Why are Private Banks Bad at Branding

Private Banker International - March 2007

Private banking is arguably an industry that, more than any other sector of financial services, should promote strong upmarket brand values to attract and retain valuable wealthy clients. In reality, many players are still back in the Jurassic age when it comes to such core image-building

The neglect of brand by the private banking business will become a potential value destroyer in an increasingly competitive wealth business, some brand specialists assert. As the wealth industry consolidates, with private banks, asset managers, hedge funds, financial advisers, insurers and others all moving into each other’s territory to varying degrees, strong branding is going to be a major determinant of future success, they contend. As these forces cause relentless industry fragmentation, a standout brand has become absolutely essential, declares Alison Petit, global marketing director at Rothschild Private Banking & Trust. For private banks, their brand should be “one of their biggest assets”. In a similar vein, US consultancy Phoenix has found that, just as many financial services products have become commoditised over the past decade, high-end financial advice is largely following that path as well. “It is becoming increasingly difficult to distinguish the advisory platforms of one financial provider from another,” Phoenix says. Advisers that will manage to excel in this tough environment will find a way to differentiate without following a “herd” approach, it contends. Such advisers typically are the leaders when measured by customer loyalty and retention, one element of an effective brand. “Despite the millions which have been invested in communications, our industry has few true brand leaders,” says Ian Ewart, head of marketing at Barclays Wealth, who is considered to be a private banker who has made the use of modern wealth branding as a competitive weapon almost a crusade. Branding specialists say brand neglect is all the harder to understand as wealth players have some solid examples of how a brand product can be successfully entrenched among the rich – namely, elitist credit cards. Centurion card American Express led the way with its vastly successful card range, including the Centurion product. Since then, others, such as Coutts, have jumped on board the bandwagon. Its World card carries the tag line ‘a cut above the rest’ and is billed by the bank as a super-premium card. Card brands have also made a big impact on the goodwill side of the issuers’ balance sheets. Credit card-orientated bank brands display the highest proportion of brand value to market capitalisation because “emotional and image-related factors are significant drivers of demand in this sector”, according to Brand Finance, a consultancy. One successful brand makeover was the launch of Barclays Wealth, bringing together various operations that had not knitted together successfully. Barclays Private Bank, Barclays Stockbrokers, Barclays Financial Planners and Gerrard, a leading UK private client manager, came under the umbrella of the brand, aimed at putting wealth on the radar of the Barclays group’s 15 million customers. Internally, it was decided that a marketing approach based on a range of different wealth silos meant that few, if any, synergies were being achieved by parts of the group that serviced similar affluent targets, which made a case for a strong unifying brand. Now, the single brand is letting the bank reap the benefits of premium pricing and a reduction of client acquisition costs, in turn driving greater customer loyalty, cross-selling and a greater return on assets employed. For Barclays, the strong brand also helps attract the best talent in the wealth industry. Despite such clear examples, Petit and others say that there are a number of deep-seated reasons for private banking’s traditional neglect of committed branding. Many firms have relied on word of mouth recommendation from existing clients to find new business, and thus have felt no need to use marketing and advertising techniques. James Lawson, senior research director at high net worth consultancy Ledbury Research, says it is understandable that many private banks have neglected branding because client referrals are still such a key way to build a wealth business. Word of mouth and recommendations “will always be the most effective way of growing assets under management in the sector” for many banks, he says. However, the emergence of new wealth, be it executive, business ownership or foreign, means such client segments are less likely to have peers who are wealthy and can make these recommendations, he adds. He says: “In this case, marketing as a discipline comes to the fore.” Snooty banks Experts also contend that a degree of elitism over brand is at play at some private banks, amid the snooty assumption that branding is more the preserve of the big universal banks or insurance companies competing for the business of the grubby common herd. Even worse, say fans of branding, the view still exists that branding is nice but not essential as a device that will attract or retain clients. Even when a brand strategy is agreed, private bankers often seem to think all it really is about is a posh typeface, stationery and glossy brochures – or ads showing fashionplate young people sunning aboard private yachts or playing polo. Most private banks also tend to employ the same clichés to describe the relationships with their clients, claiming to offer a service that is more ‘bespoke’ or more ‘personal’ than that provided by rivals, Rothschild’s Petit notes. In fact, a real brand goes far beyond a company’s visual identity, she declares. It’s primarily about the way that an organisation is viewed and the various values and experiences associated with it. In turn, creating and establishing a brand centres on “measuring and understanding how others see the organisation”. All this comes down to one central criticism – many executives in private banking have never really understood their own consumers, which is essential to any business, be it wealth management or the fast-moving consumer goods industries, experts say. Private banks should have no excuse for not drawing in expertise from any other business to improve their own capabilities, whether it is the marketing of soap powder or luxury Aston Martin sports coupés. “As an industry, private banking is poor at consumer understanding,” Ledbury’s Lawson maintains. One example is segmentation, he says. “Any other sector will have divided the marketplace into groups, or segments, with similar profiles and needs so that they can be found, engaged and serviced in an effective manner. Such segmentation in the private banking industry rarely goes further than asset levels or source of wealth – there is much more that can be done.”