ING has aligned its asset allocation for the Netherlands, Belgium and Luxembourg as of October, as the next step in the centralisation of its investment policy. In the meantime, the private bank has reorganised its customer service in order to create order in a “jungle of service concepts”.
This is evident from an interview with Head of the Investment Office Bob Homan (photo, left) and Leon Wijnands (photo, right), Director of Private Banking & Wealth Management. The interview took place as part of a series of Fondsnieuws, (Investment Officer Luxembourg’s sister publication) on private banking, in which all major private banks in the Netherlands will take part in the coming weeks.
“In recent years we have been talking to clients about the question: what do you expect from a private bank,” said Wijnands about the reason for the reorganisation that was completed in July - with some of the wealth and investment advisors leaving. “Customers turned out to expect more insight from us. As a bank, you tend to wave jargon, technology and returns around without first understanding where the client’s wealth comes from and where it is going.”
In the meantime, the bank was engaged in soul searching, continued the head of private banking. “We banks have created a jungle of personal banking, private banking light, remote banking, wealth management, you name it, by piling up all kinds of different service concepts. As a client, you are sometimes played back and forth between different departments, depending on the size of your assets. Clients don’t expect that.”
The results of the study and the self-reflection led to a new classification of clients at the private bank, namely according to the nature of the assets. A relationship manager now focuses on either private wealth or entrepreneurial wealth.
Wijnands explained further: “The wealth of one group of people is built up through employment or inheritance, and that of the other group is acquired through entrepreneurship and from being active in a company. Not only do both groups of people have a different DNA, but the complexity, issues and taxation are also different in both cases.”
Aspirations
He is convinced that private bankers understand their clients better with this new classification. “If you know where someone comes from, you can also better understand where they are going, and have a better aspirational conversation.”
In the months leading up to the change in July, ING’s private bankers practised these aspirational conversations on each other. Wijnands was no exception. During their conversation with a private banker, for example, he and his wife discovered that behind their investment goals lies the dream of a motor home. One which they could take around the world.
“That has not changed anything in our investments, but it has given us more peace of mind. Peace that we also want to create with our customers.”
In ING’s new model, such discussions take place once a year, face to face. The rest of the communication is mainly digital, whereby a client can arrange many things himself in the app and if desired - with investable assets of 1 million plus - sometimes his relationship manager can join in via a telephone call or online meeting.
The embrace of the digital model has brought about another innovation at ING, namely the transition from regional expertise to a central, nationwide expertise centre that is accessible and available to customers throughout the country. According to Wijnands, this involves a “heavy expertise centre in the field of investments and a heavy expertise centre in the field of lending”.
Centralisation of the Investment Office
As far as the investment department is concerned, the Investment Office has also undergone a centralisation move, with the integration of the offices in the Netherlands, Belgium and Luxembourg. The first step was taken in March, by standardising the instrument selection. Since 1 October, the integrated Investment Office has also been working with a single asset allocation. Homan: “So if we are going to consider IT in the portfolios, we will do that in the entire Benelux, not just in the Netherlands or Belgium.”
According to Homan, the coronavirus has accelerated the centralisation with the introduction and embrace of online meetings. “In the past, opinions on the best investment ideas were somewhat more divided by country, partly because we often sat together in a meeting room per country. Now everyone prepares their investment ideas separately and forms their own opinion about the other ideas. There is more equality now.”
Sustainable investments
From clients, the flow towards sustainable strategies is still greatest, as it will be in 2019 and 2020. Partly thanks to the good returns, Homan said he thought. Although customers indicated in ING;s monthly barometer that a sustainable investment can cost as much as 2 per cent of their return, past experience has shown that after a number of bad years for sustainable investments, customers may suddenly find that a different strategy becomes interesting again. Homan explained: “But in their minds, people are willing to forgo some return for sustainability, and that’s already quite something.”
He also said he expected that the flow of money to sustainable companies will continue for some time, and that this will benefit the prices of sustainable companies. “Ultimately, the cost of capital of sustainable companies is lower than that of the polluters, and therefore the return for an investor. Over the next five years, that effect will be offset by the flow of capital to such companies, creating valuation differences that are sustainable for the time being.”
Finally, what does the low interest rate mean for the portfolios at ING?: “The world changes less than you might think,” said Homan. “The idea that if you take more risk, your chances of return increase, is still valid. In practice, you see that the return expectation of profile 1 - with 90 per cent bonds, the most defensive profile - is perhaps 1 per cent. That is higher than the savings rate, but we do see that people then decide to shift slightly in investment risk and move to another profile.