Embracing transparency to create new private banking models
This year has kept its promises to be a whole new ballgame when it comes to financial regulation. With MiFID II and PSD2 now in force, financial institutions are at a crossroads. How these new rules can help private banks better serve their clients? We are examining the opportunities arising from this environment.
Providing transparent and suitable services with MiFID II
MiFID II, which is in application since 3 January 2018, touches on roughly all aspects of individual investing, including investment advice, how products are sold and regulated, information and fees.
With the objective to enhance protection for retail investors, MiFID II imposes greater transparency over the way funds are sold. Yet, providing a higher level of support and protection to every client who needs discretionary portfolio management does not come for free. MiFID II, which spans thousands of pages, requires making significant changes to the existing model to be compliant. This includes reviewing processes such as client on boarding, client information, calculation and presentation of fees as well as products.
Complying with MiFID II can be fulfilled through the development of new digital solutions. And East West United Bank is investing in this direction. Regulatory terms like ‘enhanced quality’ foster a modern customer journey where a combination of personal interaction and digital tools form the basis of the customer relationship.
PSD2 to further secure online payments
While MiFID II has kept the private banking sector busy over the last months, the Second Payment Services Directive (PSD2), which aims at increasing the security of online payments and providing greater transparency between all the different banking systems, has also had an impact on wealth management.
Implemented in January 2018, PSD2 represents a completely new challenge for financial institutions insofar as third parties can access customer account data. This paradigm shift could significantly redesign the market. While some can consider this change as a threat, East West United Bank sees opportunities arising from it. With PSD2, every financial institution is able to offer services or new products to clients from other banks, without them having to open an account elsewhere or move their assets. And, this turns out to be a substantial advantage to private banking clients. In other words, they can test new services and make a comparison with other value propositions.
In this context, data analysis is critical to understand what clients need and to come up with suitable services and advice.
Regulation is an opportunity to rethink existing business models even though compliance involves significant investment. At East West United Bank, we think that behind every constraint lies an opportunity.