The increased loss of confidence and trust of investors in private banks, which have seen their reputation shaken by investment scandals and profits fall, due to decline in wealth and increased allocation to lower margin asset classes, can be turned into opportunity if the firm has a good business model and has emerged from the crisis with its brand intact, believes Alfonso Gómez Garcimartín, head of BBVA private banking in Spain.
Banca Personal and BBVA Patrimonios, which were recently integrated under the same brand, BBVA Banca Privada, cater respectively to affluent investors with at least E300,000 in assets and ultra high net worth individuals, defined as those having more than E2m. In the ultra high net worth wealth management unit, BBVA Patrimonios, which accounts for E10bn assets of the total E40bn managed by the bank, the 80 private bankers can deal with a maximum of 30 family groups. “Our model is quite unique in the Spanish private banking industry. Understanding investors’ needs is the name of the game and our closeness to clients is a very important competitive advantage for us,” says Mr Gómez, who has been driving the Spanish bank since he left the direction of the bank in the UK in July 2008.
“Communication and client handholding are absolutely critical. Our bankers have significantly increased their contact with their clients in order to keep them up to date and explain how we are managing the situation. Our philosophy is to be clear and transparent at all times,” he says.
Increased headcount
The bank’s assets have remained flat over the past two years, against an average decrease of 16 per cent in the private baking sector. While some other domestic competitors have cut their costs and reduced staff, in the past 18 months the second largest private bank in the country has considerably increased the number of its advisers, who shot from 180 to 300. “We are strengthening our advisory force because we believe that the lack of confidence in investors gives us a great opportunity to propose BBVA’s model, which is solid and has produced very good results” he says.
The primary source of new advisers is the BBVA group itself, explains Mr Gómez. “We plan the personal career of our bankers, we train them to make sure that they have good knowledge and can add value. Technical skills are important but so are commercial skills, and we are trying to combine both,” he says, conceding that some new advisers are also poached by competitors.
This hiring spree is aimed to make the most of the potential growth in the domestic private banking arena. BBVA private banking, which has around 9,000 clients, of whom more than 5,000 are in the ultra high net worth space, is looking to increase the number of its affluent/wealthy clients by 15,000 by the end of 2012, explains Mr Gómez.
According to a study from consulting firm Accenture, up to 65 per cent of wealthy Spanish families do not use the services offered by specialised wealth management firms in Spain. “The most sophisticated families in this country deal with us but in Spain most of the wealthy individuals do not use private banking specialists to manage their wealth and take care of their needs,” he says.
“The market potential for private banking in Spain is huge. BBVA has a very solid position and a great reputation and we should be able to take advantage of this,” says Mr Gómez, pointing out that migrating clients from competitors is the main way to increase the bank’s client base.
Long-term relationships
Client loyalty is crucial to ensure the success of the strategy. If the latest world wealth report by Merrill Lynch and Capgemini found that around 25 per cent of high net worth investors withdrew assets or left their wealth management firms altogether in 2008, the annual results of the Spanish bank’s client research survey reported increased levels of client satisfaction year on year, with over two thirds stating they would recommend the bank to families and friends.
“On average, our clients have been with us for 12 years and our annual client turnover is only 1 per cent,” claims Mr Gómez. The reason why many customers have lost confidence in private banks is because product push has been the philosophy underlying many banks’ hunger for profits. “What is most crucial that private banks realise is that we should not sell products but advice,” he believes.
The way advisers are remunerated has a huge impact on the business model of a private bank. Like in the rest of industry, private bankers at BBVA have a basic salary and a bonus but their performance is based on many aspects, such as the number of new clients they get for the bank, levels of client satisfaction as well as business performance, including profits and assets under management.
