Relevancy, transparency and ease of use emerged as goals for wealth management firms to strive for in delivering client-centric communications at a recent event of industry leaders held in New York.

Relevancy, transparency and ease of use emerged as goals for wealth management firms to strive for in delivering client-centric communications at a recent event of industry leaders held in New York by ClearView Financial Media in partnership with Equipos.

And “client centricity will be the battleground where wealth managers find themselves fighting it out in the years to come,” said panelist James Edsberg, a senior partner at Gulland Padfield.

The 2008 crisis “changed forever clients’ perceptions about how their portfolios were managed,” said Alan Hamilton, president and chief executive of Equipos, sponsors of the event. Coupled with this, clients are now used to getting any information they want immediately from the internet – a game changer when it comes to communications.

Yet Hamilton cited some alarming statistics that point to an industry trailing that societal trend: 92 per cent of wealth managers still think face-to-face communications are the most important method of communication, while 82 per cent of clients think electronic communications are.

This gap is surely an opportunity for an industry which, as part of broader financial services, faces cost cutting. “Everybody is looking where they can to cut costs,” said Hamilton, with some institutions facing IT cost cuts of 10-20 per cent.

This is a fertile environment for hosting, he said, as it can generate annual savings in excess of 80 per cent and is ideal for periodic reporting cycles. But around 62 per cent of firms rely on pre-2007 client reporting systems. And that’s just because of a lack of investment. “It’s more expensive to keep what you have than move to a new system,” he said.

Investment and cost-cutting

Kunal Vaed, a principal at Booz & Company, agreed that the wealth management industry in North America is facing headwinds. “Clients are questioning the value of advice versus the fees they pay for advice,” he said. In this environment, investments in digitization need to be targeted where they both cuts costs, improve the quality of advice and improve client service.

One of the areas where digitization can do this is in taking the hassle out of dealing with a wealth management institution, said Vaed. “Wealth management is still a highly manual operation,” he told the delegates.

On the other hand, looking outside the sector there are plenty of examples of firms which have made the client experience simple: Amazon, eBay, Apple. “The intuitiveness and simplicity of that experience is what clients are looking for in wealth management,” said Vaed.

Other client complaints include feeling like “the whole firm doesn’t know me” and "not having enough information on their portfolio whenever and wherever they want” - for instance not being able to view a full balance sheet view of their wealth, including assets held away.

Process and efficiency

However, this desire to solve clients’ “pain points” needs to be approached in a strategic way, panelists said. 

“One of the myths about client centricity is that you have to deliver everything a client wants whenever they want it – that is the way to exhaust yourself,” said Edsberg.

Instead, he said firms should take some time to determine which of their service elements create loyalty from their clients.

Tying in with this, Colin McClive, a director in the financial services industry division at Microsoft, said that examining customer profitability was part of client experience, as understanding clients’ economic value was fundamental to delivering the right level of service.

“Banks can make substantial improvements by doing two things: first by segmentating their client base properly. You can’t be truly client centric unless you have decided which clients are your focus. And second, invest in a high quality client insight programme. This industry has come to rely too much on generic surveys, but these don’t provide the insight a bank needs,” said Edsberg. “Nothing beats asking your clients how you are doing.”

The advisor “versus” the platform

Talk of process inevitably led the discussion to the tension between the client service delivered by a personal relationship between an advisor and their clients - which is inherently idiosyncratic - and the service delivered by a strong platform, with Edsberg saying that the platform has become a more important differentiator in the current environment.

Ida Liu, head of Citi Private Bank’s North America Asian clients group, highlighted the way a highly customized platform can be leveraged to deliver a client-centric service to target specific segments of the wealth market.

Citi Private Bank researched the trends of wealth creation in Asia and emigration to North America, as well as the investment and wealth planning needs of this market, to design its platform.

“We have been very focused on delivering a customized set of services,” said Liu. “For a start, Citi looked at what investment preferences this client segment had, at the top of which is real estate, and so it created a fully comprehensive real estate solution.”

It also examined the way these clients invest, which embraces FX strategies to hedge business and personal interests around the world.

The service has been running for a year and a half and has had “tremendous success” in year one, she said, particularly with clients in San Francisco, LA and New York.

Ultimately, though, the consensus was that there needs to be both a strong platform and front-office talent to succeed.

“Business is always all about people,” said McClive, “so there’s a convergence between the technology and the capabilities of people.”

Client-centric reporting

The communications platform, though, was widely seen as a huge enabler to client service. But one area where firms are lagging, according to Hamilton, is when it comes to delivering information from the same source in different formats so they are suitable for the three main personal devices: laptops, mobiles and tablets. With a quick “show of hands” poll he established that nearly everyone in the room owned not one but all three of these devices.

“I want to have access to the same experience on every device,” agreed McClive. “That is where Microsoft has made huge investments.”

McClive added that in the technology sector more and more firms were building out their social capabilities and integrating that into customer relationship management systems.

Highlighting how financial services may be catching up in social media generally, new research from Boston-based Cerulli Associates found that asset managers increased their marketing and compliance staff dedicated to social media efforts by more than 60 per cent from 2011 to 2012.

Regulatory drive

As well as technology, clearly new regulations are changing reporting requirements, said Hamilton. He recommended consistency when it comes to reporting to clients, management and regulators. “Regulation is forcing transparency,” he said. “There isn’t a piece of data on clients’ systems that can’t be traced back to the source.”

But in terms of organizing data, this must be done in a way that is client centric, he said.

Success in this area has greatly accelerated in the past five years, said Hamilton, as firms understand that the key is making communication relevant to the individual. “The challenge is mass customization, and making thousands of people feel unique,” he said.

And indeed client centricity was hailed as providing a path out of the misery the financial services industry has found itself in since 2008.

“A lack of client focus contributed to the banking crisis. Rediscovering a bank’s client focus is also the recovery roadmap that management teams and clients are looking for. That’s how this industry will recover,” said Edsberg.

He had the following advice: “Focus on the tangible elements of client service, of which communications is one.”