MCB: Blending technology and the human touch for affluent clients

Some studies suggest heirs will look for a new financial advisor after inheriting their parents’ wealth - What are you doing to cultivate family loyalty and prevent heirs from moving their money to different institutions?

Inter-generational issues are challenging to deal with as they morph overtime. Over the next decades, the baby boomer generation will leave a staggering amount of assets to their children and grandchildren. Passing on wealth to the next generation is always tricky. Family relationships are rarely straightforward; simply handing wealth to successors before they are ready is fraught with potential dangers. Inheritance tax planning is complex and requires support and advice. 

At MCB Private Banking & Wealth Management, we consider wealth transfer during the financial planning process with our clients but remain cognizant of this delicate phase for them. In tangible terms, while conscious of the challenges of the forthcoming generational transfer of wealth, our Financial Planners and Portfolio Managers have developed the skillset to embrace multi-generational clients. Our bankers are trained and equipped to reach out and build trusting relationships with our clients’ family members and we aim to do so as soon as they come of age. In addition, we have within MCB Private Banking and Wealth Management a segment which caters for affluent customers, named MCB Select, which actually is also ideal for our heirs who are in the building phase.

In our experience, families with significant wealth are focused not only on investment management of their financial assets; they also care deeply about the long-term welfare of their families. In sum, we promote a long-term family strategy focused on the growth and development of family members. Our wealth preservation strategy is furthermore deeply rooted in the bank’s digital transformation journey whereby the bank is building out the technological capabilities to provide services that meet the needs of the next generation of investors.

How do you approach advice in terms of inheritance? How does it differ from typical financial advice?

At MCB Private Banking & Wealth Management, together with a panel of experts, we work with our clients to transfer wealth to their heirs in the most effective way. Based on their needs, assets, and liabilities, we offer advice for the optimal transfer of their assets to future generations. Understandably, our Financial Planners create plans that keep as much of the wealth as possible within the family. Our team of experts provide tailored solutions for developing the best solutions; whether through exclusive financial advice available to their children such that they are equipped to make the right decision when the time comes; recommending eventual adjustments to wills/agreements; and if necessary designing financial solutions while the transfer of their business is being finalized.

It is normally advisable to start planning as soon as feasible and various inheritance strategies may be adopted at different stages of the children’s lives. 

At MCB Private Banking & Wealth Management, we believe that it is never too early to educate children in financial matters and technology can really engage young people in saving and investing. With the traditional pocket money and bank accounts, putting a modest amount into an account may be a sensible way to get children into saving while limiting their access to the final pot. Of course, no two children are the same and the level of education and engagement of each child may vary from family to family. For young adults, our planners can set a realistic plan that provides enough income to live comfortably by transferring the wealth in a trust or alternative structures. Albeit the applicable inheritance tax rule, parents and grandparents can retain an element of control over how the money is spent. Such a trust ring-fences capital and allows it to be spent on future objectives.

Passing wealth to the next generation can be hugely beneficial, but only if it is done carefully. Judicious planning, flexibility, and sound advice are critical. 

How different are Millennials compared to their elders? How different are their expectations and behavior?

Several studies have demonstrated that millennials have different behaviors compared to older generations. According to Accenture’s Wealth in the Digital Age Investor Survey, millennials want computer-generated recommendations (robo) as a basic component; a self-directed investment portal with advisor access; gamification that will help them learn more about investing and keep them more engaged with their portfolio; a mobile platform that connects directly to advisors; a platform that incorporates social media and sentiment indices to assist in financial recommendations and software that enables tracking of transactions; and payments and other financial data in real-time to provide better recommendations.

In addition, the financial crises, as well as the volatility of financial markets, have rendered some millennials relatively cautious and conservative in regards to financial matters. They are increasingly demanding socially responsible or even impact investments and tend to mistrust social security systems for their own retirement needs. They consult peers and media before acting on advisor recommendations. At the same time, word-of-mouth and personal recommendations significantly influence the buying decisions of millennials. They still value traditional media and face-to-face meetings for advice. This clearly highlights that the majority of millennials regard technology as an additional way to communicate and invest, but not as a substitute for personal interactions provided by a wealth manager.

Going back to the concept of financial wellness, research shows that younger HNWIs want to remain in control of their finances with more involvement in their decisions. They need easier access to on-demand advice, and to a broader investment universe, that includes alternative options, such as sustainable investments with Environmental, Social and Governance (ESG) considerations. There has also been a rapid rise in the popularity of do-it-yourself investing, often with young people, who are keen to make money and to learn more about markets. Some of those who have made speculative bets in cryptocurrencies or meme stocks are now looking to do more on their own.

Millennials in Mauritius are highly loyal towards their brands of financial service providers. They extensively use technology to process their transactions. Consequently, they consider technology and online platforms an important aspect of financial advice and transparency and simplicity is key to them. We foresee that with globalization and digitalization, there will be higher competitive pressure from cross border advisors, and hence the need to start early with this generation. 

How have you transformed your wealth management offer to satisfy the new generation? And how do you engage potential new customers?

MCB Private Banking & Wealth Management has embarked on a digital transformation journey whereby we reviewed our client base and defined our segments based on investable assets and fiscal residence. Hence, there are three distinct brands, namely Private Banking, Select and External Asset Managers (“EAM”). The Private Banking segment looks after the HNWIs (whether they are fiscally resident/non-resident), the Select segment tends to the affluent customers, while the EAM desk aims to create a synergy between the client, the asset manager and the bank.

Moreover, as part of our digital journey, we are implementing a full-fledged Order Management System and Portfolio Management System that shall automate trade order placement, transmission and execution for clients and enhance portfolio management capabilities. In addition, given the different types of customers, what we strongly feel as a team is that we need to have an integrated platform that could address our customers’ different needs.  Building wealth is agnostic to all segments and one of our goals is also to democratize investments across all investors. 

Therefore, products are designed in a way that resonate well with our customers’ expectations with a focus on state-of-the art technological platforms. It is essential that our services have a value-added functionality embedded for the millennials. To generate this value, we reflect the voice of the customer in target aspects of marketing, products and operations, and through our digital capabilities.

According to research by Accenture, the current wealth management advisory model is not working for women. Do you notice differences in terms of investment behavior by women compared to men? What are some examples? And how have you tailored your offerings to serve female clients better?

In fact, there is also a body of evidence to suggest that women may invest differently. Berkley’s Hass School of Business professor Terrance Odean studied investment patterns for men and women over a six-year period in the 1990s, and found that men traded 45% more than women, resulting in average returns that were a percentage point lower. A separate study from Barclays Capital and Ledbury Research concluded that women were more likely to be successful investors because they adopted a longer-term strategy.

Evidence also suggests that women may also be more inclined to seek investments that are aligned with their values, prioritizing ethical investing and philanthropy. Almost three-quarters of US high net-worth women polled in a recent survey said they considered social, political, or environmental impacts when deciding whether to make an investment. The figures for men were less than 50%. And crucially, women may lack confidence in financial matters - even when their level of expertise is on par with men. On average, female respondents in a 2013 Barclays survey believed they had substantially lower financial expertise than men.

At MCB Private Banking & Wealth Management, like every client, female clients want someone who listens to them, who offers valuable advice and who works hard on their behalf. Furthermore, our clients want to understand the risk profile of their investments – in depth and as they relate to their goals in life and their family’s financial position. We focus our approach to women on education and networking – an area where we know there is still much work to do. Events may be organized on some aspect of investing, usually from tax, investment themes to real estate, to broaden the range of interesting individuals our clients could meet, and connections they could make. 

In addition, the diversity of team within MCB Private Banking & Wealth Management PBWM, with a good representation of women within the team allows us to be in a better position to understand and tailor our offering to woman investors. The MCB Group commitment to enhancing gender equality also gives us an edge with regards to this.

Technology is being implemented to digitize almost every area of a bank, but advisory remains complex to automate. How is your bank approaching the integration of AI into its advisory services? Will it be a mix? Will the human touch always be required when it comes to wealth management?

Artificial Intelligence (AI) offers many possibilities on revolutionizing the wealth management industry. Besides, fintech and wealthtech companies are bringing disruptive business models to the affluent market with low-priced, convenient products. These companies have started to expand their offerings beyond the affluent segment. Moreover, the great wealth transfer is coming and the next generation is expecting highly digitized experiences while demanding more for less. 

As part of our digital transformation journey, we consider data analytics and AI and behavioral insights as crucial given that it may efficiently offer portfolio management services to our clients. For traditional clients, however, this service will rather be seen as a complementary offering rather than a replacement for human-based advice. For clients with more complex investment decisions, the hybrid robo-advisory model might be most appropriate. 

Finding the right mix of automated and human contact is a top priority. While banking clients, particularly those who are digital natives, may be increasingly happy to do much of their day-to-day banking business online, when it comes to financial advice and complex wealth management or investment matters, they still prefer human advice and interaction. Even the disruptive fintech start-ups with their sophisticated robo-advisors are now starting to employ human bankers – further evidence that wealth management will continue to be an industry that to a significant degree revolves around human relationships.

In our view, a hybrid model is the key to delivering the high-tech, high-touch approach that HNWIs have come to expect.  In the end, the ultimate combination leverages the best technology with the intelligence and experience of a real person. 

How do you see wealth management evolving in the next decade? (open banking, platformication, new players, new technologies…)

Innovation is imperative for today’s banks. The traditional banking industry has begun to lose ground to fast-growing, disruptive players. Embracing open banking models enables wealth managers to integrate internal client information with external sources to drive data transformation, which can ultimately differentiate a wealth manager in an increasingly competitive market.

Blockchain is another technology that will revolutionize wealth management and investing. By creating a decentralized database of unique, verifiable digital assets, financial services providers can simplify the transfer of assets like stocks. The rise of Non-Fungible Tokens (“NFTs”) have also created a way to prove the authenticity of physical and virtual assets. The application of this technology creates opportunities for wealth managers to bring non-bankable assets, such as direct equity, residential and commercial real estate, family businesses, art and passion assets, into the bankable environment and creates a means to evaluate, store, authenticate, and calibrate their value.

Today, and into the future, we are seeing the power of partnerships between established banks and fintechs. Bringing innovation partners into the wealth management ecosystem can accelerate the pace and scale of digital transformation to give clients access to leading digital banking and customer experience solutions and new features. Some banks are adopting the “Buy” model by being aggressive in searching for potential takeovers to help it bolt on capabilities and fend off threats from fintech and Big Tech players alike. For instance, JPMorgan (the biggest U.S. bank by assets) has acquired a number of fintech start-ups: 55ip, a company that automates the construction of tax-efficient portfolios, the U.K.-based robo-advisor Nutmeg to help boost its overseas digital banking effort, and recently an ESG investing platform “Open-Invest”. 

On this account, MCB has set out on a digital transformation journey to modernize and unify its architecture while at the same time extending its agile delivery capability. Through the partnership, MCB is accelerating the path towards digital transformation to enhance the customer experience by providing clients with tailored services that they can easily access, wherever they are. MCB’s transformation to digital-first enabled the bank to shorten the time to develop new products and reduce time to market. 

I believe in the future years, we will see more collaboration and consolidation with specialist players and fintech to further reduce the time to market and provide simple and scalable solutions to clients.  Staying relevant, and keeping it simple and easy will be the overarching motto.