Q: What are the opportunities for banks in wealth management? How can they differentiate their offerings?
Howard Williams, SunTrust Banks: Wealthy individuals have multiple and complex financial needs. Banks that are able to meet these needs achieve long-term relationships in which advice, as opposed to products and transactions, becomes the focus. These banks establish multiple touch points with these clients and typically benefit from enduring client loyalty and a predisposition toward referrals of other prospective clients. The primary differentiators are strength of advisory capabilities, product breadth, and client ease and convenience.
Arjun Saxena, Oliver Wyman: To protect their core business, banks need to selectively combat the deposit offers deployed by discount brokers such as Charles Schwab and full-service advisers such as Morgan Stanley. To poach customers from brokers, banks can develop a range of new products that appeal to the changing financial needs of the aging population. For example, banks are poised to serve the more than 40 percent of mass-affluent households that will need to tap into their home or small business equity to finance their retirements, a need that traditional wealth managers are ill-suited to serve. Banks can assemble a wealth management platform that is better aligned with the needs of most Americans than that of most brokers.
Q: What challenges do banks face in the wealth management space?
Williams, SunTrust Banks: The first challenge is changing the conversation with clients and prospects from growing their assets to living off of their assets. BAI research shows that clients are interested in consolidating their assets with one organization after they retire, and banks are a front-runner for this opportunity because of the ease of accessing their money, and because these clients are interested in protecting their wealth more than growing it.
Next is finding shelf space to allow the retirement message to co-exist with the ongoing multiple retail and commercial messages of day-to-day banking. Banks need to move away from a product focus and begin focusing on total solutions that are oriented to client needs. For example, boomers are looking for help consolidating their array of accounts. They want easy access to all of their money, and they need a strategy for liquidating their assets in the most efficient manner.
Saxena, Oliver Wyman: One of the key challenges lies in subsegmentation -- understanding the expectations of customers in homogenous subgroups of retirees. The needs of retiring high-net-worth boomers differ significantly from those who will need to tap into their home equity or depend on Social Security income in their retirement. Other challenges include building a value proposition that allows banks to effectively compete to manage 401(k) rollover funds; brand-building and creating mindshare for retirement services; and managing incentives and channel conflict, and training personal bankers and advisers to work together.
Bertrand Lavayssière, Capgemini: The biggest challenges are cultural inflexibility that prevents the adoption of new services, new technology, new ideas; technology limits that do not permit wealth managers to be as flexible as their clients demand; client demand for more transparency; and more-demanding and active investors.
Douglas Smith, Metavante: The single biggest challenge for banks in the wealth management space is the product-silo mentality. Banks need to organize around the customer -- offering investments, advice, planning, banking and insurance. All these offerings should appear seamless and holistic from the customer's perspective and offer a "one stop shop" experience.
Q: What are the key technologies that can help banks target and serve the mass affluent?
Williams, SunTrust Banks: Banks excel in online, electronic-payment-transfer and virtual cash technologies. These technologies will help meet the challenge of serving the mass affluent market, particularly the baby boomers who want to use every available service option, including face-to-face, telephone, ATM and online. Analytic and database management tools, such as CRM profiling, will help to identify prospects and their shopping and buying patterns. Financial planning and income planning tools also can help clients see their total picture -- where they are, and where they need to be. Income planning tools are particularly important to this demographic; they need to understand how to best manage their spending in light of the savings that they have accumulated.
Saxena, Oliver Wyman: Banks have a range of transactional information on their customers that can help them understand their customers' needs more deeply than traditional wealth management competitors. Banks can use predictive modeling techniques (built off demographic or transactional information) to understand which customers may be going through life-events that might trigger demand for new services and the potential for the bank to replace an incumbent wealth management provider. In addition, analytic technologies used in credit-card marketing or affinity marketing could be leveraged for prospecting, relationship management and effective cross-selling of bank-centric retirement products. In general, the ability to use data to anticipate customers' needs is a major competitive advantage banks enjoy over brokerages.
Lavayssière, Capgemini: The first is a simulation or forecasting tool to assess portfolios and external factors, such as changing market conditions. The second is information technology to build networks that link clients' legal, real estate and accounting records to their investment portfolios. The first bank to link these different service providers in a database will better understand their clients and be able to offer more-targeted investment counsel.
Smith, Metavante: Customer relationship management (CRM) -- a warehouse of client-specific data -- assists wealth management providers in guiding customers to make appropriate buying decisions. Beyond CRM, a non-threatening information collection process that encourages customers to share future life goals is needed. Key to being effective is soliciting information in a manner that is all about the customer, not what he or she is being sold. The process must be framed around the customer's goals.
Q: Do baby boomers demand online banking capabilities?
Williams, SunTrust Banks: Absolutely, and we anticipate that the demand will increase. In fact, research shows that the two biggest factors contributing to rollover capture are helpful online retirement tools and helpful online information on retirement. Online banking is an expected capability for information gathering and transactional convenience. However, advisers will remain a critical component in helping the client to plan, and in the delivery of advice.
Saxena, Oliver Wyman: Online capabilities most commonly are used by customers for account management, research or viewing statements -- not for initiating investment transactions. For discount/online brokers, the client value proposition is heavily built on value, low transaction costs and online capabilities. However, mass affluent clients accustomed to full-service brokerages prefer initiating transactions by phone with direct contact to the adviser. With the addition of wealth management services, though, banks could provide a valuable integrated online financial snapshot that gives customers a comprehensive view of investments, checking accounts, lending accounts, credit cards, etc.
Smith, Metavante: Without significant online capabilities this market will not materialize to the extent that it can. Customers want to see how their investments are doing via the Web. Financial calculators and tools already exist online, but it will be critical to make the process more self-service. A portal approach allowing customers to mix and match offerings -- such as securities trading, portfolio analysis and electronic payments -- will likely become the norm.