The global business model of private client banking services is
fundamentally based on relationship and advice. Thus, it is based
on confidence.
Declining client confidence in advisory services as provided by
banks is an indirect consequence of the financial crisis. Clients
have begun to ask: “Why should I trust in the advice of banks which
have seen such bad results in their own management operations – how
will they manage my money and assets?
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“Will they manage my assets fairly, honestly and in my best
interests?”
It is very obvious: confidence in the ability of banks to serve as
a trusted advisory partner has been deeply tarnished. What we find
is a “perfect storm” for advisory services. And this finding
affects the business model of a whole industry.
Banking at a crossroads
A number of scientific disciplines have tried to define the term
confidence. We can hold that there is no “one and only
definition”.
By analysing psychological models for the constitution of
confidence we can find that confidence is linked directly to “good
old virtues”. These are for example: acting transparently and
predictably; paying focused attention, reinforcing listening skills
and empathy and communicating effectively.
The non-industry specific customer advocacy model (CAM) also
describes the need to meet good, old-fashioned virtues in business
practice.
However, according to Massachusetts Institute of Technology
Professor Glen Urban and his contribution to the debate, Customer
advocacy: a new era in marketing: “The customer advocacy model can
be viewed as the top of the pyramid.”
“Total quality management and customer satisfaction form the base
of the pyramid. They are necessary conditions for trust and
advocacy.
“If a company is to recommend its own products honestly, it must
have products that are good enough to recommend.”
Urban adds: “Customer advocacy strategy aims to build deeper
relationships with customers by earning greater levels of trust and
commitment.”
Put simply, CAM can be defined by doing what is best for the
customer even if it entails recommending a competitor’s product. By
acting as a customers’ advocate in a market, a company has a
greater chance of earning more trust, sustaining better
relationships, creating positive word-of-mouth, reducing marketing
costs, increasing brand value – and achieving profit and growth.
Customer advocacy reflects a cultural shift towards an advanced and
mature customer orientation.
‘Virtue-driven’ guidelines
In the course of our findings, we have found a vital need for a
recreation of confidence and the creation of let’s say “virtue
driven” guidelines for achieving confidence, including fairness,
frankness, delivering on promises, acting predictably and
transparency.
Only if a thorough and uncompromising set of strategic imperatives
are implemented within the business model of the industry can banks
move towards a paradigm we have called “confidence banking
2.0”.
This will need to encompass: strategy, style, structure, systems,
services and products, branding and proposition, staff, shared
values and skills.
• This is an edited extract from an academic contribution, during
the 11th International Conference of the Society for Global
Business & Economic Development, May 2009 in Bratislava,
Confidence Banking: the challenge of recreating a climate of client
confidence for banking advisory services, by Gregor Broschinski,
German Expert for Banking; and Jozef Komornik, Professor in
Management, Comenius University in Bratislava, Slovak
Republic
