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Wealth Management

Affluent investors typically overlook banks as a source for personal financial advice.

Affluent investors typically overlook banks as a source for personal financial advice. But a customer-centric business model and a focus on financial services, coupled with CRM technology, can help banks develop and maintain relationships with wealthy clients.

  • Peter Spenser, Partner, Financial Services Industry practice, Deloitte Consulting (N.Y.)
  • Rick Applegate, President, First Commonwealth Financial Advisors (Indiana, Pa.)
  • Matt Schott, Sr. Analyst, Retail Brokerage & Investing, TowerGroup (Needham, Mass.)
  • Lori Marks, SVP Accounts, Wealth Mgmt., Sanchez Computer Assoc. (Malvern, Pa.)

BS&T: Wealthy clients tend to consult financial advisers and accountants for personal financial advice before they speak with banks. How can technology help banks develop closer relationships with these individuals? What can banks do to improve their standing with this affluent segment of the market?

Peter Spenser, Deloitte Consulting: Banks need to be more proactive in anticipating and identifying opportunities to provide advice and investment suggestions. Banks also need to build strong relationship teams that span across a number of different product areas. From a technology perspective, this implies a 360-degree view of the clients that can be shared across the team. More sophisticated tools (e.g., planning, allocation) and reporting capabilities need to be made available both for use by the team, or online directly to the client. Finally, technology can help banks better understand and segment the client base to provide more targeted products and services.

Rick Applegate, First Commonwealth Financial Advisors: Banks must come to realize that their competition for personal advisory clients is not other banks. Instead, it's other successful financial advisory practices as run by CFPs or CPAs. The model banks need to develop follows those operations and distances itself from being too closely identified as a banking operation. A key distinction among the best of the financial services firms is the focus placed on customer relationships versus transactions. Technology, if viewed by banks simply as a way to expedite transactions, will not help them at all among the competition for affluent accounts. But if technology is seen as an extension of the service-focused relationship between the client and the adviser, banks will be on the right track.

Lori Marks, Sanchez Computer Associates: Leveraging existing client relationships represents an enormous opportunity for banks. Banks can develop valuable relationships by investing in the lifetime value of customers and servicing evolving client needs to help financial "wallets" grow in value over time. Technology can help by aggregating data across systems, silos and channels to provide a client-centric view for a better understanding of client needs and preferences - today and in the future. This allows banks to stratify their customer base and provide the right mix of products and services to grow the retail or emerging affluent bank clients of today into the affluent investors of the future.

BS&T: What are the relative strengths and weaknesses of other service providers, like financial advisers and accountants? What are the strengths and weaknesses of banks?

Applegate, First Commonwealth Financial Advisors: One of the greatest strengths for banks is the opportunity to retool and redefine themselves within this competitive field. As they do not carry the greatest identification among households for such services, they have the most upside to benefit from [an] aggressive makeover of how they operate. But that brings up the greatest weakness of banks - they are not aggressive. Aggressive as in, "Let's move forward, today." Therefore, to exploit the opportunity at hand, they must attract experienced financial advisers from other fields and empower them to build and run a 21st century, technologically driven services firm. As for other firms, it may be easier for banks to get into their business than it is for existing financial firms to become bankers.

Matt Schott, TowerGroup: In terms of investing, the affluent have traditionally viewed brokerage firms, indepependent money managers and independent advisers as providing superior investment performance compared to a bank's trust department. However, trust rules that constrained the choice of investment options have been relaxed. Banks are actively evaluating and selecting portfolio and overlay management tools in an effort to structure open architecture investing platforms with tax management. The trust department's edge comes from an innate understanding of the role of a fiduciary, but the technology will help banks to compete in the area of investment performance.

Marks, Sanchez Computer Associates: Often considered investors' primary financial services provider, banks have many strengths relative to other providers, including brand, positioning, market reach, multichannel distribution and established client base. However, unlike many other providers, banks are not viewed as competent advisers. To change this perception, banks must move from their traditional transaction-based business and adopt the wealth management vision of their competitors, who offer a client-centric, fee-based model to build profitable relationships. Banks have the required information to accomplish this but need to bring it together across product-based organizational silos to a single integrated view to effectively capitalize on customer opportunities.

BS&T: If banks do not serve as the primary financial adviser, what role will they ultimately serve? And if banks are serving as the primary advisers to affluent clients, how can they incorporate the advice of other key advisers to ensure that their clients receive the best counseling?

Spenser, Deloitte Consulting: If a bank is not serving as primary financial adviser, an alternative role would be product/services supplier (the "manufacturer") operating through that primary financial adviser (the "distributor"). Typical products would be credit, jumbo mortgages, small business lines of credit, as well as cash management, trust and estate work, small company IRAs, etc. Where the bank is the primary financial adviser, the way to provide best service is the combination of an excellent relationship manager/adviser, supported by seamless access to best-in-class products and services - said another way, a virtual team supporting the relationship manager based upon an open architecture (from both a business and technical perspective) providing access to third-party products - private equity, hedge funds or insurance products - as well as services (estate planning, trust adviser).

Marks, Sanchez Computer Associates: Banks are traditionally seen as deposit takers, not trusted advisers with compelling investment ideas. The reality is, bank staff has limited skills in the areas required to service the affluent investor segment. The market perception together with limited skills means banks should consider relationships with RIAs [registered investment advisers], insurance and brokerage operations to help bridge the gaps and augment existing banking products and services. This is critical in attracting affluent customers, who are always seeking diversification. Technology can help in these efforts by seamlessly presenting the right products and services across the full spectrum of financial services: banking, investment and insurance.

BS&T: What partnerships should banks consider adopting to attract affluent clients? How can technology help in these efforts?

Spenser, Deloitte Consulting: What attracts affluent clients is the reputation for the quality of service and advice and trustworthiness. All of these are predicated by the caliber and networks of the people, the training and knowledge programs, and the organizational structure and incentives. Layered on top of this is provisioning of tailored wealth management products and services, ease of client access to information and performance. Partnerships to consider should be targeted toward other products and services that may or may not be related to financial services. Examples include law firms, real estate brokers, accounting firms, leasing firms, colleges, fraternities and charitable organizations, etc.

Schott, TowerGroup: Establishing relationships with attorneys and accountants who work with affluent clients in a bank's footprint is essential. Developing an open architecture investment program that supports access to a wide selection of third-party money managers will also be well received by affluent clients. The technology platform should support the bank's due diligence efforts in evaluating money managers. It should also utilize overlay management technologies to effectively customize an investment program and maximize after-tax performance while maintaining compliance with the investment policy statement defined for the client.

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

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