Relationship Capital and Wealth Management Advisors

Over the next 15 years the largest transfer of wealth from one generation to the next will be taking place here in the United States.

The demographic shift will be particularly significant from 2010 onward.

Historically, retail banks have been product-centric businesses.   

Many retail banks are just beginning to transform to their relationship capital management processes to capture the business opportunity.  Many are seeking to be Trusted Advisors which requires very strong relationship capital.

Successful Wealth Management revenue growth is almost entirely due to the relationship the Wealth Advisor has with the client or prospective client.

92% of high net worth individuals (HNWI) plan to transfer their wealth to their family.

To preserve relationships across generations, wealth managers are looking to understand the characteristics of the next generation, such as:

•         much greater use of technology

•         increased demand for exposure to international and ethical/’green’ investments

•         demand service in multiple geographies

•         has an international social network influencing investments

•         less risk averse and looking for high performance.

Wealth managers try to build relationships with the next generation through wealth education programs and peer group networking events, and seek to understand who will be the inheritor(s).

To enhance the customer experience and increase relationship capital, it is important to understand what customers seek of wealth advisors:

Most likely the customers do not think so…. 44% of customers judge their experience as bland and uneventful.

…whatever you think…. 80% of companies believe they deliver a "superior experience". Their customers say only 8% of the companies are truly delivering a superior experience.

…and it is costing you lost revenue…. Fewer than 30% of Fortune 1000 companies can identify their most valuable customers. Companies do rarely understand their customers - their value, potential or the experiences they value.

…and it is not about IT…. CRM initiatives often equals IT projects. The human factor, i.e. “customers formerly known as people”, is neglected.

…and it is not about more product features and functionality…. 69% of customers say that emotions account for more than half of their experience

…and it is not really about your own organization…. The ability to create an effective customer experience and drive adoption is one of the most critical scaling factors for ROI. 

95% of senior business leaders now think that Customer Experience is the next competitive battleground.

CHALLENGES in Wealth Management Collaboration

The Segmentation Challenges:

1. To manage ever more complex client demand, traditional segmentation by size of funds (Assets Under Management - AUM), is increasingly exchanged for segmentation by:
• Behavior and involvement
• Demographics and cultural background
• Willingness to consume services.
2. Dynamic, client/needs based service models are required
3. The “Mid-Tier Millionaire” segment is difficult to serve
4. Wealth managers are looking at new ways of becoming a ‘trusted advisor’ to their clients, rather as a lawyer or accountant might be.

High Relationship Capital with Clients = Trusted Advisor Status =ROI

Challenges related to Sales Effectiveness:

1. For the firms, the need to maximize the productivity and client-facing time of existing relationship managers is more relevant than ever
2. Main challenges to accomplish a productivity lift will be to reform and automate current processes
3. Leading firms agree to the need of providing wealth management advisors with better tools to support more in-depth relationships with more HNW clients
4. Uncertainty if applied Key Performance Indicator’s drive correct sales behavior within the sales force
5. Relationship manager must be experienced and skilled to be able to deal with Ultra-HNWI clients (social skills, intelligence, product understanding)

Client Reporting Challenges:

1. Client reporting is constantly under pressure to aggregate more and more information and still be understandable and easy to read for clients
2. Complexity is added by e.g.:
• Changing client investment needs
• New products
• More and more real time updates
• Global clientele requiring efficient servicing of their global needs.
3. Wealth managers need to deal with many different tax and regulatory regimes is making operations increasingly complex to manage and has added further complexity to performance tracking and client reporting
4. Dissatisfaction with reporting and the subsequent perception of lack of transparency generated by this is a big problem
• Client reporting is perceived as a major concern in the US and UK and the main reason for loss of clients
• This however seems to be less of a problem in Switzerland.

In summary, new Wealth Management business models are being created so that measurable interactions between Wealth Advisor and client are tracked in order to deliver a quality experience that drives greater revenue and profits.

With all the proliferation of information technology that supports the creation and delivery of client reports, it is the successful collaboration between Wealth Advisor and the HNWI Client that drives higher accumulation of Relationship Capital that ultimately generates revenue and profits to the organization.

• Whether it is the trusted relationship the client has with the wealth advisor…
• Whether it is the relationship the client has with a real-time web-based asset reporting software agent…

These relationship interactions whether between people or between people and software will be measured and added to the credit side of the Wealth Advisor’s relationship capital account or subtracted by posting to the debit side of the ledger.

Email Rob or Post a Comment via TNNW Blog.
 

Sign up for our newsleter;
Email a friend.