more traditional services that rely on a deep understanding of individual circumstances and needs, such as inter-generational wealth transfers, succession planning, and other life events.
There are more straightforward operational benefits too. Better technology enables faster client acquisition, onboarding, and servicing and this in turn frees up more time and resources for bespoke and personalised client advisory services and discretionary wealth management, creating a virtuous cycle of client service efficiency and high-quality advice, as the cornerstones of a successful wealth management business. And during the pandemic, these new technologies enabled banks to provide better assistance during the various lockdowns.
Explicit charging models
CaixaBank Private Banking is committed to a model that focuses on reducing conflicts of interest with our clients. Best practice is to move forward with an explicit-payment paradigm, instead of relying on operating fees. Therefore, we are developing independent advisory services, such as CaixaBank Wealth and CaixaBank Wealth Management Luxembourg. We are also enhancing our discretionary portfolio management strategy, ensuring it is smoothly integrated into our client-manager relationship. As a result, CaixaBank is the market leader in discretionary portfolio management in Spain with €41.75bn under management, and a 43.4% market share (Inverco data from June 2021).
Going green
The other significant driver of innovation in private banking is demand for products that incorporate environmental, social, and governance (ESG) criteria. CaixaBank Private Banking reinforced its model in 2021 by committing to impact and sustainable investment and has thus become the benchmark in sustainable private banking.
“In 2020, we recorded a 176% increase in the average balances of private banking clients in socially responsible investment (SRI) mutual funds. This trend has continued in 2021 and it will continue in the coming years,” says Victor Allende, director of private banking at CaixaBank. “In 2021 we launched a new range of investment funds and pension plans, the SI Impact Solutions Range, with the highest sustainability rating. This launch is driving CaixaBank’s impact investing and is fostering a culture of sustainable finance in society. With this goal in mind, CaixaBank Group has signed a strategic partnership with BlackRock. BlackRock’s Fundamental Equity Impact team will provide consultancy on impact investing in equity investment portfolios based on its unique methodology for selecting companies that have a real impact on society and the planet.”
The benefits of integration
The key to the success of our investments is based on a model of trust that combines the universal service of CaixaBank's extensive network with a highly specialised team of more than 1,000 specialised professionals and around 70 specific centres throughout the country. We prioritise the investment strategy that best suits the client's needs in terms of return, risk, term, and liquidity.
The most important thing is to achieve wealth preservation, diversification and construction of portfolios that can respond positively to possible risk scenarios. The biggest challenge is to navigate the rate scenario and avoid valuation traps. In this context, alternative assets are of particular importance. In addition, investment in illiquid assets can be used for the purpose of generational transfer.
As Victor Allende puts it: “Our relative position is stronger not only in funds, but also in savings, insurance and pension plans. In my opinion, that is the litmus test. If you advise and conduct financial planning, the result should be high diversification and a position consistent with clients’ long-term objectives.”
The most efficient weapon to win the battle for private banking’s next generation.