Offering premium services to lure privileged clients

Offering premium services to lure privileged clients

Rudijanto, Contributor, Jakarta

In the current tough market, Indonesian banks must improve the
quality of their services and products if they want to remain
competitive.

For many banks, their future relies on their existing big
customers. This explains why the competition in alluring premium
clients is getting stronger.

Although this market segment accounts for only about 20
percent of bank customers, the value of their savings and
deposits is far higher than the remaining 80 percent of clients.

For many banks, such as Citibank, ABN-AMRO and American
Express, Bank Danamon and Bank Internasional Indonesia (BII),
providing premium banking services to their privileged clients is
not only aimed at retaining their important customers but also at
raising their fee-based income.

Banks are having to be more creative in diversifying their
sources of income because dropping interest rates are likely to
result in the decline of their traditional revenues such as
earnings on interest.

"Certainly, the competition to win (big) clients is tougher
but the market also grows bigger. Competition makes the market
better," ABN-AMRO's head of consumer banking, Suhail Chander,
said.

Banks estimate their premium clients contribute 80 percent of
their total funds. They have different approaches in meeting the
demand for more personalized services from their important
customers. Indonesian banks generally offer valued clients extra
asset management services.

With dropping interest rates, fixed-income investment options
such as savings and deposits are no longer attractive as people
seek other investment alternatives to get higher returns.

"Customers look beyond deposits to alternative solutions.
Eventually, all banks will have to offer complete solutions,"
Citibank head of wealth management K.S. Jagannadhan said.

American Express (Amex) is attracting these clients with
Centurion World, which offers its members a number of financial
benefits.

It also offers exclusive lifestyle benefits to its premium
clients. Such benefits include invitations to exhibitions and
investment seminars, luncheon and dinner events and golf
tournaments.

"Since premium clients are an exclusive group with high
incomes at their disposal, their requirements are towards
specially formulated benefits in wealth management, especially in
investment-related products," Amex head of customer loyalty Brian
Powell said.

Each member of Amex's Centurion World had a financial
assistant to handle their American Express accounts, Powell said.
"Relationship managers" offered a range of services such as
providing information on investment products, returns and
interest rates, he said.

Almost all banks targeting the premium sector provide
dedicated managers. These managers' task is to maintain long-term
relationship with the clients and provide advice on various
options for investment.

Investment advice and alternatives offered to privileged
clients vary from one bank to another. Some banks offer the stock
market as a high-yield, high-risk investment option while others
prefer to provide safer advice.

"We do not suggest the stock market due to its high
fluctuations now. But we offer them safer options such as mutual
funds," BII director of consumer banking Rudi N. Hamdani said.

Other banks such as ABN-AMRO offer privileged clients a
mixture of investment alternatives, including life insurance,
mutual funds and property. The bank leaves the decision on what
types of investments to make to the clients.

"Basically, we do not ask them to put their money in certain
products. We just advise them, for instance, to put a certain
amount in life insurance, some in property and some in other
products. But they are the ones who make the decision," Chander
said.

Bank Danamon provides a fund manager to guide clients to
select appropriate investments. The bank has a unique "investment
gallery" with online access to the Jakarta Stock Exchange, Bank
Danamon executive vice president for customer wealth management
Carolina Dina R.S says.

With various investment alternatives, affluent clients can
find many different ways to invest their money.

Some bankers say the current situation where many investments
are weighted towards bank deposits rather than other options is
far from ideal.

"The current conditions (in which we operate) where the yield
is already fixed and the money deposited in banks is guaranteed
by the government is not healthy at all," ABN-AMRO vice
president/head of marketing and product development Elwin Karyadi
said.

Compared to other countries such as Taiwan and Singapore,
Indonesians were still far more saving-minded than investment-
minded, Karyadi said. But he believed becoming an investment-
focussed society was a gradual process.

The government's plan to issue bonds every month is also
expected to provide more incentives for people to shift from
deposits to other products.

"We are moving in that direction. It is a matter of time
before that happens. I think in the next two-to-three years it
will become easier to advise clients to invest in non-deposit
products," Chander said.

But not all people are entitled to enjoy this banks' premium
services. Only those with deep pockets are approached. How deep
their pockets are depends on each bank's definition of premium
clients.

Amex only admits those with a minimum deposits of US$50,000 to
its Centurion World membership. Bank Danamon requires those who
want to enjoy its premium service PrimaGold to deposit a minimum
of Rp 1 billion (about $116,000).

ABN-AMRO does not approach clients based on their deposits but
on their cash potential. While certain clients have only small
accounts at ABN-AMRO if they have large amounts of cash in other
banks they are treated as preferred clients.

"Setting the minimum amount for this service is not the right
approach. We have to consider the total availability of funds,
not the funds already deposited with our bank," Chander said.

Certainly, banks' success attracting premium clients does not
depend on the reward programs that they offer but more on the
service, advice and, most importantly, the returns they provide
their clients.

In the end, the bottom line counts. In this climate, clients
are more than ready to move their funds to competitors or to
better investment options. This attitude has nothing to do with
loyalty or disloyalty, it is about a return on capital.