Offering premium services to lure privileged clients<\/p>\n
Rudijanto, Contributor, Jakarta<\/p>\n
In the current tough market, Indonesian banks must improve the
\nquality of their services and products if they want to remain
\ncompetitive.<\/p>\n
For many banks, their future relies on their existing big
\ncustomers. This explains why the competition in alluring premium
\nclients is getting stronger.<\/p>\n
Although this market segment accounts for only about 20
\npercent of bank customers, the value of their savings and
\ndeposits is far higher than the remaining 80 percent of clients.<\/p>\n
For many banks, such as Citibank, ABN-AMRO and American
\nExpress, Bank Danamon and Bank Internasional Indonesia (BII),
\nproviding premium banking services to their privileged clients is
\nnot only aimed at retaining their important customers but also at
\nraising their fee-based income.<\/p>\n
Banks are having to be more creative in diversifying their
\nsources of income because dropping interest rates are likely to
\nresult in the decline of their traditional revenues such as
\nearnings on interest.<\/p>\n
\"Certainly, the competition to win (big) clients is tougher
\nbut the market also grows bigger. Competition makes the market
\nbetter,\" ABN-AMRO's head of consumer banking, Suhail Chander,
\nsaid.<\/p>\n
Banks estimate their premium clients contribute 80 percent of
\ntheir total funds. They have different approaches in meeting the
\ndemand for more personalized services from their important
\ncustomers. Indonesian banks generally offer valued clients extra
\nasset management services.<\/p>\n
With dropping interest rates, fixed-income investment options
\nsuch as savings and deposits are no longer attractive as people
\nseek other investment alternatives to get higher returns.<\/p>\n
\"Customers look beyond deposits to alternative solutions.
\nEventually, all banks will have to offer complete solutions,\"
\nCitibank head of wealth management K.S. Jagannadhan said.<\/p>\n
American Express (Amex) is attracting these clients with
\nCenturion World, which offers its members a number of financial
\nbenefits.<\/p>\n
It also offers exclusive lifestyle benefits to its premium
\nclients. Such benefits include invitations to exhibitions and
\ninvestment seminars, luncheon and dinner events and golf
\ntournaments.<\/p>\n
\"Since premium clients are an exclusive group with high
\nincomes at their disposal, their requirements are towards
\nspecially formulated benefits in wealth management, especially in
\ninvestment-related products,\" Amex head of customer loyalty Brian
\nPowell said.<\/p>\n
Each member of Amex's Centurion World had a financial
\nassistant to handle their American Express accounts, Powell said.
\n\"Relationship managers\" offered a range of services such as
\nproviding information on investment products, returns and
\ninterest rates, he said.<\/p>\n
Almost all banks targeting the premium sector provide
\ndedicated managers. These managers' task is to maintain long-term
\nrelationship with the clients and provide advice on various
\noptions for investment.<\/p>\n
Investment advice and alternatives offered to privileged
\nclients vary from one bank to another. Some banks offer the stock
\nmarket as a high-yield, high-risk investment option while others
\nprefer to provide safer advice.<\/p>\n
\"We do not suggest the stock market due to its high
\nfluctuations now. But we offer them safer options such as mutual
\nfunds,\" BII director of consumer banking Rudi N. Hamdani said.<\/p>\n
Other banks such as ABN-AMRO offer privileged clients a
\nmixture of investment alternatives, including life insurance,
\nmutual funds and property. The bank leaves the decision on what
\ntypes of investments to make to the clients.<\/p>\n
\"Basically, we do not ask them to put their money in certain
\nproducts. We just advise them, for instance, to put a certain
\namount in life insurance, some in property and some in other
\nproducts. But they are the ones who make the decision,\" Chander
\nsaid.<\/p>\n
Bank Danamon provides a fund manager to guide clients to
\nselect appropriate investments. The bank has a unique \"investment
\ngallery\" with online access to the Jakarta Stock Exchange, Bank
\nDanamon executive vice president for customer wealth management
\nCarolina Dina R.S says.<\/p>\n
With various investment alternatives, affluent clients can
\nfind many different ways to invest their money.<\/p>\n
Some bankers say the current situation where many investments
\nare weighted towards bank deposits rather than other options is
\nfar from ideal.<\/p>\n
\"The current conditions (in which we operate) where the yield
\nis already fixed and the money deposited in banks is guaranteed
\nby the government is not healthy at all,\" ABN-AMRO vice
\npresident\/head of marketing and product development Elwin Karyadi
\nsaid.<\/p>\n
Compared to other countries such as Taiwan and Singapore,
\nIndonesians were still far more saving-minded than investment-
\nminded, Karyadi said. But he believed becoming an investment-
\nfocussed society was a gradual process.<\/p>\n
The government's plan to issue bonds every month is also
\nexpected to provide more incentives for people to shift from
\ndeposits to other products.<\/p>\n
\"We are moving in that direction. It is a matter of time
\nbefore that happens. I think in the next two-to-three years it
\nwill become easier to advise clients to invest in non-deposit
\nproducts,\" Chander said.<\/p>\n
But not all people are entitled to enjoy this banks' premium
\nservices. Only those with deep pockets are approached. How deep
\ntheir pockets are depends on each bank's definition of premium
\nclients.<\/p>\n
Amex only admits those with a minimum deposits of US$50,000 to
\nits Centurion World membership. Bank Danamon requires those who
\nwant to enjoy its premium service PrimaGold to deposit a minimum
\nof Rp 1 billion (about $116,000).<\/p>\n
ABN-AMRO does not approach clients based on their deposits but
\non their cash potential. While certain clients have only small
\naccounts at ABN-AMRO if they have large amounts of cash in other
\nbanks they are treated as preferred clients.<\/p>\n
\"Setting the minimum amount for this service is not the right
\napproach. We have to consider the total availability of funds,
\nnot the funds already deposited with our bank,\" Chander said.<\/p>\n
Certainly, banks' success attracting premium clients does not
\ndepend on the reward programs that they offer but more on the
\nservice, advice and, most importantly, the returns they provide
\ntheir clients.<\/p>\n
In the end, the bottom line counts. In this climate, clients
\nare more than ready to move their funds to competitors or to
\nbetter investment options. This attitude has nothing to do with
\nloyalty or disloyalty, it is about a return on capital.<\/p>",
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