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It’s important to remember just how exciting the challenger banks were. They brought real – and much needed – innovation to personal finance; a digital-first approach offered both a fresh look, a new approach to customer-led products and a more agile user experience. Then coronavirus hit and it exposed some fundamental flaws in the customer experience they offer. The big issue is that none had fully left start-up mode, so they weren’t able to provide either a full suite of banking services or adequate customer support at a time when it was most needed.

Against this backdrop, the pandemic has only served to prise open problems that predate the last 10 months. The front-end experience was, initially, second-to-none and they were able to set up financial products that were tailored to the individual needs of consumers. However, this is an expensive proposition that has resulted in lower margins for those players. In recent years the high street banks have become better at doing what brought the challengers fame: the user experience - and, significantly, they are also better able to offer personalised experiences at scale.

If the challengers aren’t careful, they may find themselves disrupted by those they disrupted.

Trust in times of adversity

It’s not surprising that we seek the comfort of the ‘tried and trusted’ when times are tough.

The established banks have a long heritage and this stands them in good stead in this regard. According to a survey of 2,000 UK consumers by TopLine Comms, consumers trust traditional banks like Nationwide, Barclays and Santander (61.5%) more than they trust the challenger banks (21.5%).

Two main factors account for this. First, as we’ve established, few digital banks offer the range of services that consumers have come to expect. Having immediate access to a detailed run-down of your spending is convenient; not having access to loans, mortgages and overdrafts or human customer service to resolve complex issues is highly problematic.

Second, more than half (54%) of consumers surveyed by Fujitsu said they don’t trust challenger banks with their tech and data. That’s a big obstacle to adoption if your business is digital-first.

Overall, people seem to trust the devil they know; they may not like the high street banks, but they do trust them. Moreover, as recent history has shown, they are more likely to be bailed out in the event of a financial crisis.

The human factor

Mortgage 'holidays', furloughs and redundancies - with the world of personal finance evolving in increasingly unexpected and unwanted ways for many, consumers are looking for banking experts to help them navigate a complex journey, whether that’s done remotely or in a physical branch.

More established banks have the infrastructure and deeper pockets to provide human advisers. The digital-first players don’t always have this infrastructure and some rely on chatbots - a technology not sufficiently advanced to handle the complexities of highly charged emotional situations.

The banks that create the perfect blend of human and machine ultimately come out on top – automating the parts of the customer experience that machine learning does best but relying on real people to deliver the customer service.

The end-to-end experience

It seems people use the front-end experience offered by challenger banks as an add-on to the core banking functions provided by high street banks. This is backed by a Finder survey which revealed that people are only depositing on average around £150 per month into their digital bank accounts. Even the UK’s most popular challenger bank, Monzo, reports just a fifth of its customers use its services and nothing else. By comparison, a third of Barclays customers use Barclays’ services exclusively.

Moving forward, it’s possible we’ll see some attrition as well as further waves of consolidation as some of the challengers’ specialist services woven into the offerings of platform players like Visa. On the other hand, some of the most successful challengers will look to take on their high street rivals more directly with differentiated offerings, for example ethical player Triodos Bank capitalising on the consumer tide towards transparency and sustainability.

Trust and breadth of financial services products are a priority. Purpose and transparency are shifting rapidly to the fore. When the digital battle-lines are drawn, it’s not only the front-end user experience that will matter as a differentiator. To be fighting fit, whether it's a challenger or high street bank, the work on delivering what consumers expect from a bank, front end and back, needs to start now.

Natalie Smith is an English Solicitor admitted to the Supreme Court of Justice of England & Wales in 2003. Prior to taking up her role at Lutea (Hong Kong) Limited and relocating to Hong Kong, she worked extensively in Tax & Estate Planning and Trust & Company structures. She’s worked with family offices, international entrepreneurs, both regional and city law firms, and headed up the Private Client and Wealth Structuring department for one of the ‘Big 4’ Accountancy Firms. After nearly 2 decades of practice, she joined Lutea (Hong Kong) Limited as Director in November 2019.

Lutea has been providing trustee & advisory services to residents of Hong Kong and Asia for over 25 years and focuses on helping private individuals, families and businesses around the world maintain family wealth and ensure succession throughout the generations. The firm does this with practical and holistic succession planning, trusteeship of family trusts and pension schemes, international will drafting, company incorporation and administration services and UK tax advice. As a global organisation, Lutea has offices in Jersey, Hong Kong, Singapore, Anguilla, and the UK. It prides itself on personal service and employs modern technology to meet the evolving needs of clients.

We caught up with Natalie to hear about the ins and outs of establishing a trust in Hong Kong.

How attractive is Hong Kong as a trust jurisdiction?

Since 2013, Hong Kong has been following modern trust laws due to the Trust Law (Amendment) Bill under Trustee Ordinance. Since Hong Kong’s trust legislation is based on English trust law, with a judiciary experienced in trust law, Hong Kong has become an attractive trust jurisdiction by giving a high level of confidence in the legal framework. It also is a party to a wide range on International Tax Treaties.

Hong Kong offers a combination of advantages for those who set up trusts and has become one of the most attractive Asian trust jurisdictions. It is one of the major international financial centres and stock exchanges in the world. Hong Kong is a hub of international business in Asia due to its central geographic location. The well-developed transportation network, airport and telecommunications network facilitate business activities.

With its comprehensive investment infrastructure and owing to the support provided by different professionals in various areas, Hong Kong has also become an ideal platform and vehicle for investment.

What are the advantages of setting up and operating a trust in Hong Kong?

Hong Kong has a favourable tax regime as well as a robust regulatory environment. A trust in Hong Kong will be set up and managed according to a well-tested set of laws and regulations, including the Trust Law (Amendment) Ordinance, the Trustee Ordinance, the Companies Ordinance and elements of common law stretching back centuries.  As a result, a trust in Hong Kong is regarded as a secure, reliable, and effective way for families and individuals to manage their assets.

Trusts usually have a period of existence, called a ‘perpetuity period’ during which the trust can exist and is usually defined in the trust deed that first establishes the trust. However, in Hong Kong, there is no such limit, trusts can exist indefinitely and can be used to plan for multiple generations ahead, safeguarding capital and permitting longer-term, more strategic planning.

Hong Kong is a member of The Financial Action Task Force on Money Laundering (“FATF”) therefore Hong Kong fully subscribes to the FATF's recommendations in combating money laundering and terrorist financing.

In Hong Kong, it’s possible to set up a trust in which the trust entity, the trustee, banking and investment activity, legal, and accounting services are all covered by the same jurisdiction and subject to the same law.

In some jurisdictions, a trust’s settlor cannot have any control over the day-to-day operation of the trust. In Hong Kong, that is not the case - settlors can reserve some powers of investment and management of the trust to themselves, meaning settlors can retain greater control over the trust assets.

Some jurisdictions permit full freedom of testation, allowing a person to set up a trust to confer their assets on whomever they please. Other jurisdictions, however, practice various forms of forced heirship, in which certain individuals are automatically entitled to a portion of a deceased person’s assets. While you can usually place the affected assets in a trust, this still affects how you can set up trusts. Hong Kong has no forced heirship laws. When you set up a trust in Hong Kong, you can divide and confer your assets in any way you choose, and assets placed in the trust are beyond the legal reach of forced heirs in other jurisdictions on the death of the settlor.

Hong Kong has a tax regime that is unusually positive for the beneficiaries of trusts and does not treat trusts like businesses. There is no capital gains tax levied, the taxation of income is assessed on a territorial basis so only income arising in or derived from Hong Kong, is subject to tax here.

In Hong Kong, it’s possible to set up a trust in which the trust entity, the trustee, banking and investment activity, legal, and accounting services are all covered by the same jurisdiction and subject to the same law. Since all such entities are familiar with interacting with the others under the aegis of Hong Kong trust law, setting up a trust in Hong Kong can also be more efficient and run more smoothly.

What are the key things to consider when establishing a trust in Hong Kong?

The trustees are the appointed legal owners of the assets within the trust and they have the responsibility of administering the trust and the trust assets in accordance with the terms of the trust deed and the prevailing trust law.

The selection of a trustee is crucial when creating a trust, the choice of trustee should consider knowledge, experience, access to the assets and management abilities. Choosing a trustee is a personal decision because the trustee will be deciding how the beneficiaries will receive distributions from the trust. This can be guided by informed decision making when creating the trust. The settlor typically provides the trustees with a letter of wishes regarding their desired wishes on how they would like the trustees to execute their discretion with regard to the trust fund and distribution of the trust assets. The wishes contained will cover both the period during the settlor’s’ lifetime and also after death. A letter of wishes is not a legal document and can be reviewed and amended from time to time but does not form part of the trust deed itself.

Often a priority for settlors is the continuation of wealth for the benefit of future generations. This can be achieved by effectively locking up the capital of the trust and specifying to whom of the family the income and capital should be paid in the years to follow. A settlor can also give the trustees the discretion to pay capital to beneficiaries if he/she think it appropriate.

The settlor should consider guarding against or providing for, in particular, the following:

How can Lutea help clients to successfully protect and grow their wealth?

Our objective is to provide trustee, corporate, administration and advisory services to individuals and families concerning the organisation, management, preservation, protection, and succession of their wealth. Leveraging our global network and local expertise, we deliver high-quality, tailored services to our clients, ensuring that we understand their changing needs and providing them with the comprehensive support they require.

How has the global pandemic affected your operations?

We have a business continuity policy in place meaning we can smoothly change our operations from office-based to remote working and ensure minimal impact to our operations. Following the Hong Kong Government’s direction, we have implemented work from home arrangements and flexible working hours to limit the number of staff in the office, and avoid staff travelling during peak hours.

Armed with modern technology, all staff are equipped with devices to allow them to work remotely. This has also minimised the impact on our business, by allowing us to conduct virtual meetings and video conferencing on platforms such as Skype, Zoom, and Microsoft Teams.

At a time of crisis, logic would say that heritage brands should fare better, but counter-intuitively, the COVID crisis has in many ways validated the digital model. While the immediate lockdown reaction of fear and uncertainty may have played into the hands of traditional financial institutions, the ensuing weeks and months have shown why fintech providers are here to stay. Louie Sumpter, founder and strategy director at creative agency EveryFriday, tells Finance Monthly about how fintechs and traditional institutions will fare coming out of the global health crisis.

Although the future looks bright for this new generation of digital start-ups, the COVID-19 pandemic is the first major economic crisis that these players have had to contend with.

To examine how fintechs and heritage institutions will fare through the COVID-19 crisis, EveryFriday interviewed eight senior marketers at a number of leading financial institutions. In doing so, we sought to understand: would the advantages that have benefited fintch providers to date see them through this crisis? Will consumers instead turn to big, established brands that offer greater scale and a sense of security?

As we’ll see, COVID-19 has rewritten the definition of trust and opened up a window for new and better.

COVID-19 has accelerated existing behaviours

As consumers seek advice from multiple sources, the role of financial institutions as authorities has begun to shift. The reliance on digital tools to constantly check and manage money is deepening the trend of banks becoming similar to other app-based utilities.

These changes are indicative of a wider cultural shift towards self-sufficiency. Today, people need to see and experience things for themselves; they don’t want to rely on being told that everything is okay.

As consumers seek advice from multiple sources, the role of financial institutions as authorities has begun to shift.

FinTech start-ups have capitalised on this shift in expectation. When COVID-19 struck, these start-ups were better positioned to pivot and adapt. Many were able to continue providing a best-in-class experience with virtually no impact on customer service or communicability. In fact, research from Capgemini shows that over a third (36%) of consumers have found a new financial services provider during the COVID-19 pandemic, with “digital disruptors the destination for many of these consumers”.

As Alessandro Onano, Chief Marketing Officer at Moneyfarm, puts it, “As a digital company, we reacted with flexibility and velocity. We immediately started to produce a daily video and market update, which relayed information to customers in a simple way.”

Large financial services institutions, on the other hand, which employ tens of thousands of employees across multiple geographic locations, have found it harder to flex to this new environment. “A well-established company, on the other hand, doesn’t have this level of flexibility. Big corporations can’t communicate as quickly or immediately release new features and tools for their customers. That’s something only a small, digital company can do,” Alessandro concludes.

This crisis, then, has accelerated a key difference between fintechs and heritage institutions: speed to market, flexibility and the enablement of self-sufficiency.

Understanding the role of trust in financial services 

With change afoot, it’s important to understand the role trust plays in the consumer decision-making process.

When it comes to money, trust has been (and seemingly always will be) the bedrock of customer acquisition and retention in financial services. In the past, trust was intrinsically linked to heritage. These financial institutions, with hundreds of years of experience, boast qualities such as security, stability and confidence. Customers have felt safe and secure trusting their money with these companies, because they’d seemingly “always been there” and “always would be there”.

When it comes to money, trust has been (and seemingly always will be) the bedrock of customer acquisition and retention in financial services.

In recent years, however, fintech providers have re-written the rules of trust. To these players and their customers, trust is not dependent upon years of heritage in the marketplace. Instead, trust is built upon a new layer of foundational principles: customer experience, transparency, accessibility and consumer control.

As Melanie Palmer, CMO at Nucoro, says, “Our mission is to make sure that people have financial control. COVID-19 has caused a lot of stress for people. Imagine a scenario where you can’t easily log into an app, you haven’t been communicated to, so you’ve called customer service and been put on hold for what feels like five hours. All of this impacts your mental health, as well as your financial stability.”

The notion of handing control back to the consumer should not be understated, particularly during a time of marked uncertainty and panic. Melanie continues, “Financial control means transparency. It means being able to see things you need – in exactly the moment when you want to see it.

In our current reality, boasting centuries of experience is only one component in addressing consumer trust. Being able to communicate seamlessly with customers, to offer instant answers, to provide clarity and to allow transparent access to money is arguably more important for practical, short-term consumer needs.

The tension between functional and emotional trust  

As we emerge from the worst of the COVID-19 crisis, brands have a unique opportunity to take stock of new consumer attitudes. This crisis has emphasised the need for features such as transparency and control, which enable people to make decisions on their own terms. This is an aspect of functional trust – digital platforms are better set up for this, because their tools enable practical decision-making.

Functionality can be described as a “bottom-up” approach to building trust, because it builds from the day to day experience up. This is a brand building strategy that emphasises how products deliver accessibility, transparency, control and ease-of use.

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But there is another form of trust that is equally important – that is emotional trust.

Heritage brands are more adept at tapping into emotional trust. This approach leverages the heritage, scale and personality of a brand, which is built over years of experience. In this sense, traditional players are more skilled at communicating trust from the “top-down”, which aligns with higher-level, aspirational feelings.

While early indicators suggest that COVID-19 may well validate the new digital model, this is the first real challenge that fintech providers have faced. For many, it may well be a defining moment of truth. As some digital start-ups furlough staff and others make wide-scale redundancies, the smart brands will employ a communications strategy that addresses both the functional and emotional aspects of consumer trust.

On the flip side, heritage brands face a sharp wake-up call: address functional values of transparency, control and accessibility, or risk losing customers due to platforms that boast superior self-sufficiency.  As Melanie notes, “If social distancing continues, digital should be fundamentally important. Are you going to deal with a bank that sends you letters in the post and has a branch you can’t visit anymore? Or one that has a really cool, slick app? It hasn’t occurred yet, but I can imagine that if this becomes a normal behaviour, then we’ll see this shift happening.

Fintech players now have an unparalleled opportunity to prove the value of a digital-first strategy, but only if they are able to address the balance between functional and emotional trust.

Here Finance Monthly hears from Hannah Conway, Consultant at Brandpie, on exactly why shifts in consumer trust are what drive and alter the financial landscape.

The financial crisis of 2008 had far-reaching consequences, some of which can still be felt. Public trust in traditional banking institutions has eroded and brands in the sector are dealing with the reputational damages endured. One needn’t look further than Chase Bank capitalising on the trend of being relatable on social media only to face public wrath for bailouts that occurred ten years earlier.

Consumers have clearly not forgotten the crisis. In fact, the 2018 Edelman Trust Barometer ranked financial services as the least trusted industry worldwide. In the same report, technology ranked as the most trusted. Silicon Valley flourished in the decade following the financial crisis, with organisations small and large introducing technologies that would come to revolutionise consumer finance.

In this landscape, tech conglomerates, have been able to make serious in-roads into different aspects of consumer finance, a process that shows no signs of waning.

Amazon was among the trailblazers innovating in this space, introducing one-click ordering as early as 2000. With an ecosystem boasting 310 million active customer accounts, over 100 million Prime subscribers and over 5 million sellers across 12 marketplaces, Amazon is no rookie. The retail giant is building an array of financial services to increase further participation in the Amazon ecosystem, ranging from payments infrastructure to Amazon Pay – which already has 33 million customers worldwide.

Amazon Cash, which launched in 2017, enables customers to deposit cash to their Amazon.com balance by showing a barcode at participating retailers. The cash is applied to their Amazon account immediately, giving “cash customers”, such as anyone who doesn’t have a bank account or debit and credit cards, the ability to shop on the e-tail giant.

The technological advancements in voice will ultimately enable Amazon to make further encroachments into consumer finance. Virtual assistant Alexa is set to dominate voice shopping, currently having the largest market share of smart speakers, more than twice that of its competitors, Google and Microsoft. Purchases processed through voice are expected to skyrocket to $40 billion by 2022. As consumers were already using the platform, the introduction of new customer-friendly payment experiences serve to further boost Amazon’s position.

The technological advancements in voice will ultimately enable Amazon to make further encroachments into consumer finance. Virtual assistant Alexa is set to dominate voice shopping, currently having the largest market share of smart speakers, more than twice that of its competitors, Google and Microsoft.

Apple has similarly made great strides in the space. ApplePay is already available in 33 countries, with over 250 million users worldwide.

CEO Tim Cook recently announced Apple Card, a new credit card, which is expected to be released in the US this summer before potentially being rolled out globally. Purchases from Apple’s physical stores, website, App Store or iTunes will come with a 3% cash back, with all other purchases at 1%, all in the form of Daily Cash, which will then be added in Apple’s Wallet app.

Apple is building an ecosystem which will see consumers use Apple products to pay, with the cash back options leading to more purchasing. In addition to the seamless customer experience across its portfolio, the giant is pushing privacy as its main differentiator, with its latest “Privacy Matters” commercial prime example. Apple wants to assure customers that all their private information on their phone is safe, with its new credit card offering similarly touting security and ease of use.

Facebook introduced peer-to-peer payment in its messenger app back in 2015, but it is the company’s subsidiary Instagram that is making significant in-roads to consumer finance.

Facebook usage might be steadily dwindling, but Instagram is on the rise. As Instagram is a highly visual medium and users have the feed to interact with their favourite brands, it was a logical next step that the network would introduce purchasing and payment mechanisms sooner rather than later. This became a reality earlier in the year with Instagram enabling in-app checkout for its shoppable posts. In April 2019, the offering was extended from brands to influencers, significantly boosting Instagram’s reach. Deutsche Bank analysts have already predicted Instagram’s move into social shopping could be worth $10 billion by as soon as 2021.

But while the West is fast encroaching this space, no one has managed to catch up to WeChat’s fast ascension into the sphere of digital payments. With over 1 billion active users, and thanks to its own in-app shopping and payment system, the Chinese social media network is a force to be reckoned with. It provides a seamless mobile lifestyle through which consumers can order food, send and receive money, pay utility bills, shop and more.

With over 1 billion active users, and thanks to its own in-app shopping and payment system, the Chinese social media network (WeChat) is a force to be reckoned with. It provides a seamless mobile lifestyle through which consumers can order food, send and receive money, pay utility bills, shop and more.

Social payments are the norm. Consumers can buy a friend a cup of coffee and send it through WeChat Pay. Busking musicians no longer expect coins or notes, they have signs with their WeChat Pay QR codes on them. WeChat Pay leads the way with over 600 million users, outranking most of its competitors. Tencent, the company that owns WeChat recently joined forces with JD.com, China’s leading e-commerce platform to cover both online and offline markets.

Thanks to the innovative way they use technology to communicate integrity, security and trust, as well as creating a better customer experience, tech organisations have seen younger generations and seasoned consumers alike gravitate towards digital-first offerings.

But while challengers were ahead of the curve in evaluating how consumers want to interact with banks, traditional players need not despair. From designing apps that introduce a more mobile-first offering to embracing cutting-edge tech, such as AI and IoT, to enable predictive and hyper-personalised interactions, there is plenty traditional banks can do to create captivating customer journeys to meet customers’ ever-evolving expectations.

Below Gemma Platt, Managing Executive for Vigilant Software, discusses with Finance Monthly how we can restore consumer trust in the age of disruptive banking using better compliance measures.

Atom Bank launched publicly in April 2016 and secured total funding of more than £200 million by the following year, specialising in savings accounts and mortgages. In April 2017, online bank Monzo had its UK banking licence restriction lifted, allowing it to offer current accounts for the first time. Tandem, Starling Bank, Loot and Revolut are more digitally led financial services brands that didn’t exist a handful of years ago.

Changing consumer behaviour

Meanwhile, research by Accenture has shown that customers’ physical interactions with traditional banks are decreasing; from 2015 to 2018, the number of consumers who visit branches at least once a month dropped from 52% to 32%. Over the same period, the number of consumers who use ATMs at least once a month dropped from 82% to 62% – a decline of nearly a quarter.

In many ways, these shifts are unsurprising. We live in an increasingly connected world. As mobile devices become more powerful, and the networks connecting them faster, banks can offer better functionality to customers anytime, anywhere. If the goal is to put customers first, to tailor services to suit them and to work with their daily patterns, digital technology is a great enabler.

However, just as the digital era is disrupting the ways in which consumers engage with their banks, it is also disrupting the trust those consumers have in their banks.

Wavering trust levels

Trust, as all financial organisations know, is the foundation of their relationship with customers. When trust fails, so do banks.

According to Accenture, consumer trust in banks has been rising steadily, and is now at its highest point since 2012. It seems likely that, following the 2008 global financial crisis and subsequent recession, consumer relationships with their banks have stabilised.

However, at the same time, consumer concerns about cyber security and online fraud are on the increase. PwC research in 2017 suggested that a massive 85% of consumers would not do business with a company if they had concerns about its security practices, and 71% said that they found companies’ privacy rules difficult to understand. This was before the introduction of the GDPR (General Data Protection Regulation), which has shifted the issue of personal data protection into mainstream consciousness.

Similarly, the Ping Identity 2018 Consumer Survey: Attitudes and Behaviour in a Post-Breach Era, which surveyed more than 3,000 consumers in the UK, US, France and Germany, found that one in five of them had fallen victim to a corporate data breach, and just over a third of those had suffered financial loss as a result. Unsurprisingly, the survey also found that 49% of consumers would not engage a service or application that had suffered a recent breach.

Where banks are digitally led, two areas of trust collide. Customers might have more faith that their banks are reliable, well run and unlikely to collapse, but are simultaneously more fearful of the wealth of risks and threats in the online world, from the theft of their personal data to viruses and malware that can attack their personal devices.

Where banks are digitally led, two areas of trust collide. Customers might have more faith that their banks are reliable, well run and unlikely to collapse, but are simultaneously more fearful of the wealth of risks and threats in the online world, from the theft of their personal data to viruses and malware that can attack their personal devices.

Furthermore, research into the security posture of banks and other financial services organisations suggests that consumers may be right. When the Economist Intelligence Unit surveyed more than 400 C-suite executives at major banks around the world last year, it found that just under half of respondents believed that a cyberattack would cause “at least one systemic bank failure in the next two years as the digital transformation of the banking industry continues to automate the sector”.

In other words, as banks rely on digital technology more and more, whether to offer customer-friendly mobile apps; to automate manual processes to streamline management and reduce costs; or to take advantage of new innovations such as AI, Cloud computing and the Internet of Things, they expose themselves to ever greater levels of cyber risk.

‘Always on’ compliance

Digital banks – whether challenger brands that have entirely bypassed physical premises, or traditional institutions that have branched out into highly functional apps and websites – are ‘always on’. And this is precisely how they need to see their approach to cyber security and compliance.

Traditional approaches to regulatory compliance – whether with frameworks for best practice such as ISO 27001 or legal requirements such as the GDPR – tend to involve organisations undergoing a single period of reviewing, updating their tools and processes accordingly, and creating a record for audit purposes. This is repeated perhaps once a year to demonstrate that compliance is being maintained.

However, in a dynamic, digitally driven world, compliance needs to be dynamic and digitally driven too. This means undertaking compliance checks more frequently and maintaining online dashboards that offer a real-time snapshot of the current compliance posture and are automatically updated when elements of the organisation’s digital infrastructure are changed. Banks have embraced digital technology to offer their customers something new; the next step is to use digital portals, dashboards and compliance management tools to ensure a next-generation approach to building trust.

Here Ramesh Ramani, Cognizant Head of Banking & Financial Services, argues that for banks to remain relevant in a context of regulatory pressure and intense competition, during an era when experience is overtaking trust as a key differentiator, they have three options: become a multiservice provider; go beyond banking to become part of people’s lives; or find a niche segment.

So what are the Steps to unlocking future banking growth?

Today, banks are no longer just competing with each other. The BigTech firms are nipping at their heels, trying to gain market share within the financial services industry. For example, both Google and Facebook have already secured e-money licences. And, according to Crunchbase, there are now over 12,000 fintechs operating globally, with new entrants such as N26, the branchless digital bank offering a paperless sign-up process that can be completed on a smartphone, with identification verified by a video or selfie, which is building a large customer base rapidly. As digital banks such as Monzo report less than one-tenth the cost of servicing a retail account compared to a large traditional bank, these fintechs, built on technology from the outset, are undoubtedly luring away previously loyal customers and revenue through their ability to offer a more digital customer experience.

Trust is no longer the holy grail and experience has taken over

Customer experience has now become the most important differentiator. Where trust was once hailed as the holy grail for banking institutions with customers sticking with their bank for long periods – indeed, sometimes their entire lives – this is no longer the case. Trust and legacy are diminishing over time as younger consumers, brought up in a world surrounded by the BigTechs, increasingly look for speed and convenience. There are, however, notable instances of big-name banks being early adopters, using technology to streamline their operations, improve customer experience and enhance their offering. For example, in Spain, BBVA has developed an app feature called Bconomy, which helps customers set goals, save money and track their progress. The app makes suggestions about how to save money and compares prices on things like utilities and groceries. Idea Bank in Poland makes its products available on the go with branches and co-working spaces on commuter trains. These Idea Bank cars feature desks and conference spaces, plus free office supplies, Wi-Fi and coffee.

It is clear that banks are aware they need to change their strategy to remain relevant. To survive in the evolving banking landscape, banking institutions have three options:

  1. Become a “multiservice provider” – as profit margins decrease with new entrants coming into the market, banks must consider partnering with the new digital players to ensure they remain an important element of the banking ecosystem. If it is done right, an ecosystem with fintechs need not cause them to lose or dilute their relationships with customers – nor come at the expense of their bottom line. Many fintechs are now offering flexible partnership options that include white-labelling services. And, if done correctly, a partnership with a fintech can bring multiple benefits. For example, ING and Santander have white-labelled Kabbage’s automated SME lending platform and integrated it into their product portfolios.
  2. Go beyond banking to become part of people’s lives – banks should transform their customer experience, and one way is to make themselves integral to their customer’s lives. For example, besides supplying a mortgage to a family that has just moved into the area, a bank could become their hub for the move, offering them advice on the best schools for their children as well as providing information on local amenities.
  3. Find a niche segment – banks today are trying to be everything to everyone, which is causing their innovation to stall. Those identifying a market niche will have the best chance of survival in the digital era. We are already seeing examples of household names in the banking world, such as Credit Suisse and Barclays becoming more selective about areas they want to be in to differentiate themselves.

New regulations continue to shake up the landscape

Even as little as three years ago, one could argue that banks still held some form of advantage over new players due to the vast amounts of customer data they held, giving them unrivalled access to consumer spending patterns. However, with new regulations, such as Open Banking, forcing financial institutions to make their data available, this data ceases to give them the competitive advantage it once did.

However, these regulations are certainly improving the landscape. For consumers, it means they can more easily pick and choose banks for different purposes by managing all accounts and payments in one centralised place. For example, taking advantage of the UK's new Open Banking environment, ING Bank has developed Yolt, a free mobile app which allows users to centralise their finances and manage their money with different banks for different financial services in one place. And, in theory, this improved access to payment information and spending data will lead to better banking products that offer more efficient service to consumers.

As the use and implementation of technology continues to change the banking landscape, we can expect a dramatic change in the sector within the next five years. A decade ago, many investment banking leaders thought it was ridiculous to suggest that software would run and complete their research analysis whilst today, many are almost entirely reliant on automation and AI to provide thorough and fast analysis. The question is, which banks will recognise and take advantage of the market changes ahead? Only time will tell.

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As financial professionals know, clients have wide-ranging needs relating to personal property ownership, and the services that appraisers provide can establish a solid foundation and basis of value so that one can advise and help a client manage their assets.There are many situations when working with a qualified professional appraiser is a necessity, such as when deciding about scheduling for Insurance, Estate Planning, Wills and Trusts, Equitable Distribution of Property, Estate Taxes, Gift Tax, Charitable Contributions, Damage Claims and Litigation for any reason.

Unlike major art collectors, the majority of clients inherit or collect bits and pieces for years, but are often unaware of what they own, or the current value. Contacting an appraiser to do an inventory and detailed
appraisal is the first step. An appraisal report is a legal document and one as important as a will. Frequently having an appraisal done will be the first time that a client’s property will have been accurately identified, described and valued for any purpose, and has proven particularly important for the recovery of items in the case of theft. Often a client’s personal property will be of greater value than their residence, and by having an appraisal to review, advisers are able to help clients make informed decisions and plan ahead. Once an
adviser has the necessary value information about the client’s property, they can make sure that there are no surprises and help them avoid potential problems with heirs or make choices that might keep them from reaching their financial goals.

Although laws may differ according to country, it is particularly important for financial advisers to work with a professional, accredited appraiser who has no vested interest in the property to be appraised.

Whether it involves fine art, a particular collection or the accumulated valuables in their residences, an appraisal report, if properly prepared by a qualified professional appraiser, will provide a defensible value at
a particular given time. A proper appraisal report should be prepared by an independent, accredited professional appraiser, who belongs to one of the major recognized appraisal organizations and is compliant with USPAP (Uniform Standards of Professional Appraisal Practice) which are the quality control standards for all appraisals performed in the United States and its territories. The report should be presented in a cohesive,
logical, readable manner and should provide a client with evaluations and analyses of their tangible assets. In this respect, appraisals are particularly applicable and necessary for wealth managers, trust & estate practices, the insurance industry, and to collectors.

Although laws may differ according to country, it is particularly important for financial advisers to work with a professional, accredited appraiser who has no vested interest in the property to be appraised. This will ensure that the value conclusion is independent, accurate and will clarify questions of value under any circumstances. Not only do national taxation services, but also museums, institutions, businesses, insurance companies
and collectors all require appraisal reports that are objective, true and independent of auction houses, dealers and other collectors.

Recent hurricanes, fire disasters, earthquakes and tsunami around the world spotlight how financial advisers and insurance companies working together with appraisers/valuers can help their clients to be prepared for and begin to recover from such natural disasters.

Therefore it would be prudent for those working in a financial advisory capacity to always consider working with a qualified professional appraiser, to ensure that they have all the facts needed to advise their clients on how best to prepare for the future.

 

About Jean O'Brien:

Jean O’Brien, Principal of JA O’Brien Associates, is an Accredited Senior Member of the American Society of Appraisers with over 30 years of experience appraising a broad range of Fine Art, Decorative Arts and Antiques. Her background includes degrees in Studio Art and Art History, ASA professional appraisal training, and over two years at Christie’s International Auction House Education Division in London, where she earned two diplomas from the Royal Society of Art.

Contact details:

Jean A. OBrien, ASA
Principal, J.A. OBrien Associates, LLC
4817 West 69th Street
Prairie Village, Kansas 66208, USA

Telephone: 913 722 2460
913 787 1926

Trust, context, the story, the relationship; these and many more are the strategy picks of today’s challenger banks, and the weapons of choice in today’s battle for the high street consumer. Below Finance Monthly hears from Yelena Gaufman, strategy partner at Fold7, who explores the current banking landscape and the increasing dominance of social good.

There is an undeniable disruption currently occurring in the world of banking. Innovative and cost-effective fintech and 'neobank' startups such as Revolut, Monzo, Tandem, Starling and Monese, are offering a fresh spin on an old formula and winning customers across the UK and beyond as a result. These are digital-first banking brands boasting features borne from bold, utility-first strategies and, more recently, a drive towards social good, and it's predominantly these features that have won them such good press and such good custom.

There is still a catch, though. This disruption might be well-documented, but it's not a foregone conclusion. Even if they are the “banks of the future,” these challenger banks could still learn a thing or two from their brick’n’mortar forebears when it comes to building trust, and they should start by asking one simple question: What is it that makes a person commit to one brand over another? Something so powerful it can transcend convenience and commodity? Emotional connection.

These challenger brands might offer a convenient, forward-thinking service, and they certainly represent significant value, but they often struggle to communicate their value proposition to consumers, particularly outside their traditional audience of urbanite early adopters. They also might offer a compelling vision of a different kind of banking, but what they really need to develop if they want to sow the seeds of genuine, lasting displacement, is an emotional connection with consumers.

A foundation of trust

The most obvious hurdle facing our fresh-faced fintech brands is the legacy and authority established by the incumbents. Consumers are far more likely to place their trust in the hands of an institution with a proven history, especially when it comes to parting with their hard earned bucks.

Building trust takes time, of course. But fresh-faced fintech brands do have a pair of aces up their sleeves. They are still figuring out what they want to be, and, perhaps more pertinently, whom they want to be trusted by. The clay is still wet, and willing to be mold into a prism through which all future brand decisions can be made and understood. When building their brands, however, and forging an emotional bond with their consumer, they should take two things into serious consideration:-

Growth, storytelling and worth

In order for new banking and fintech brands to truly demonstrate their worth, a compelling brand story and a brand purpose is an absolute necessity. It all starts with understanding the context of what you're offering and how it plays into the lives of your intended audience. Being a feature-led, innovative company is great, but what is it that defines your work beside it being new and convenient?

Making a brand feel like it's actually worth something is no mean feat though. One way of doing this is to underline the role that your brand's innovations can fulfil in our daily lives, effectively tying the business and its services together with a wider sense of purpose. This is a method ably demonstrated by one of our recent campaigns for Gumtree.

Aptly titled “Turning Points,” the campaign visualises, in a very bold and unique way, how the app can help users to seize opportunity from change. We see a young couple moving through various stages of their life together, with Gumtree a facilitator of the natural changes that affect a lot of us at “that stage in our lives.” The app is used to swap a bike for a crib and then that crib for a bunk bed, before the crib is finally shown being sold on to another young couple, ready to begin their own adventure. It's a snappy, visually striking idea that reinforces the power of using familiar emotions to bridge a brand to its potential customers.

We currently sit at an intriguing juncture in banking for both disruptors and incumbents, with the industry forcing older brands to think about how they operate and vice versa. If the startups of today can organically forge and nourish emotional relationships with their customers and build lasting legacies of their own, the banking landscape of the near future could look very different indeed.

Nearly 50% of 2017’s Initial Coin Offerings are currently failing, and one serious factor in this lack of success comes from the lack of trust in a business. Investing in ICOs is risky. Little regulation results in a vulnerability to fraud, and is putting off people from contributing - and rightly so, why would you want to just throw away money?

With that said, ICOs can prove an incredible investment opportunity, with huge potential for growth starting at the pre-sale; and if a potential contributor has trust in a project, there is absolutely no reason for them not to invest.

So how can you earn investors’ trust? This week Tomislav Matic, CEO of Crypto Future, provides Finance Monthly with his top five ways to incite trust in potential investors.

1. Be transparent

One key factor in convincing others of your legitimacy is through being as transparent as possible. Of course, not every detail can be given away, but letting potential contributors understand the inner workings of your company can go a long way to showing them all the work being put into your ICO.

Being transparent develops a unique relationship with investors. Show them you align with legal compliance - you could even go as far as showing off clips of on-site testing; whatever it takes to show the world that you are genuine in your efforts, working hard to make this project a success - it goes much further than you might think.

2. Go social

On average, people spend 116 minutes of their day on social media - just under two hours checking what other people are doing. Only a fool would miss out on this opportunity for both exposure, and a chance to involve future contributors.

Use Facebook, LinkedIn and Twitter - and other social media sites too - to give people regular updates on product details, blog posts, interviews, information; anything you can think of. Frequent updates through a channel that people will be checking regardless go a long way to making investors feel involved in the progression of the project, connected and valued - that extra insight only helps towards bridging that relationship.

3. Introduce your team

By now, contributors feel the platform is safe, they know the inner workings of your product, and they feel involved with the project; it’s time to show them the team behind it. It’s all well and good having a brilliant product, but if you’ve got someone running the ICO who isn’t capable of delivering it, how can an investor trust it?

Roll out the blogs, the interviews, the Q&As, and get their social media accounts active too. Does your CEO have an incredible track record of getting ICOs off the ground? Shout about it. And an inexperienced leadership team isn’t necessarily a bad thing either - you just need to show to contributors why they are in the position they hold.

4. Create an extensive whitepaper

Not everyone will go through the entire whitepaper from front to back, but having a detailed outline of everything to do with your project gives contributors access to any specific information they might need.

Having a strong, comprehensive whitepaper in place allows investors to complete their due diligence at their own leisure. It’s a recurring theme: access to information. The more access, the more allowance you give for trust to blossom.

5. Outlining a clearly defined roadmap

Actions speak louder than words, but if you’re showing future contributors exactly what you’re planning and how you’re going to implement that plan, and then following through on it, there is absolutely no reason for them to believe that you can’t continue in that vein.

Outlining your strategy is a brilliant way of proving that you follow up on promises, and if you can do it before the ICO even starts, even with the smallest steps, investors will be more inclined to put their faith in you once the sale has kicked off.

Building trust is by no means easy, but it is incredibly vital to aiding your ICO’s success. It can without doubt be the difference between an ICO that hits the ground running, and one that flops completely.

The process starts early, and requires a huge amount of time and effort - much like building trust face to face - but the rewards are tremendous.

By Melanie Ison, Nerine Group of Fiduciaries Hong Kong Managing Director

Originally from Guernsey in the Channel Islands, I started in the trust and fiduciary sector in 1998. I worked for a large South African bank-owned trust company in Guernsey for eight and a half years before making the move to Hong Kong in June 2007 where I joined a large global bank-owned trust company. From there I moved to Nerine in 2008, and took over the running of the Hong Kong office in 2011 with formal appointment as managing director in 2015.

The Nerine Group of Fiduciaries core business is bespoke succession and wealth structuring for global High-Net-Worth (HNW) and ultra HNW families.

Guernsey is a leading jurisdiction for succession planning so it was natural for me after finishing my education to move into this interesting sector. When I started in the industry, I quickly realised that succession planning for individuals and families exposed me to a wide range of issues and circumstances. It is a varied area of wealth management and has a genuine impact on people’s lives; getting it right for a family is rewarding. Being able to apply my experience and expertise in structuring appropriately for families brings a lot of satisfaction. There is an assumption that we deal solely with financial assets but that’s just not the case. We have the capabilities to deal with real property, family businesses and unique assets as well as facilitating family discussions and managing issues; family governance matters are becoming an increasing part of what our clients need from us.

From a Nerine perspective, my key responsibilities in Asia include overseeing the growth of the business in this region and ensuring Nerine’s brand remains strong in the region. Nerine has an enviable reputation for working with the best professionals in the best interests of our clients throughout Asia. I have been significantly involved in ensuring Nerine is synonymous with expertise and knowledge, and am pleased to say we are trusted by our clients and have grown both our staff numbers and our business presence and recognition throughout Asia.

It is through our trusted relationships, and our ability to tailor bespoke solutions to each client’s needs and expertise that we succeed. Trust and fiduciary specialists should give the right advice and implement the right solutions, so families can ensure they’re as well prepared as possible to preserve and enhance their wealth for the next generation and beyond.

At Nerine, we help families to get the right professionals involved to address their broad financial and familial needs. We anticipate issues and put in place good family governance, appropriate ownership structures and excellent corporate governance for their circumstances; it’s not an overnight process and taking shortcuts can have disastrous consequences.

Ineffective succession planning can cause a family business to shut down overnight. There is significant case law in Asia which can all too often make this a reality. One of the best known, and widely publicised, of these cases was the famous Yung Kee Restaurant and the founding Kam family. The case ended up in Hong Kong’s Court of Final Appeal and caused a bitter family feud because expectations were not managed and family members had differing views which had not been clearly defined or planned for in prior discussions. Cases like this are increasing as families become more international and generations think differently from one another; they help us as responsible fiduciary specialists to hone of expertise and avoid pitfalls.

Cultural sensitivities must be taken into account, particularly in the area of family wealth and business  where  the younger generations may have been schooled elsewhere and don’t hold the same traditional values and visions as their parents or may not feel the same sense of legacy towards the family business and wealth.

Asian HNW individuals and families continue to grow in number and wealth. Their needs, and those of the generations to follow them, will evolve and develop as they lead increasingly global lives with varied interests. It is those fiduciary experts that fully immerse themselves in the region, who are able to cater to the varied demands and respect the traditions, while keeping abreast of developments within the sector, who will win the trust of clients looking to ensure their legacy is secure and successfully passed on  to the next generations.

Nerine Trust Company (Hong Kong) Limited
Suite 1703
17th Floor Central Plaza
18 Harbour Road
Wanchai
Hong Kong
Tel: +852 3125 1200Fax: +852 2537 7624
Melanie.Ison@nerine.com.hk

A report from MHA MacIntyre Hudson and Charity Finance Group based on a survey of over 120 trustees has raised concerns about complacency on financial governance within charities.

57% of respondents said that they understood strategic financial governance matters well or very well, with only 12% saying that they had a poor or inadequate understanding. This is very positive and indicates that boards are taking financial matters seriously.

Yet 84% of respondents said that it would be beneficial for their charity to have a better understanding of strategic financial governance matters.

This could be linked to the fact that only 16% of respondents always assessed board competency for charity finance skills, with 28% assessing skills sometimes and 30% occasionally. This was compounded by the fact that 47% of respondents never or only occasionally assessed the effectiveness of their financial governance.

Other interesting findings were:

Commenting on the findings of this report, Sudhir Singh, Partner and Head of Not for Profit, MHA MacIntyre Hudson said: “Strong financial governance is a major contributor to successful and effective charities, so whilst we don’t want to be overly critical of the good intentions of most trustees and charities, it is difficult to escape the very clear conclusion that many people just need to do better.

Andrew O’Brien, Director of Policy and Engagement, Charity Finance Group said: “This report is an important wake up call for the charity trustees and executive teams. Every charity should be regularly assessing its skills and understanding at board level to ensure that it has the ability to govern itself financially. There are lots of resources out there, but charities need to make a commitment to using them Complacency is simply not an option.”

(Source: MHA MacIntyre Hudson)

Lindsay Leggat Smith is a Scottish solicitor who has worked in the international trust and company services field in Monaco for some 30 years. Following the recent acquisition of Carey SAM in Monaco by international professional services provider Equiom Group, Lindsay continues to serve as Chair of the Monaco operations, where a significant part of the business relates to cross-border inheritance issues, an area in which Lindsay has considerable practical experience.

 

What are currently the hottest topics being discussed in relation to wills and probate in Monaco?

Without a doubt, the hot topic of the moment is Monaco’s enactment in June of this year of Law No. 1.448, which brings welcome clarity to many facets of private international law. These include such matters as the competence of the local courts, recognition of foreign judgements and public documents, conflict of laws, various forms of contractual obligation and importantly, matters involving the person being capacity, marriage, divorce and separation, adoption and maintenance provisions. Inheritance (“Succession”) is dealt with at Chapter V of Section II. The principal change relates to the introduction of the concept of professio juris into Monaco law. While this principle, which allows individuals to choose the law applicable to certain of their activities, is now to extend to several areas such as marriage, divorce and separation and certain contracts, its effect is likely to be felt mainly in the field of inheritance.
Monaco is henceforth aligned with the principal provisions of the European directive, allowing choice of law in matters of inheritance, with the choice now being available between the law of the place of last domicile or the deceased’s national law. Nationals of common law countries who reside in Monaco may thus now submit the administration of their estates to their respective national law as opposed to the civil law of Monaco, their place of domicile. This can often be of interest to testators unfamiliar with local law who are reluctant for it to be applied to their estate, and in particular the civil law principle of forced heirship. Law 1.448 has the effect of extending to simple Wills the essential features of Monaco’s Law No 214 of 1935, which still regulates Will Trusts written by common law nationals in Monaco. Failure to make a choice will result in Monaco law being applied to its full effect.

 

What are the challenges associated with operating in this sector?

Monaco is home to individuals of 130 different nationalities, so the main challenge of catering to the inheritance needs of this clientele stems from the huge diversity of the issues which can present themselves. These are often very complex, involving questions of law and taxation, in particular in several jurisdictions at once - in circumstances where the heirs of a deceased Monaco resident are themselves located in different countries. Complex family relationships also arise in cases where a deceased may have children from several marriages. Executors and Trustees often find themselves facing questions which go beyond matters of estate administration. The work is stimulating and allows a great deal of interaction with our network of colleagues and contacts overseas.

 

What do you think lies on the horizon for wealth management?

Opinions will differ, but it may turn out that the effects of the seemingly unstoppable rush to transparency in all walks of life will dictate or at least greatly influence wealth management strategy for the immediate future. Beneficial Ownership and Trust Registers, FATCA and CRS automatic exchanges of information, and Legal Entity Identification numbers for securities transacting in Europe are all measures designed to track and record investments and assets held by individuals and, to a lesser extent, businesses. These latter are, however, subject to no less intrusive controls at various levels. Leakage of information through investigation, theft, hacking and the like will be exploited on social media. The overall result will be a continuing drive towards investments which are beyond reproach, transparent, fully reported and taxed, and socially sustainable.

 

Carey SAM recently became part of Equiom– could you tell us a bit about the acquisition?

Carey SAM in Monaco joined Equiom Group in late September but we are already seeing the impact of this exciting new development. The acquisition process was most harmonious and it is obvious that we share many common values. Equiom is a multi-jurisdictional business with offices in many leading international financial centres. The Group’s focus is entirely aligned with ours – attaining the best possible outcomes for our clients, wherever they are and whatever their needs. Being part of Equiom Group will give us that extra reach and opportunity to work with our new colleagues towards that goal.

Website: www.equiomgroup.com

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