Recovering profitability with an efficient, quality client service

by Thibaut Jacquet-Lagrèze, Product Marketing Manager, Odyssey Financial Technologies

How technology enables wealth managers to serve their clients better while reducing operational costs

Wealth management is going through a structural crisis. Over the last few years, it benefitted from a sharp increase in revenues and profitability that was based on a management model that has known better days. In the context of constantly
rising markets, wealth managers didn’t have to twist their clients’ arms to get them to invest in structured products that were very profitable for the Bank. Their clients were satisfied with the performance of their investments and hence the service received.
With the current financial crisis, the crash and the ensuing market instability have rendered
this model less efficient: the substantial drop in share values decimated the wealth of investors who then turned towards products that were less risky but also less rewarding for wealth managers.

Private banking revenues, for example, collapsed. A McKinsey survey revealed that private
banking profits fell to 2003 levels, a 42 per cent drop compared to 2007.
Faced with this crisis, wealth managers must think about adapting their management model so that they no longer have to depend on regular market increases for profitable business: instead they could apply a model that is less sensitive to fluctuations in markets that are currently unstable and, in any case, historically cyclical.

A single priority: serve the clients better

Clients have assailed their banks to change investment strategies and seek more detailed transparent information on risks to their investments and underlying products. Lots of them have changed banks through mistrust or dissatisfaction with the service.

Serving clients better to gain their loyalty has become a priority for wealth managers trying to improve profitability.

Private investors are demanding better service from their wealth managers. Several needs have come to light: for example, a) receiving detailed information on the value and performance of their investments in real time, b) exact up-to-date knowledge of the risks linked to their investments, c) advice and investment proposals
that suit their objectives and risk profile, d) a tailor-made financial planning service, and, especially, e) proactive monitoring by the wealth manager so he or she can react rapidly to changes in the risk levels of their investments.

A PricewaterhouseCoopers survey in 2009 shows that client advisors should spend more time with their clients to improve service quality, limit the risks of losing the client and increase assets under management (AUM) (the most efficient way being satisfied clients bringing new assets for management or recommending their advisors to acquaintances). Currently, client relationship managers only spend 40% of their time with their clients while they spend 16% on administrative tasks.

Front-office IT is an efficient way to handle these questions.

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