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Trust in Private Banking & Wealth Management

A HNWI Private Client Perspective

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The major antecedents of the HNWI’s trust in a private client banking relationship is the dependability, reliability, integrity and responsiveness of the Private Banker (PB). Other components included empathy, promptness, competence, consistency, commitment, conflict handling, credibility, mutual benevolence, promises, personal experience and open communication.

The importance of trust is absolutely essential for the successful and profitable long-term private banking relationship. Greater trust is required when the HNWI private client requires an ‘investment advice based service’. Trust in the financial services sector is comprised of three constructs: dependability, knowledge and exceeding expectations.

Further, HNWIs need to trust their PB wholly and completely, they need to trust that the PB is looking after the interests of the HNWI and not the interests of the private bank, further the slightest mistrust and the HNWI will be lost as a customer. It is probably the most important issue of it all. PB’s are working with peoples’ pension funds, personal assets and investments, which have taken many years of hard work to accumulate, so if there is the slightest mistrust then the HNWI will move to another wealth service provider, as one HNWI explained:

“The slightest mistrust then you lose me as a customer. I need to trust you, wholly and completely, I need to trust you and I need to understand that you are looking after my interests and not the interests of the bank.”

However, HNWIs want to trust that the PB is not working independently and that the professional advice given is the ‘house view’ of the private bank rather than an individual opinion and that the PB is supported by a team of specialists generates the trust. HNWIs like to see the service providers house view coming through to say that under these circumstances the house view is how they should be doing this and when that is conveyed to the HNWI to say they are going to be doing this and the house view is that and their suggestion is this. HNWIs do not like the WM making decisions without consulting or working within the rules of the company, as expressed by the following respondent:

“One of the important things for me is the wealth manager must not be seen to be someone to make decisions off his own bat … the fact that you have a team generates the trust.”

Higher levels of trustworthiness lead to a higher level of co-operation, and lower levels of perceived risk and uncertainty, and vice versa. HNWIs want to trust that the PB is not working independently and that the ‘expert professional advice’ given is the ‘house view’ of the private bank rather than an individual opinion and knowledge that the PB is supported by a team of specialists generates this trust. Trust is fundamental in the private banking relationship and consists of integrity and honesty and the individual reputation of the private banker and the corporate reputation of the private bank.

Further, it is critical to have mutual confidence, mutual trust and honesty in the private client banking relationship. HNWIs have to make sure that the PB is going to give them the best deal and they have to trust him to do that. This has fallen through the crack sometimes, but trust is vital to a successful banking relationship. The PB has got to ‘look out’ for the HNWI and be pro-active; HNWIs feel that this doesn’t often happen and it could improve significantly, as mentioned by the following respondents:

“Trust is fundamental in the relationship.”
“Well there is only one criteria in life and that is integrity, integrity, integrity, integrity. I don’t want anybody who gives me the slightest doubt of dishonesty whatsoever, they are fired, gone … history. I don’t tolerate it.”

It is critical to have mutual confidence, mutual trust and honesty in the private banking relationship, where the HNWI and PB need to like each other and experience a rapport. However, the mutual trust needs to be developed over a period of time on both sides of the banking relationship, as noted by the following respondents:

“There would naturally be an important period during which you would have to establish the mutual confidence and trust.”
“Trust is both ways because I need to be honest because otherwise they can’t do their jobs properly either.”

HNWIs measure the trust in the PB by listening to what they say about other HNWI private clients. A consensus seems to have emerged in marketing that trust encompasses two essential elements: 1) credibility; and 2) benevolence. Trust in a partner’s credibility is based on the belief that one’s partner stands by its word, fulfils promised obligations, and is sincere. Further, trust in a partner’s benevolence is a belief that one’s partner is interested in the firm’s welfare and will not take unexpected actions that would have a negative impact on the firm. It follows that trust requires a judgement as to the reliability and integrity of the exchange partner.

Benevolence as a component of trust that may contribute to explaining loyalty. This study confirms that both credibility trust and benevolence trust are factors present in the HNWI/PB relationship and do contribute to the HNWI client loyalty in private banking and wealth management. HNWIs have issues with trusting remote relationships such as call centres. HNWIs feel that they have no ‘relationship’ with the individual at the call centre who have no idea who the HNWI is. Relationships managed at a distance, where social interaction is limited may result in an erosion of trust.

However, the HNWI trust fails if the PB doesn’t keep to a commitment or there were unknown charges on their bank account or their fees are not what they should be. Further if a joint decision does not work out then the trust in the WM’s ability will erode, as noted by the following respondent:

“If we make a joint decision and it doesn’t work out your trust in their ability might erode. Not responding to an issue or a problem.”

In order to gain the HNWI’s trust, the PBs must act in the HNWI’s interest, further, the failure of the PB to contact or track down the HNWI would be unacceptable, as expressed by the following respondent:

“If my wealth manager did not track me down wherever I was, I would lose trust straight away. I would not accept that he could not get hold me. That is unacceptable.”

HNWIs measure the trust in the PB by listening to what they say about other HNWI private clients, as the following respondent confirmed:

“A lot of it is seeing what they are saying about other clients and that also says a lot about what they are saying about you to other client.”

HNWIs want continuity with their private bankers to build up trust. HNWIs consider that there is no continuity of people in private banking, people change too often and the banking relationship has to start again each time, the person is coming in cold and that does not build up trust in the private bank, as expressed by:

“It is actually essential that you have continuity, not three or four changes in a year.”

Key Findings: Trust

  • The components of client trust are empathy, promptness, reliability, competence, integrity, consistency, commitment, conflict handling, credibility, mutual benevolence, promises and openness.
  • The importance of trust is absolutely essential for the successful and profitable long-term private banking relationship. Further, without trust the HNWI/PB relationship will fail.
  • Greater trust is required when the HNWI private client requires an ‘investment advice based service’ compared to transactional private banking. HNWIs want to trust that the PB is not working independently and that the ‘expert professional advice’ given is the ‘house view’ of the private bank.
  • The HNWI trust in the private bank ‘doesn’t just happen’, it is built up over time, through personal relationships and social interactions, which in turn forms a ‘bond’ and ‘trust’.
  • Trust is a ‘two-way street’ where the HNWI and PB trust each other and collaborate together. The HNWI needs to trust that the PB is looking after the interests of the HNWI and not the interests of the private bank.
  • Determinants of trust erosion are service failure, failure to resolve conflicts and/or mistakes and leads to negative loyalty and the ultimate loss of the HNWI and their business.

The above are extracts from research into global HNWs, UHNWs, entrepreneurs, family businesses and family offices by Dr Stuart Gibson.

 

Stuart Gibson

Dr Stuart Gibson is an independent consultant and expert in research, strategy and marketing within the wealth management sector, having spent 32 years working and collaborating with global financial organisations in Europe, Middle East, Asia, Africa and USA. He is also a Visiting University Lecturer having taught on BA/BSc degree courses in Financial Services.

Dr Gibson holds a PhD and MSc in Marketing, Private Banking & Private Wealth Management and a Postgraduate Diploma in Marketing. He is a Fellow of The Chartered Institute of Marketing, a Fellow of the Chartered Management Institute, a Fellow of The Institute of Direct and Digital Marketing and a Chartered Marketer.

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