Why Do Banks Need To Capture Their HNI Clients' Preferences Digitally?

By Vinayak Deshmukh | Jan 04, 2023

"Hi Alex, Please check my email. I have drafted the blog post on this month’s investment insights" messages Fred. "Yeah, sure Fred. I'll proofread and get back to you," says Alex, the VP of investment research at a well-known private bank. Fred continues, ”We spend so much time writing in-depth analyses of what is happening in the financial markets. Wouldn’t it be good to also get feedback from our clients as to what they think? By understanding them through these regular touch-points, we can cater to what they are looking for in terms of services and investments.”

Banks keep publishing thought leadership articles, do podcasts on the latest market happenings, and regularly try to share their knowledge in order to educate, engage and upsell to their HNI clients. However, most communication is one-way. They have no way of knowing if a particular client is interested in ESG investing or in say the Hong Kong/ China markets. And, even if there are some client preferences that are being captured, it mostly happens at the time of onboarding. But client preferences are not static, they keep changing based on the life stage of the client and the experiences the client has had. 

According to E&Y, banks that outperform the market follow a strategic approach to meet their clients' expectations. They identify client segments and personas and then market relevant products and services to them. This can happen only when banks know each client’s preferences or interests. This information needs to be up-to-date, and this is possible at scale only when done digitally.

The Current State Of Digital In Wealth Management

The wealth management industry is seen as a slow-changing industry that provides customized services. Customization remains valuable, but for many clients, it is no longer sufficient. Today's young and wealthy clients are not all about “face-to-face” interactions. A hybrid approach where digital makes them independent, with the necessary support from wealth managers is what they are looking for. And for delivering these digital experiences and services, a better understanding of clients is required. Without having sufficiently accurate client data, it is impossible to revamp the digital experiences for these new digital-savvy wealthy clients.

According to McKinsey, many wealth managers in Asia have a long way to go before complete digital adoption. Digital services that millennials and Gen Z consider basic are still lacking. e.g., a lack of personalization and product recommendations designed for specific client segments.

                  Ref: McKinsey Report On Analytics Adoption Rates In WM - Asia

There are broadly 3 parts to the client journey: client acquisition, onboarding, and advice engagement. The first two are crucial, and decide the relationship between the bank and the client. Making this as seamless as possible with the necessary digital tools is essential. The third part is “ongoing engagement”. A lot of times this gets ignored, but if a bank needs to sell new products and services to an existing client, they need to know them and keep them constantly engaged. Client analytics to capture all these digital interactions to give a single point of view for a client is important.

What Wealth Managers Expect From Banks

With the rise in digital adoption by millennial HNWIs, wealth managers know that they too have to adapt accordingly. Wealth managers expect their firms to enable them to engage better with their clients by using innovative tools for analytics. This will assist them in obtaining a consolidated client view. But what are the wealth management firms' priorities?

      Ref: Capgemini Wealth Manager Survey - 2022

There seems to be a huge gap between what wealth managers think is important for them to serve their clients and their perception of their bank's focus areas. Given the tech-savvy clients they serve, wealth managers believe there is a greater need for a better CRM, smart analytics tools, and better digital tools for client interactions. But the wealth management firms still don't think of it that way. This is a missed opportunity that private banks and wealth management firms need to seize.

Millennials & Gen Z Seek Digital Engagement

Private wealth clients are expecting more from their interactions with financial advisors. But private banks and wealth management firms are missing the point about segmenting their clients. The future of private banking is with younger HNIs - millennials & Gen Z clients. With the great generational wealth transfer to take place, wealth management professionals must set their sights on using innovative technologies for catering to this tech-savvy generation.

According to the Capgemini Global HNWI Insights Survey 2022, a higher percentage of millennial HNWIs prefer audio/visual interaction channels over face-to-face interactions. A whopping 46% - 47% of millennial HNWIs want to communicate with or receive advice from their wealth manager through audio/visual interactions. Face-to-face communication is preferred by only 26% - 28% of the clients.

           Ref: Capgemini Global HNWI Insights Survey - 2022

The new generation of wealthy clients is highly strategic. These digital natives want financial advice to be delivered but naturally, in a mode, they have grown up with, that is digital! They are moving away from face-to-face interactions. Thus, private banks must adapt accordingly and focus more on the modes of interaction that their digital native HNWI clients desire.

Building Client Personas - Why It's Important

Wealth managers or relationship managers are frequently in touch with most of their clients. They do have significant information about their clients' preferences and requirements. But often, a unified client view is unavailable making it difficult to provide relevant and personalized services. Client information is scattered here and there. There is a need for a system to gather all the client data in one place. When every digital touchpoint becomes an opportunity to know the client better, not only can banks understand client behaviors, but they can also build client personas to cater to them better. Adding this level of client-centricity is a win-win for both the banks as well as the clients they serve.

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