Head of Private Banking VTB Dmitri Breitenbikher in an interview with Kira Altman in the framework of the program “3 D: Business, Money and Friends” spoke about the attitude to money of different generations of customers and how to maintain and increase capital.
Dmitry, when we began to prepare a series of programs “3 D: Business, Money Friends”, I immediately thought of you, because your customers are people who have money. And, as you said earlier in one interview, “before you offer something to the client, you need to make friends” …
Dmitri Breitenbicher: This idea is not new, and the thought is not mine, it’s a Chinese proverb that, yes, I like it, because it reflects the essence of the Private Banking business. I like to repeat that wealth is the result of the ability of a person to think. So our friends are smart and interesting people. And you need to be friends with those who are better than you. You will suffer, but grow. And if this is your business, then the business will grow. As of the end of the first three quarters of this year, Private Banking’s business in the VTB Group grew by more than 15%, exceeded 1.3 trillion rubles. According to our forecasts, by the end of the year more than 20% of the increase in funds under management is expected. This is twice as fast as the market.
The reason is the right relationship? In friendship?
Dmitry Breitenbikher: One friendship is not enough, clients need more professional expertise and efficiency of interaction with the bank. We have both.
Are you talking about the business of the merged bank VTB and VTB24?
Dmitry Breitenbacher: Yes, but only about PB segment. The fact is that in the united department for working with wealthy clients we will also be responsible for the premium segment “Privilege” – this is another trillion of resource portfolio.
This is more than two trillion – a huge business.
Dmitry Breitenbacher: Yes, great business and new great opportunities connected with joining. And great opportunities give rise to great ambitions. And such integration within the same department of management procedures for the Private Banking and Privilege segments, on the one hand, will enable the raising of customers and the increase of the average check, and on the other hand it will ensure the “seepage” of personal work with each client into a larger mass segment, in the bank. This, in my opinion, is also an important element in building work with wealthy clients.
Dmitry, the cycle of programs “3 D: Business, Money Friends” will start with the case, for each of your customers it is.
Dmitry Breitenbacher: Yes, and often not one. Most of the Russian clients of Private Banking created their own business from scratch. Overcome obstacles, made mistakes and began again. They did not just invest money in their business, they invested in everything themselves. Hence the attitude to their own business, to their business, as to a living being.
Somehow too pompously sounded …
Dmitry Breitenbacher: I understand your skepticism from the pathetics of this comparison, but the parallels between business and a living organism are quite appropriate. See, any business also has its own life cycle. He is born with a little idea, even with a dream. Then it develops and grows. Business can be destroyed due to management errors. Or maybe the natural “aging” and sunset of the company. As a rule, this happens because the idea that lay at the bottom of this business has exhausted itself. But in business there is an opportunity to avoid it: it is necessary to offer a new idea or radically change the old one.
As they say, “to give up good in favor of the best” …
Dmitri Breitenbicher: Exactly, and now, when the rate of change is extremely high for the preservation and development of business, these updates need to be done more frequently, outstripping general market changes. Since usually by the time when the need for change becomes obvious, it’s too late to change. And to begin to change earlier, courage is needed.
This is a rare quality for our society …
Dmitry Breitenbicher: I agree. The majority prefers to be content with the small. Much easier to complain forever – it’s not so, it’s not that, here they did not give me, they offended me. As a result, passivity and some kind of childish expectation that someone will do something for you, the circumstances will go well and so on.
But the train has already left ..
Dmitry Breitenbacher: That’s just the point, that many do not understand that yesterday was yesterday, and every morning they wake up with last year’s thoughts in their heads.
I agree, today, especially on television, there are a lot of talk shows, where people gather and discuss: here it was before, there will be more, solid talking heads …
Dmitry Breitenbacher: The issue here is not the format, but the content. It is important that the head and what they say. So for wealthy people, philosophy is very simple: to live not life expectancy, but to live and do today. Every person at every moment of life makes a choice: who to be, what he should be, with whom he should be. It is the readiness for such choice and responsibility for its choice – the key overall quality of a businessman, an entrepreneur in Russia. You see, these are people of business. And the attitude to his work as a constantly changing, improved product of his own creativity is the basis of self-realization. Therefore, the case is one of the important factors in the quality of life of a wealthy person.
We are talking about the fact that business is an important factor of self-fulfillment and filling the life of your customers. I want to ask about the money and the attitude towards them.
Dmitri Breitenbicher: In the practical sense – to spend or save? Here, just the relationship can be diametrically opposed, from extremely scrupulous, even to trifles, to the exponentially broad.
And what about the well-known expression “the saved ruble – the earned ruble”?
Dmitri Breitenbicher: I assure you, it’s not a question of their economy or rational use. On one “economy” the state can not be built exactly. If you see a big business, it means that one day someone took a very big risk. Therefore, these people are united by the attitude to the money that is invested in business. They are somehow simpler and more aware of the possibility of losing this money.
That is, any investment is a risk …
Dmitry Breitenbacher: You will never win big, if you only minimize losses. After the decision is taken, work is begun on maximizing the return on these investments, which completely overshadows the fear of losing them. This is an entrepreneurial trait, which, in fact, contradicts even the human nature itself. The scientifically established fact is that the sensation of losing a certain amount is twice the pleasure of its acquisition. Therefore, we are genetically inclined to shy away from risks stronger than that required by analysis and common sense.
So money is not an end in itself, is it a means?
Dmitry Breitenbacher: Of course, it’s a remedy. This is in any textbook on economics written that the function of money: a means of exchange, a means of evaluation, a means of accumulating and preserving value …
I mean that money is not money …
Dmitri Breitenbikher: It sounds, of course, beaten, but that’s what’s interesting. There is such a global study that determines the “index of happiness”. So, there is no strong correlation with the level of income per capita. For example, there, in my opinion, in the top ten most happy Costa Rica, which is ahead of Germany and the United States. Therefore, a number of experts believe that the modern economy needs some dissatisfaction with happiness. A man needs more and more, and so he buys and buys, thereby stimulating the growth of the economy. This pursuit of happiness turns into a dog race after a mechanical hare. As a result, most people become victims of inflation of pleasure accompanying the escalator of growing expectations.
That is, happiness is more difficult to measure thing.
Dmitri Breitenbicher: Or more simple. Remember, “happy simple heart.” It is also worth mentioning the factor of generations. The current generation of clients are people who have undergone a radical change in terms of a guaranteed system of material well-being. Therefore, the task of material well-being for this generation is a matter of confidence in life and recognition. Therefore this generation of workaholics. It does not matter how many there are: someone earns a trip on vacation, someone on the apartment, someone on the island. No matter how much, it is necessary to work.
A new generation does not need it?
Dmitri Breitenbicher: To a lesser extent. They do not perceive the situation, that money is something that can not be at all. Therefore, in the foreground in the value scale is the recognition. And the recognition in the online-created person there with their profile and interface. Orientation to a quick result – in the form of likes. The phrases “long-term project”, “over which you have to work hard” and “earn so much money later” do not motivate them at all.
Since we touched on the topic of the new generation and digitalization of society, several questions in the style of popular online interviews …
Dmitry Breitenbacher: Let me guess. How much do I earn? I can not say – a commercial secret.
Then it’s easier – you see the rap battles?
Dmitry Breitenbacher: Yes. But the point here is not at all trying to join this fashionable phenomenon today. This really has its own aesthetics. In fact, panci are the same epigrams. And, despite the apparent rigidity, there are very bright.
Now, I think VTB can confidently position itself as a bank for all generations. I want to ask about friends and relationships. You said that this is a very important topic for business …
Dmitry Breitenbacher: Of course, Private Banking is a service. The difference from the goods is that the service can not be touched, tried or seen. In fact, a service is a promise. And personal. And if the goods are made somewhere for thousands of kilometers is not clear by whom, then the service is provided by a specific person. And the failure to fulfill this promise can be perceived as a personal insult. Therefore, the positioning of these services should not contain any advertising tricks and tricks, this undermines the basis of business – trust.
I agree that the promotion of services for wealthy customers should be a human face. I myself am very cautious about the joyful faces of models from the photo bank in the advertisement of Private Banking.
Dmitry Breitenbacher: Yes, such as for a carbon paper, stencilled business suits, smiles and handshakes of people who never worked in a bank. You invite the client to enter into certain relationships, and he asks himself – with whom? Who are these people? And the banks in return tend to formalize their company, instead of personalizing it. The consumer wants to see people from flesh and blood, and the company shows him brick and lime – the image of the building and a few symbols relating to their services. And brochures with general phrases about the individual approach and an exclusive set of premium services. Good managers know very well that if a potential client refuses a personal meeting, but asks to send “some information about the bank,” they are unlikely to be able to open an account for him. They know that in order to decide whether or not to trust this person, one must see it. Your marketing should have a human face.
Why? Is it so difficult?
Dmitri Breitenbikher: Because business is very personalized and for each client, something of its own at the current point is of great importance. Therefore, a great temptation to go around the whole spectrum. And when you say everything at once, the risk is high to miss the main thing. There is such an effect, the “party effect”, in my opinion, is called, when you talk to someone and suddenly someone nearby mentions your name, you switch to another discussion and inevitably lose the thread of conversation with your interlocutor.
And yet, what is important in the RV VTB?
Dmitry Breitenbacher: The first is professional expertise and competence. This is already in the DNA of the brand. Only large corporate clients had access, and now thanks to the integration processes in the VTB Group, private customers also have additional opportunities. The second is technology. Here it is necessary to say about remote maintenance and work with databases. The third is a personal approach and cadres.
Is this the secret of the effectiveness of the interaction that we talked about?
Dmitri Breitenbicher: Yes, but I do not think that this is any secret of building work with VIP-clients.
Then why does not everyone invest in it and why does the quality of service in a number of banks leave much to be desired?
Dmitri Breitenbikher: Because such investments are very difficult to quantify. What is the effect and when will they give additional expenses to increase the competencies and education of managers, the number of these managers and their assistants, the technology for a limited number of well-off customers, special client activities to increase loyalty and so on … That is, there are no clear figures that such investments in improving the service will bring more revenue. Therefore, in order to increase profits, banks cut costs, cutting their services down to the limit. As a rule, this becomes the limit of patience of customers.
I have a practical question: what would you recommend to your friends in order to save this money and multiply it?
Dmitry Breitenbacher: There are no universal recipes. Now, against the background of lower interest rates on deposits, customers’ interest in investment products is growing. Since the beginning of the year, the share of investment products in the total customer portfolio of Private Banking Group “VTB” has increased to 22%. Primarily it is investment in bonds of reliable issuers, shares of companies with regular dividend payments, structural products with capital protection and various strategies for individual trust management. I am sure that the trend towards an increase in the share of investment products will continue in 2018. In addition, the understanding of the need to include various insurance programs in the portfolio is gradually coming to light. And this is a clear trend. Insurance is like a parachute. If you do not have it at the right time, you definitely will not need it.
And in terms of currencies?
Dmitri Breitenbicher: We see an increase in the share of ruble instruments in the portfolios of VIP clients, from 35% to 40% since the beginning of the year. An important role in this also played a significant difference in interest rates between currency and ruble deposits amid low inflation, and this difference and the rates for ruble deposits will continue to decline. By the way, in this regard, we have now launched an excellent instrument with a higher yield relative to the deposit – our annual VTB bonds with a coupon of 8%.
And on deposits the same 6-7%?
Dmitri Breitenbicher: Yes, so this is substantially higher than the deposit rate. An additional advantage of the paper, in addition to a higher rate than the deposit, is the absence of personal income tax on the coupon to be paid in the presence of market transactions with these securities and in the event that there is no early sale. By the way, another plus is liquidity, that is, the possibility of selling to the maturity date on the secondary market.
Author: Kira Altman
Article in Russian: BFM.ru