Client satisfaction at UK private banks and wealth managers has improved remarkably, almost to the levels of satisfaction seen prior to the ...

Client satisfaction at UK private banks and wealth managers has improved remarkably, almost to the levels of satisfaction seen prior to the stock market falls of 2000 and 2001, according to the latest survey from Market-Dynamics Research & Consulting, a UK-based consulting firm.

The MDRC study said aggregate client satisfaction increased by 14 per cent in 2004 to reach an index score of 60.8. Using the MDRC model a private bank or wealth manager with an index score of over 75 would be considered to be excellent, a score between 60 and 75 would be rated by clients as “good”, a score between 50 and 60 would be “acceptable” and an index score below 50 would be considered “poor”.

“An industry average score of 60.8 suggests that most clients are generally pleased with the products and service on offer from their wealth manager or private bank,” said the MDRC study.

But the MDRC said that the 14 per cent overall improvement does not adequately show the dramatic improvement in performance at the worst performing firms, or the continuing erosion of client satisfaction at the best performing firms.

The lowest score achieved in 2004 was 50.8, a substantial improvement over 2003 when the lowest score given was 36.6. No firm in 2004 was given a “poor” score and a “good” rating was achieved by 46 of the 96 private banks and private client wealth managers in the survey, a 48 per cent increase over the number of firms rated as “good” or better in 2003.

London-based private bank C. Hoare & Co and UBS in the UK achieved the highest overall client satisfaction in 2004. Both C. Hoare & Co. and UBS achieved a score of 80.2. C. Hoare & Co. also achieved the highest score in a score in 2003 and 2002, while UBS has been in the top quartile in the MDRC survey since 1997.

MDRC said there were two contributing factors to the general improvement in client satisfaction scores:

• Firstly, discussion with the management at more than a quarter of the firms in the survey suggest that most firms have now implemented specific programmes to improve elements of the overall client experience, and to bring the product and service mix closer to client expectations.

  In some firms this is has been in the form of business-wide product and service changes or client facing process re-engineering, while at other firms these programmes have been local initiatives, but both have yielded tangible benefits.

  Interestingly, the sharp improvement in satisfaction at the worst performing firms appears not to be attributable to any single factor, rather the improvement seems to be attributable to modest improvements in the quality of financial advice in their wealth management firm, but they also report an improvement in the satisfaction with their relationship manager and in the products on offer. Many of the firms in the bottom quartile acknowledge that client satisfaction had been of lower priority than reducing operating costs over the past 4 years.

• Secondly, client satisfaction levels have also improved as a result of apparent number of clients who have withdrawn from an integrated wealth management product and returned to an advisory or self-directed model, giving them a greater degree of control over their portfolios and a reduction in management fees. Many of these individuals had been the most vocal in expressing dissatisfaction with the products and services provided by their private bank or wealth manager.

MDRC also examined the client satisfaction trends at firms that are wholly investment or wealth managers compared to those that are full service private banks offering a complete range of credit, banking and investment management services.

Over the 4 years from 2000 - 2004, full service private banks achieved an average rating 19 per cent higher than firms offering solely a wealth management service. In particular, clients of private banks gave their relationship managers a significantly higher rating for the quality of financial advice and breadth of financial knowledge than clients of wealth managers.

In this study wealth managers appear to be less successful in meeting their clients’ wider financial expectations. MDRC said high net worth individuals are increasingly seeking a “one stop” financial service and investment management is only one part of that service.

Levels of client satisfaction might be improving dramatically, but MDRC said much improvement is still needed. “Client satisfaction remains well below the levels that many would regard as acceptable for an industry focused on providing ‘bespoke’ wealth management solutions,” said the survey.

MDRC identified five major actions for increasing client satisfaction and improving client retention:

• Understand client needs and expectations, by carrying out systematic and structured analysis of the client base, and segmenting the client base into the groups of individuals with similar needs and expectations.
• Measure client satisfaction, to identify what are the strong and weak elements of the product and service mix, and continue to measure client satisfaction on a regular basis to identify emerging trends.
• Re-engineer weak components in client service, identify not only where the weak points are in the product and service mix, but also who are the weak points in the product and service mix.
• Tailor service delivery(or appear to tailor delivery) to allocate resources to those segments that demand or will pay for additional resources. Minor differences in product range, communication or delivery differentiation can often deliver substantial increases in client satisfaction when targeted on client specific requirements.
• Be proactive in managing the client….. but not obtrusive.