With Danes’ growing fortunes, competition between private investment companies and banks is on the rise. Against this backdrop, Festina Finance has developed a digital tool that makes it easier to attract clients who are prepared to invest while living up to the administrative burdens that requires a lot of resources from the banks.
Although record numbers of Danes have money sitting in their bank accounts, low deposit rates are forcing banks to impose negative interest rates on larger assets. Industry experts are speculating that Danes will be motivated to withdraw their savings to invest in trustees or external investment platforms. Since this would have a domino effect, resulting in significant lost revenues, it is vital for banks to offer the right investment services to retain their customers who are eager to invest.
This point is reinforced in the weekly economics paper, Økonomisk Ugebrev – which recently conducted a survey on wealthy private customers. Their results confirmed that 85 percent of wealthy clients want to withdraw their assets from banks to invest them. This could result in 380 billion DKK no longer being managed by Danish banks.
Recognizing this, Mikkel Eriksen – the business development director of Lån & Spar Bank – noted “It is crucial that we help the growing number of private customers who are demanding consultancy and advice.”
A matter of ambition
Of course, not all clients will have the option to receive wealth and investment advice from their bank. In order to be eligible, they must have disposable income and savings – of a predefined amount – that are not already tied up in investments. At the same time, many new opportunities have emerged outside the bank for private customers who would like help managing their assets.
This puts more pressure on the banks to stay competitive. According to Eriksen:
Today, very few banks have the resources to handle the potential customer group who are qualified to receive advice about how to manage their assets. By digitizing and automating multiple steps in the process, banks will be able to handle and service more customers. It is a matter of retaining customers in the bank and staying competitive.”
That is why Lån & Spar Bank have implemented a new solution, built by Festina Finance, to digitize and streamline investment advice for their private customers, who are ready to invest.
As Eriksen explains: “With the integrations of Festina Advisor, we plan to automate the introduction of our products and create additional sales for new customers. Customers will be able to manage their assets independently, efficiently, and unaffected by the banks opening hours. That option was already partly available for simple products, and we wanted to be able to sell more complex products digitally.”
Now, customers can do their homework in advance
Increasingly, banking customers are realizing that their money does not necessarily have to be managed by or sit in traditional banks. Many digital platforms now offer the same services as traditional brick and mortars, and it is across these platforms that the battle for customers is being fought.
“The use of technology and digitalization will continue to grow, so it is only natural that customers expect banks to follow suit and to receive advice on their own terms,” Eriksen explains.
Now, Lån & Spar’s clients can report their financial ratios, such as tax information, budgets, and debt information through a mobile app. Because the bank uses Festina Advisor, it makes pertinent information available to the investment advisor before the client comes in for a personal meeting.
As Eriksen points out:
Typically, clients have done a great deal of legwork before coming in for an investment advice meeting. This is motivated, in part, by customers taking more responsibility for how their wealth optimization and pension savings are combined. Therefore, we must remain open to full self-service for our customers who are digitally inclined.”
Freeing staff and customers from administrative burdens
For many new investors, asset management is a highly complex affair. Just as it became more accessible thanks to digitalization, the European Union tightened its grip and introduced new regulatory requirements to protect private investors.
Senior developer at Festina Finance, Mark Wrobel, states:
The increasing regulation has resulted in more administrative processes and thus increased costs for the banks. Digitization has the potential to ease these challenges. It’s hard to make old systems communicate with each other, and that’s where Festina Advisor comes into the picture. We ensure that there is a free exchange of data, and that consultants can focus on the business rather than the technicalities. This means that they can use their time for what they are best at: assisting customers.”
At Lån & Spar, staff members are already benefitting from easing up on administrative burdens:
“Regulation is complex and requires a lot of resources. But the journey through Festina Advisor makes it easier for us to implement new integrations, and we are saving huge administrative costs by digitizing our business. These are resources we can use to optimize other areas of our bank,” Eriksen concludes.