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How likely is a customer to leave his wealth manager?

By Aggie Anthimidou 11 Jul 2016

The following is an excerpt from a report written in collaboration with Forbes Insights: The Rise of Bionic Wealth.

Data holds the answer

What are the chances of a customer leaving a wealth manager? On the surface, it seems the answer might be guesswork based on a vague sense of that investor's complex history. With data—the analytics to make sense of information collected from customers' digital footprints across their banking experience—the answer can be precise. Even more significant, the loss of the business can be predicted, action can be taken and attrition prevented.

Consider the viewpoint of wealth managers about trust. A little over a quarter of all wealth managers surveyed say that deep personalization is the best way to build trust with clients. Almost half (45%) say that detailed analysis of financial results and performance is the dominant driver of trust, an underestimation of the value placed on performance by clients. But all the data in the world won't bring value without the right tools.

Beyond legacy systems

Many banks are running on technology built in the last century. A catastrophic IT systems failure froze the accounts of 12 million customers of a major bank in 2012. Legacy systems are typically unable to manage the risk and complexity of a banking environment that is becoming more complex every year; they can't scale with the growth of data. Failures and breaches of varying magnitude are the cost of complacency. Indeed, a significant number (42%) of wealth managers surveyed believe that legacy systems are "somewhat of a problem."

In fact, they underestimate the harm behind legacy systems. "Legacy systems are a huge issue in the industry, a significant hurdle to innovation," says François Monnet, head of private banking for Greater China at Credit Suisse and the sponsor of its digital private banking project in Asia Pacific. "A lot of banking systems have been built in silos where the credit system is not fully integrated with the front end, and developing a platform that hand-builds data in near real time to provide insights to clients is a multiyear investment of the highest possible complexity."

For its digital private banking platform, Credit Suisse used a buy-and-build strategy that combined in-house systems it owns with technology from a selection of vendors, including a core banking system. The result is an app that gives clients access to account information, personalized insights and tools to respond to the markets and collaborate with advisors. Says Christian Huber, chief operating officer of the firm's Asia Pacific private banking operation and Monnet's colleague, "Our digital private banking platform is built around the empowerment of a segment we call validators—clients who want to be engaged and prefer to retain control of their investments. But we didn't build it for our clients; we built it with our clients, through many iterations, based on feedback from them and our relationship managers."

Huber points to one of the key questions for the industry: how comfortable banks feel about having client data on mobile devices in the effort to build closer working relationships with wealth managers. "At Credit Suisse, maintaining client and data confidentiality and security are our priorities—and we invested a lot of money on security to ensure mobile client data in a secure environment," he says. "For wealth management, it's important to keep the client engaged and empowered—and we strongly believe that when it comes to serving our clients, the combination of having our wealth managers work with clients in tandem with technology is a winning proposition."

Yet many wealth managers surveyed feel ill-equipped to handle the varied needs of their clients. Almost 40% say it's challenging for them to balance the different investing and communication styles of their different clients. An equal number of advisors say they are challenged by the amount of time they have to spend with older clients overall and that technology is a factor. A telling result: 40% say they are more comfortable with technology to communicate and find it challenging to meet in person with clients. This is where the digitization of information and service can give wealth managers the time to deepen relationships.

Data builds trust

Delivering personalized service and results is all about analytics and channels. Business intelligence software can capture financial and customer data and offer predictive modelling that determines the "next best product" from a world of complex options, targeted to the client. The future value and profitability of that client—each client—can be assessed. The right product gets presented to the right client, at the right time. Putting those capabilities on top of a mobile platform gives wealth managers the ability to make decisions on the go, while clients are on the go. A significant percentage of clients surveyed (62%) say they want wealth managers to send information about their investments and financial solutions to any of their devices, wherever they are.

"Information is delivered quicker, with less detail, but to some extent it is more substantive," Gatesman says about digital platforms. "Advisors can distil advice to three or four major points and give clients the core why to recommendations versus broader, elaborate explanations. It becomes a pointed delivery through a smartphone or Skype or Facetime with the next generation of investor."

Banks have to deliver information in an experience-driven way. Having all the channels available to respond to individual preferences is essential. Calls are certainly effective in certain circumstances, not necessarily to educate clients on complex matters. A video conference with screen sharing, for example, is efficient and rewarding. So is an online conference with an expert. Technology enhances the intimacy and immediacy of the client relationship. After all, video is a face-to-face experience.

About the research:

To gain a unique view into the experiences of both clients and advisors as the wealth management industry faces change, Forbes Insights, in partnership with Temenos, surveyed more than 60 wealth managers and 35 High-Net-Worth (HNW) clients about the evolving banking experience—how they communicate, their needs and the importance of technology. More than half of the executives surveyed are CEOs, and almost 30% are heads of asset management. Three-quarters of the executives are evenly split across Asia Pacific, Europe and North America. Almost 90% of clients surveyed have net worth between $1.4 million and $7 million. This report outlines the key findings from the research, with commentary from executives at three leading investment and private banks.

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