The biggest concern for many Swiss people is having enough to live off during retirement. And although most people are looking for secure financial solutions, knowledge about pension structures and offerings is limited - people tend, generally, to be lacking in understanding about their options.
What is positive is that people know what they do not know. Some 40% of the population thinks their knowledge of retirement provisioning is below average. On the whole, people seem aware that retirement planning is something that should start early - when they start their first job. And the value of revisiting pension planning every time there is a change in circumstances, such as becoming self-employed, starting a family, buying a house, turning 50, marrying, divorcing, or becoming unemployed, is also well understood.
The misunderstanding of financial markets is also low - so even though half of the respondents in the survey had trust in the third pillar, only 40% of savings in the third pillar are invested, leaving the remaining amount in cash accounts with minimal interest-bearing potential.
No surprise, then, that there are high levels of demand for retirement planning and advice. Why, then, are banks not seeing a significant uptick in demand for pensions advice and planning?
Indeed, the retirement provisioning market is just one example of many areas in banking and wealth management where there is high market potential and demand, but banks today are still serving the same number of clients as in previous years.
Service delivery
One reason definitely lies in the way banks provide these services. Clients can be hesitant to ask banks for advice based on mistrust, bad experiences with the quality of advice given, or because the service delivery does not suit them - for example, they prefer to use digital channels rather than go into a branch, or vice versa.
The other reason lies in a shortage of advisers. Indeed, in the past six years, the number of advisers has not increased. It has actually decreased by, we think, an average of 20%. There are various reasons for this: consolidation in the market, and young talent is not necessarily attracted to the banking industry - the job has been more lucrative in the past than it is now.
Efficiency barriers
Lack of efficiency is also a contributing factor - fewer advisers would obviously be less of an issue in a more efficient working environment. If advisers could scale and automate tasks, then they could free up time and see more clients. However, this is usually not the case. There are various reasons why this happens and why advisers cannot become more efficient from one day to the next.
Adaptation takes time - and here is why…
First of all, many banks still work with multiple isolated applications that do not exchange data, or even worse, data transfer has to be organised manually between the different internal systems. This problem becomes worse day by day with new applications entering the systems landscape of a bank.
Second, most banks already have a very broad spectrum of applications, where some even have functional gaps that often are filled with self-programmed tools. This means that advisers need to change from tool to tool, often including different usability concepts. This switching is rather time-consuming, to say the least.
The third reason lies in personalisation, a crucial factor when dealing with today’s clients and something that is only possible with a lot of manual work. By and large, banks have not managed to add personalisation to their services without putting a lot of effort into it.
Last but not least, all these manual steps include multiple operational risks that have to be controlled if the adviser’s and bank’s credibility is not to be put at risk.
Thus, the question now is how to increase efficiency and reduce manual work for the adviser. To address the three inefficiency traps, there are equally three golden rules for efficiency that banks should follow and that are easily achievable.
- Build an environment of API-connected services for an automated exchange of data.
This way, the system landscape is an ecosystem that can be easily extended with further services without the need to each time connect all systems again and maintain all data feeds.
- Make sure that new tools are not academic products, but fulfil a reasonable spectrum of functionalities.
Excellence in all micro components of an offering will become very difficult to maintain and only serve a limited number of demands. Service providers that have a reasonable functionality spectrum and, at the same time, reasonable depth in this spectrum (not overly broad, not too superficial) are valuable.
- Services that come with an innate ability to personalise services in a scalable manner is desirable.
A portfolio management system is of no use if individual constraints cannot be handled in an efficient, automated way.
Following these rules removes the need to account for multiple control tasks in order to prevent operational or even reputational risks.
The last step in this process is to calculate the potential for the firm to unlock its untapped efficiency gains. Inputs such as the size of the bank, number of advisers, average assets under management (AUM) per client, and potential addressable markets can all be analysed to give a potential efficiency gain and, thus, help with strategic decision-making about the optimal amount to invest in technology to maximise efficiency returns.
Interested in reading the full report? You can read this edition of the Swiss WealthTech Landscape Report 2024 online here.
