Better supporting clients with behavioural finance #3: the role of the private banker
The private banker is the trusted ally and primary contact for their clients. To earn the trust of the often very diverse profiles that make up their portfolio, they must constantly adapt. This is where behavioral finance comes into play, providing them with the keys to better understand and meet their clients’ expectations.
Three questions for... Laëtitia Boschung, Private Banker in Wealth Management at Societe Generale Private Banking France, by Edouard Camblain, behavioural finance expert and investment advisor.
How do you envision the role of a private banker? What types of clients do you support?
I would say that, broadly speaking, my clients fall into two main categories. The first group consists of relatively young clients, with an average age of 37, mainly working in the technology sector. The second half is made up of a more traditional clientele, split between business leaders who have recently sold their companies and a "long-standing" client base. With the latter, I tend to play the role of a confidante, whereas my younger clients are less inclined to seek this type of relationship.
Regardless of the client, I work in partnership with them. When we meet with an investment advisor, I provide a different perspective that reassures them—less technical than that of the advisor.
What types of biases do you encounter?
In the tech world, we observe biases known in behavioral finance as impulsivity and “mental myopia.” These profiles, which are primarily young, focus on the very short term and have not yet adopted a long-term investment mindset. I also note a strong cultural bias linked to the ecosystem in which they operate, which results in similar ways of behaving, investing, and gathering information within this community. With little time to devote to their wealth, they also prefer simplicity, reasoning in terms of gains or by imitating their peers from the same background. In this case, we talk about heuristic and availability biases.
Different biases come into play with a more traditional clientele. Many prefer to review their portfolio quarterly or, for some, only once a year at year-end, often with a very conservative approach. They have worked all their lives, are approaching retirement, and sometimes develop a risk aversion bias. They call me at the slightest market movement because they really want to protect their savings and enjoy the fruits of a lifetime of work. Some are also victims of the herding bias: they follow the market trends, selling and buying when everyone else does.
How do you adapt to these diametrically opposed profiles?
Behavioral finance is very useful for adapting to the profiles and expectations of my clients and responding to them as effectively as possible. For the more traditional clients, relationship-building is key. They seek trust, want to enjoy their new phase of life, and look to delegate. However, they also ask many questions and are very much in need of advice. I offer them regular meetings and appointments. I reassure the most anxious clients to guide them toward better returns.
For clients from the tech sector, the challenge is to build a long-term relationship in an environment where they are highly solicited and may favor an opportunistic approach. I support them early in their careers and make sure to closely monitor all developments and trends in the sector that may affect them.
Read the first article of the series: Better supporting clients with behavioral finance #1: wealth planning
Reas the second article of the series: Better Supporting Clients with Behavioral Finance #2: Investment Advisory
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