International Bank Management Program

The International Bank Management Program 2014 will take place from September 10 – 19 2014 in Zürich. It is geared toward Executive Director, Managing Director-level banking executives. This year, there are executives, most having over 20 years experience, coming from 8 countries.

We still have 2 slots open in this exclusive program. Contact me directly if you are interested in attending.

Have a look at the documentation: SFI International Bank Management Program 2014

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种适合私人银行的以客户为中心的商业模式 Client Centric Business Models for Chinese Banks

This week, I’ve been having a dialogue about the future business models of Chinese banks with a group of top executives from one of China’s largest banks. The discussions have been fruitful in every aspect.

One of the greatest challenges in Chinese banks are the silos between the different businesses – I could only smile and encourage them to start awareness sessions, awards and bonuses for employees who successfully engage across the silos.

Some take aways from our discussions regarding the future business models of banks in China:

  • if the bricks-and-mortar-based banks haven’t already begun a deep, revolutionary process to digitalize, they’ll never be the digital bank leaders they would like to be – it is just too late
  • product-based business models can be created, but how is this alone a strategy in the ever-increasingly commoditized banking – especially retail. Everyone agreed that this is a necessary but not sufficient factor toward developing a successful business model
  • the advisory-based model is the preferred business model of the future by far, but also requires the deepest and longest change management process of the three models, making it one of the most expensive and difficult. Just how does one really transform a sales force into an advisor team in a firm of more than 150’000 employees?

Like an armchair coach during the World Cup, many consultants and academics provide easy advise to some pretty complex problems. The real challenge is for the players on the field in these firms to be empowered to change and then let them execute the change they know is needed.

Here is the English-Mandarin version of the document we used as a discussion base.

Client Centric Business Models for PB – E-Mandarin

“Wealth Management at a Global Level and in Switzerland” Highlights

Each Fall, the Swiss Banking Association publishes their annual wealth management study.

Here is the full study: Wealth Management at a Global Level and in Switzerland

Here are 10 highlights from the study:

  1. Private financial assets worldwide benefited from positive stock market performance, economic growth and rising savings rate in emerging markets in 2012, growing by 7.8 percent to USD 135,500 billion.
  2. The assets of individuals with freely available net assets of more than USD 1 million (high net worth individuals, HNWIs) rose by a full 10 percent in 2012 to USD 46,200 billion.
  3. HNWI assets in APAC are forecast to grow by 9.8 percent annually between now and 2015, well above the predicted growth rates for the Middle East (6.8%), Europe (6.2%) and South America (3.1%).
  4. Assets managed cross-border were up 9 percent year-on-year to USD 8,500 billion. Switzerland is still the global market leader in this area with 26 percent or USD 2,200 billion of AuM. Estimates suggest that Switzerland is set to maintain its position for the foreseeable future, despite intense competition from other countries.
  5. Global assets under management totalled USD 62,400 billion in 2012, an increase of 9 percent year-on-year. This took assets back above pre-crisis levels for the first time. Growth was driven in particular by the positive performance of the equity and bond markets.
  6. Swiss banks managed CHF 5,565 billion in 2012, 51 percent of which came from abroad and 49 percent from within Switzerland.
  7. The cost-income ratio across all banks in Switzerland was 70.4 percent in 2012, much higher than in 2005. The main drivers of this increase were a reduction in operating income coupled with a rise in operating expense.
  8. In view of the greater cost and regulatory pressures, many have expected a glut of consolidations, however the amount of activity has been much lower than expected with a total of 14 mergers and acquisitions in the Swiss banking sector in 2012 and 2013.
  9. The OECD is rapidly advancing towards formulating a proposal for a global model for the automatic exchange of information (AEI). On 6 September 2013, the G20 agreed to establish AEI as a global standard by 2015.  The SBA anticipates that implementation of the automatic exchange of information within the OECD will lead to a reduction in the volume of assets managed in Switzerland in the short term, but should stabilize over the longer term, indeed increase the amount of assets managed in Switzerland.
  10. The SBA predicts that MIFID II is possibly the most onerous regulation affecting Swiss banking industry and that FATCA is expected only to have low impact.

Despite these highlights, the deterioration of the KPIs from 2000 – 2013 show a more sobering story … without a relentless focus on client delight, radical innovation, automation, outsourcing, Switzerland’s pole position as “the worlds wealth manager” is clearly threatened.

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Optimizing banking business and operating models – from strategy to implementation

The banking sector in Switzerland – and worldwide – is undergoing the most radical changes it has ever experienced. New regulations, technologies, client expectations and economic environments are shaping the very ground we walk on. And, like the Red Queen in Alice in Wonderland, banks and bankers have to keep running faster and faster just to stay in the same place. The banks that are peeking around the corner, indeed planning with insight, understand these tectonic paradigm shifts and have put “change the bank” programs on Mach-6 tempo in place.

Banks will be more focussed, possibly smaller, and definitely less risky

As banks become more focused and decentralized, they tend to become smaller but also less risky. The correlations are clear. As we observe the role of banking supervisory authorities, for example in Switzerland, we even see this mandated in the case of UBS and Credit Suisse – to protect clients and investors. Many moan, but the change is unavoidable. In the past, banks were allowed to be more opportunistic regarding markets, client segments and product and service offerings. Today, banks are required to focus their resources more specifically to fewer markets, certain client segments with specific and more limited offerings for these clients – and they are being held accountable for it. This change process is hard work requiring tough decisions, not just on where you don’t want to be, but deliberate decisions on where you want to be in the future, and then taking all the necessary steps to get there. Less is more. Fewer is better. Banking will be less complex in the future. This will result in more efficient operations, higher profits and happier clients.

You can’t get back to “growth” without going through “relevance”

The “new normal” is that banks must acclimate to a low growth environment, especially in the developed world, for the foreseeable future – necessitating massive cost-cutting, often called “industrialization”, programs. Some banks are challenged to even make their cost of equity, much less show growth. The name of the game used to be growth and relevance. Today, the focus is more heavily focussed on relevance: knowing what you want to be, for whom and with which products and services and at what price. Most banks are so focused on the regulatory-stick that the growth- and profit-carrots are getting lost in the shuffle. New operating models with real cost cutting measures and outsourcing of non-USPs are desperately needed, but must be carefully undertaken as most one-offs creep back in less than 18 months.

Improve your technology … now

Improvements in technology across the board are needed to accommodate these new business and operating models. Because IT architectures, core banking software systems, management information systems (MIS) in most banks are only patchwork solutions, they can only be limited in their trustworthiness, effectiveness and efficiency. Everyone knows that a strong IT system is a must, but it seems that few banks are willing to deeply invest in this time of low growth. But this approach, this shortsightedness will be punished – if not by the markets, then by the supervisory authorities; doing the right thing and investing in systems will be rewarded. Whereas updating IT systems is the core of change, a focus on enhanced technology is also required. Straight-through processing, automated compliance mechanisms, digitalization of the business, all the way to the front. Client demand for apps, mobile banking, and the like is still in its infancy. The best banks will invest now to delight – and not just keep – their clients.

Have a clear roadmap

Despite the overwhelming ever-increasing regulatory changes and the reactive cost-cutting focus of target operating models, a clear, deliberate business model, {read: strategy!} is the driver of growth, profits and relevance. It has been – and will continue to be – a rough road for the next couple of years. One recent study by the University of Zürich shows, for example, that only 18 percent of all Swiss banks can be categorized as “over performers” with regard to the relationship between profitability and efficiency. Is your bank in the top fifth? Delivering outstanding profits and operating exceedingly efficiently? Chances are, you are probably in the other four fifths. Therefore, it is imperative to have a strong strategic plan and navigation system providing different perspectives of your planning and progress: a satellite view – showing the strategic and financial goals for your business; a traffic view – highlighting all the regulatory-traffic issues; a terrain view – a plan for the most efficient target operating model; and, perhaps most importantly, a hybrid – a view which pulls it all together in one coherent master plan.The best banks are doing this at all layers (front, middle, back office) across the factors of clients, technology, products and governance.

Is yours? What are you doing about it?

International Private Banking Study 2013 – University of Zürich

The sixth annual International Private Banking Study 2013 published by the University of Zürich is out.

Although the results of this study are not surprising, they confirm several critical points:

  • The economic and political stability required has still not been found and is reflected by an continued increase in new regulations on financial institutions worldwide.
  • Cost / income ratios, despite improving, must still come down for banks to be sustainable in the long run. While Swiss banks have by far the highest total revenue per employee, personnel costs (adjusted for PPP) which are far above international averages, diminishes the adjusted gross margin on AuM.
  • Cost / income ratios across all countries has increased from about 65% in 2004 to about 70% in 2012. Swiss banks spend, on average, 76 percent of all revenue on generating that revenue. The increase is primarily due to wages and an increase in compliance and regulatory costs.
  • Wage costs per employee from 2006 to 2012 have decreased for all countries except Benelux . Switzerland decreased from 2006 to 2009, but has increased from 2009 to 2012 almost to the 2006 levels. After adjusting for PPP, wages are still highest in Switzerland, but considerably less than the popular press is complaining about.
  • Further cost reductions will prove to be difficult given the expected offsetting increase in costs due to new regulations. Here the only solutions are to automate as much as possible and to really focus on client delight.
  • New net money (NNM) continues to very slightly grow, the majority at the largest banks. Market performance and currency effects helped NNM in 2012 across the board.
  • When analyzing Performance vs. Efficiency in Figure 25 below, we see that the correlation between the two variables is weak at best suggesting that none of the prescribed effects dominates. Roughly 1/5 are outperformers and another 1/5 are underperformers. 32 percent are highly efficient but have low profitability. 29 percent are highly profitable, but are not efficient. It seems that the balance between profitability and efficiency is a hard tight-rope to walk. We observe that bigger banks tend to perform somewhat better than smaller banks in terms of cost/income ratio and smaller banks, by offering more individualized services, tend to achieve comfortable gross margins.
  • Overall, 2012 proved that prospects are brightening for Swiss banks. AuM, profits and costs were better than in previous years. Many banks are adapting their business models and some are beginning to explore new technological potentials.

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Maxims of Management

Managers, leaders – well you – need to know what you stand for. How you function. How you react in a time of crisis. How you manage. How you lead.

In my +25 years of working, most of them have been in management functions. Here are 29 maxims, mantras and mottos I have learned and live by.

  1. You are everywhere + always an ambassador of yourself, your family, country, company, your God.
  2. To be yourself, you need to know who you are + what you want. Find it. Authentically be that person.
  3. Find the meaning + purpose of your life + live it.
  4. Have your very own maxims, mottos and mantras. Live your maxims not anyone else’s.
  5. At least five times in your life, go well beyond yourself. Dream it, plan it + then do it.
  6. The truth is very important – no matter what it looks like.
  7. Speak the truth, but the truth in love. Love never fails.
  8. Think + say thank you + I love you as often as possible. They never wear out.
  9. If you cannot say anything nice, don’t say anything.
  10. Communication is about 90 % listening between the lines, 5 % to the lines and 5 % speaking.
  11. Get informed where you are not. Inform your people deeply + regularly. This empowers!
  12. Admit mistakes and work out problems daily. Don’t do them again. Everybody move on.
  13. Don’t complain. Get it done and be thankful. If it is unbearable, change.
  14. Constantly train your mind, your heart + your body. Use them effectively + appropriately.
  15. If it’s not yours, give it back or claim it as a resource.
  16. Personally, never do it just for the money. Professionally, focus on better not cheaper and sales before costs.
  17. Knock, and doors open. Slam them, and they might never open again.
  18. Throw a lot of lines in + work them. You can always throw the little ones back.
  19. You spend a significant amount (up to 70 percent) of your awake hours working – ensure that you love what you are doing.
  20. Survival is success in some sectors sometimes.
  21. Work + live hard. You can sleep in heaven.
  22. Keep it simple and do it with confidence.
  23. Solve things algorithmically, but with feeling.
  24. Break the rules, not the culture, not the will. Break them deliberately, not capriciously. Make sure it improves something.
  25. Improve things to improve them and not your ego.
  26. If you are on time, you are late.
  27. Use all of your vacation every year.
  28. Focus on giving and respecting. Jealousy and envy will rot your heart.
  29. Know when to be prime. Know when to be composite.

Go back and read number four.

What are your maxims? Can you articulate them? Are you consistent to them? If there was one single maxim that would characterize you, what would it be?

Let me know what you think…