(This article is published on the "Private Banking" column of Retail Banking the 89th issue in May 2017)
Authored by Shi Xiaotong
Symbolized by the private banking department established in April 2011, Industrial Bank (IB) has gone through its six year in the development of private banking. After six years of exploration and development, the private banking clients of IB is now over 20,000, with a compound annual growth of 52% and the size eight times larger than the beginning; the total amount of comprehensive financial asset in private banking is over RMB 290 billion, with a compound annual growth of 42% and the size five times larger than the beginning. IB private banking has also been rewarded honors such as "New Power Private Banking Award", "Best Chinese Private Bank · Award of Best Innovation" and etc. granted by authoritative media in China.Meanwhile, IB has also joined hands with authoritative media institutions to issue the theme report of private banking in China which raised great response in the industry and among clients.
During the six years of development of private banking, what successful experience does IB have and what kinds of story will IB share? With these questions, the Retail Banking magazine had a special interview to Xue Ruifeng, the general manager of Private Banking Department of IB.
One body and two wings
Explore a differentiated road of development
Overseas private banking has a history of hundreds of years while China's private banking starts in 2007 with only ten years of growth. Domestic banks have spent years trying to find out how to fit in the domestic market and create a private bank with Chinese features.
Based on the research and analysis on the hundred-year-old development history of overseas private banking as well as the private banking industry of China, IB believes that the operation of private banks in China must consider the market environment features, client, supervision and domestic banking system before truly building a private banking development mode that falls within the circumstance of China and has its own characteristics. Differentiation is the key of growing private banking.
Retail Banking: Since 2011, which stages has IB private banking gone through? Would you please give us a brief introduction?
Xue: IB private banking has gone through two developmental stages since 2011. The first stage is the beginning stage in which we mainly used single-type and highly profitable products to attract clients; the second stage lasts from 2013 to now in which we have gradually established a road of differentiated development. For the past 6 years, IB private banking has laid a solid foundation in terms of client development, product, service, brand and management system, and formed a client base and asset base with a certain scale. It is now in the first echelon in terms of private banking business of all shareholding banks.
Retail Banking: After years of exploration, what features does IB private banking have in terms of the overall structure and development strategy?
Xue: In order to explore the developmental way of private banking, we have cooperated with the Chinese Academy of Social Sciences, BCG and other authoritative agencies from home and abroad to jointly study on and develop an overall business structure and development strategy that is both in line with the national conditions of China and suitable for IB. We call it "One body and Two Wings.” The purpose is to return to the essence of private banking - "entrusting + consultation", take wealth management, professional service and family trust as the core, provide clients with an all-rounded and one-stop financial service platform and strengthen the professional operation capability of private banking.
"One body" refers to the organizational structure of private banking, which means constructing a "1+1+N" marketing service system within a unified range to provide clients with consultative and butler-typed services through the organic linkage of account managers in sub-branch offices, private banking teams in branch offices and expert consultant & investment adviser teams in the head office and branch offices. "Two wings" refer to the development strategy which means attracting clients with products and retaining them with services. On one hand, IB builds an open platform for product selection, purchasing, creation, marketing and investment management inside or outside the bank, fully exerts the professional managerial ability of other departments in the bank and external institutions to pick out products suitable for private banking products, and keeps enriching and promoting its product line; on the other hand, IB constructs a platform featuring specialized investment consultation, professional advice and high-end value-added services, which not only meets the demands for wealth management, but meets the personalized demands for professionalism in law, taxation, trust, insurance, investment banking, corporate governance, charitable undertakings and etc. We will rely on internal and external professional institutions and expert resources to construct an efficient and professional service platform as an important mean to retain clients and develop their loyalty.
Retail Banking: As we know the liquidity of clients in China's private banking sector is high and clients are easily flowing away. What does IB do to retain clients and stabilize its client base?
Xue: I believe what makes IB unique is that it "defines clients and business" for private banking, and finely separate private banking from wealth management. That means our private banking is not an upgraded version of wealth management. Instead it is comprehensive, consultative and butler-typed financial and non-financial services provided for private banking clients, families, family enterprises and foundations. Our services are centered on clients, multi-functional, fully covered and operational day and night. This is the key of how we retain clients.
In order to truly implement "client orientation" and build up comprehensive, consultative and butler-types services, the IB private banking team has changed the original "one-on-one" service mode provided by account managers to a service mode provided by experts and professional teams by integrating internal and external resources, thus fully executing the "1+1+N" private banking marketing service system.As for "1+1+N", the most important point is to set up a professional private banking team in branch offices as the middle "1" that offers assistance to the first "1", representing wealth managers in sub-branch offices face to face with clients. Services are provided in an overlapped way with the purpose to address the issue that sub-branch operations of retail banks generally provide insufficient services for high-end clients. "N" represents the large think tank of IB. In addition, we have also formulated the "four-step working method" based on clients, which refers to understanding clients, advising on solutions, executing schemes and follow-up tracking, by which we truly serve our clients.
Overseas layout
Try to go global
The fruitful development of China's private banking in the past ten years benefits from the fast economic growth and constant private wealth accumulation. As the globalization of Chinese economy proceeds, the enthusiasm for overseas private investment will upsurge, offering a great opportunity for private banks to go global. These private banking institutions will accumulate a great deal of experience in the process of providing business overseas, increase their ability of managing core wealth, and gradually approach to the globally advanced level, making them powerful drivers for the internationalization of Chinese financial industry.
Retail Banking: Judging from the China Private Banking 2016: Growth Against Trend and Global Presence jointly written by IB and Boston Consulting Group, we can tell the great prospect of private banking in cross-border finance sector. What plans does IB have for that?
Xue: In recent years, relying on the institutional network of domestic and overseas branches and FTZ branches, IB has made stable progress towards a comprehensive and global bank, kept expanding its global footprint and enhanced its ability of providing cross-border financial services. Being a global bank is a very important strategic plan of IB. Following this guideline, IB private banking closely sticks to the "cross-border finance" idea of IB. One thirds of IB private banking clients have assets outside China and most of them have assets both in and out of China; 40% of them are very interested in cross-border investment. So cross-border finance is a very important development direction for IB's private banking.
In the future, we plan to set up an overseas private banking platform in Hong Kong which, by virtue of diversified resources and services, helps clients develop overseas investment plans, provides suggestions on cross-border and overseas investments as well as information on overseas IPO, offer, acquisition and other resources in the capacity of an adviser. Meanwhile, we will deepen the strategic cooperation with Lombard Odier and provide clients with global asset allocation, product design and high-end value-added services overseas by the open product and service platform of Lombard Odier while actively exploring the path of overseas wealth management. We also establish partnership with other international institutions with leading advantages in some certain fields such as BOC Hong Kong, UBS, Hang Seng Bank and National Australia Bank, so as to offer more options of overseas business for clients.
Retail Banking: How does IB private banking plan to grow itself into a bigger and stronger global bank?
Xue: The goal of IB private banking in term of internationalization is to "a leader of China-funded overseas private banking business" in five years. To achieve this goal, we plan a process of three steps: the first is to serve depository core private banking clients in China and meet their demands for overseas investment. The second is to develop overseas business and make it a highlight product for domestic private banking clients, promote domestic business with overseas efforts, build best-of-class overseas investment services and further enhance the attraction for domestic private banking clients. The third is to localize overseas market, carry out localized operation in overseas markets with an aim to becoming the first choice of overseas clients to invest in the China's market.
Meanwhile, we also combine our private banking business with our "Universal Life" overseas financial service to construct a themed service platform for overseas finance of private banking. In terms of overseas investment consultation and high-end value-added services, we offer high-end, tailor-made and best-of-the-best service solutions and precisely identify the demands of private banking clients for overseas finance.
Train talents
Build a professional team of private banking service
Private banking clients are a special group of people requiring high-caliber and professional service team. IB has listed professional talent training program as one of the important tasks of private banking development in the last few years. Some of them have been executed to help enhancing the professional capability of private banking service teams.
Retail Banking: The operation of private banking cannot be done without best talents and teams. What has IB done to train and select professional talents?
Xue: Private banking has proposed the tenet of "client first", thus raising more demanding requirements on account managers and investment advisers. Let's take the example of investment advisers of branch offices. As the middle "1" in the market service system "1+1+N" of private banking, they connect the upstream and downstream functions of the whole private banking service system. On one hand, they have to be able to handle major clients and earn their trust with professionalism and rationalism; on the other, they have to be the internal trainers who can simply complicated specialized knowledge and enhance professional competence of wealth managers in sub-branch offices.
To train more investment advisers in branch offices, we have designed a great number of training courses, including apprentice training, group training and the "Xing · Fly" talent training program that are currently on going, while combining field training. Considering that private banking clients are usually knowledgeable and well-informed, we require all investment advisers of branch office must have at least 8 years of financial experience so that they can provide better services for clients on the strength of their professional and life experience. We will also introduce professional talents from other banks, including public recruitment abroad.
Retail Banking: You just mentioned that IB is now undertaking the "Xing · Fly" talent training program for private banking investment consultation. Would you please introduce for us?
Xue: "Xing · Fly" talent training program is a combat training program designed for investment advisers of private banking. Most of our current investment advisers are selected from wealth managers and account managers in the bank who possess a certain degree of professional knowledge. However, compared with traditional wealth management business, private banking is quite different. Instead of "selling products", private banking provides clients with comprehensive service by "surrounding on them". The goal of training is to completely convert the mindset of wealth managers and account managers and teach them how to "act around clients". Let's take an example of the KYC (Know Your Client) that is believed the easiest one. "Xing · Fly" can teach wealth managers and account managers how to meet with clients, find their demands, how to make clients interested in talking to you and let them trust you in a deeper and more comprehensive way. Only by truly understanding our clients can we better allocate their assets and satisfy their diversified demands.
Integrate resources
Consolidate joint development of private banking
High net worth clients always show diversity, which requires private banks to be good at integrating all kinds of resources and providing comprehensive financial service. IB has inborn advantages in this connection.
Retail Banking: As one of the domestic banking groups with the most financial licenses, how does IB plan to jointly develop its private banking business?
Xue: The demands of high net worth clients show great diversity, including wealth management, wealth inheritance, property trust, fund, corporate governance and etc. In the process of expanding and serving private banking clients, we always focus on the joint linkage within the group and among different business lines.
For example, now two thirds of our private banking clients are enterprise owners or senior executives. By taking the advantage of IB as a comprehensive financial group, IB private banking will build linkage with large-scaled enterprises every year and expand more channels via which we obtain clients. Meanwhile we pay attention to identifying clients within the group and build our presence in trust, fund, financing, leasing and other subsidiaries.
For example we have joined hands with IB Trust to jointly make tailored family wealth management plan for clients via the cooperative platform inside the group. We launched the first family trust, by which we make personalized wealth planning and scheme for clients, help them inherit wealth, avoid risks and maintain the value of their assets.
In the future we will keep promoting the linkage mechanism construction within the group, effectively integrate domestic and overseas resources and boost the rapid development of private banking business.
Retail Banking: As one of the key business sectors in the framework of Great Retail, how would IB private banking connect with other financial retail business to achieve joint development?
Xue: Our private banking provides high-end clients and their enterprises with all-rounded and personalized service. As a part of the "Great Retail", it needs to stick to the featured service of retail finance for joint development.Here we talk about how private banking business connects with the "Four Life" business of our bank.
Let's take the example of the "Enjoyable Life" pension finance. Private banking designs pension finance products in a customized way. We initiated the "Enjoyable Pension Trust" product in the industry, which not only guarantees funds for old-age care but also enables family asset inheritance, further providing personalized asset management service for senior high net worth clients.
In term of overseas finance, the "Universal Life" provides high-end clients with cross-border investment, overseas study and immigration consultation, art appreciation and other services. Its client level is similar to that of private banking. Their connection lies in that private banking can provide "Universal Life" clients who require overseas investment service with investment consultation and financial management service, design a set of overseas appreciation services in support of overseas finance, including overseas taxation and law consultation, overseas immigration and property purchasing, art and culture appreciation, high-end medicine and etc., thus providing more personalized services for high-end clients to expand their enterprises globally.
In addition, we will also connect to "Rich Life" via the construction of a service system and account manager training so as to enhance the professionalism and pertinence of wealth management. We build Elite Inheritance Club and provide value added services in connection with the development of "Vigor Life" credit card and boost and sales of high-end credit cards.
Retail Banking: Last question, would you please talk about the future development path and strategic goal of IB private banking?
Xue: As I said before, our private banking business structure and development strategy shows "one body and two wings". The purpose is to return to the business essence of "entrusting + consultation", promote the conversion of business mode from selling products to selling service, drive the sales by service instead of products and obtain profits from multiple income sources rather than only from commission fees and management fees. Our goal in the next few years is to achieve more than 100,000 clients of private banking business, manage more than RMB 1 trillion of assets, remaining a steady position in the first echelon among domestic banks in terms of private banking.