Ernst & Young >Newsroom>Articles>Private banking needs a new bredd of talents - Ernst & Young - Luxembourg

By Roger Hartmann, Partner, Ernst & Young Luxembourg
Business Review

October 2009

Since 2000, the international private banking industry, a true cross border banking activity, is under heavy political pressure due to the tax dimension related to this business. The financial crisis has only put a huge accelerator to a trend which was already clearly identified over the last 10 years. And we now all know that this important pillar of our financial center will never look the same anymore, as the G-20 in London, on 3 April 2009, has given to the industry a new shape where tax transparency, via the OECD standards on exchange of information on demand, is now part of the game.

Of course, financial privacy needs to be part of our key values driving our very own way to conduct private banking in Luxembourg. The professional secrecy of the banker is a cornerstone of our added value to the client, and this value can not cohabit with automatic exchange of information preached by some of our neighbours.

Service quality key
But the niche of sovereignty in that specific matter has disappeared, meaning that we are now entering with full speed into a niche of competence, where we need to demonstrate to our clients that a professional, true cross-border, international private banking industry can continue to flourish in Luxembourg. This challenge will be won if we are able to offer a better service quality than the onshore private bankers working in their domestic markets. During the transition phase which has already begun, we need to invest a lot of energy in order to create over time a new breed of private bankers. What is missing today, when we look at our current relationship mangers? Technical knowledge, a high culture of service quality, and top-end soft skills. Let us have a closer look to these knowledge gaps:

Technical knowledge
Technical knowledge has to be improved in all different fields, in particular in tax. In this new paradigm, tax is key. Only a performance after tax will be relevant. Tax expertise on the country of residence of our clients is an essential ingredient of our day-to-day delivery. All our clients are paying taxes but nobody wants to pay too many taxes, and tax optimisation will be an important element of differentiation for our financial center. Financial and patrimonial engineering are today, more that ever, the drivers bringing to successful business. But financial literacy in general also needs to be further developed as clients are more and more sophisticated in that respect.

Service quality
Only a very high quality of service will allow us to be successful in the near future. If we can not differentiate ourselves from a domestic client advisor in his country of residence, it will be very difficult to correct the disadvantage of a lack of proximity to the client. The key of the differentiation has to come from a real cross-border, global, professional approach to the client relationship that a domestic private banker will not be able to deliver.

Soft skills
Soft skills of our private bankers need also to be trained in a more systematic way. Having the fit and proper behavioural approach will allow the holistically oriented relationship manager to be truly client centric.

Looking at all these challenges, I am comfortable that IFBL will be able to participate actively into this upgrade of our working force. The close cooperation between this training institution and the Private Banking Group guarantees a neat and right-to-the-point delivery. But adequate training is instrumental, but not the only cornerstone. Senior executives today all know that obtaining and keeping the best people is a major priority, but often fail to act on their words.

Reshaping the agendas
Today, demographic shifts, notably the impending retirement of baby boomers, along with changing business conditions, could produce something of a perfect storm. In other words, the transition that the private banking industry has to go through will require enough young talents in order to prepare a sustainable future. Looking forward, there is probably a unique chance that Gen Y and Baby Boomers reshape the agendas of the private banks if they work together as true partners.

Right now, HR and line managers are operating in full recessionary mode. They are studying on how much to reduce headcount, meaning how to produce the same with less people. Not many are focused on what just a few years ago was described as the war for talent. As the economy recovers, however, private banks will return in the challenge of winning over enough highly capable professionals to drive renewal and growth.

People and relationship
In private banking, it is all about people and relationship. Having in mind these two oversized bookend generations have an extraordinary amount in common, the combination of these two pools of resources can only have very positive effects for the bank. Their shared vision and values represent the ideal base for an effective mentoring in a generation-jumping environment. The client experience accumulated by the boomers will therefore be ideally transferred to the young generation via an intergenerational mentoring.

In conclusion, as long as Luxembourg can keep its financial privacy, a new breed of talents is ready to take the challenge of cross-border international private banking to the next level. It will certainly not be easy, as it requires both the explosiveness of the sprinter and the determination of the marathon runner. But complexity is part of our daily life, and something is sure, things will not get easier, to the contrary.

By Roger H. Hartmann
The author is Partner, Ernst & Young, Luxembourg