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In Search of the CRM Payoff

A few firms are rolling out wealth-management platforms incorporating CRM, bucking industry trends.

Financial services companies are struggling with deployments of customer relationship management (CRM) software, causing a significant decline in CRM spending this year, according to Jaime Punishill, senior analyst at Forrester Research. "There's a real reining in of dollars spent on CRM projects," Punishill recently told an audience of wealth-management executives attending a New York-based executive forum, "Successful CRM Strategies for Wealth Management," produced by Wall Street & Technology, a sister publication of Bank Systems & Technology.

Based on a survey conducted by the Cambridge, Mass.-based technology research firm, Punishill projected that 36 percent of securities firms will spend significant dollars on CRM in 2003. The survey also found that five percent have no plans to spend money on CRM, 20 percent are considering spending, 15 percent are piloting projects, 23 percent are rolling out existing projects and 22 percent have completed projects.

CRM Project Abandonment

Increasingly firms are abandoning projects in midstream, he claimed. He cites one insurance company that "is pulling the plug on a $20 million Siebel project, convinced that it will have to spend another $25 million to complete it," he said.

But not everyone has given up on CRM. For example, after 10 months of due diligence, Timothy Tully, CIO for Mellon Financial Corp.'s Private Wealth Management Group, said the firm chose Onyx (Bellevue, Wash.) over Siebel (San Mateo, Calif.) and Salesforce.com (San Francisco) as its CRM package. Mellon chose Onyx out of concern for back-end integration costs with other pieces. Noting that Mellon is in an acquisition mode, he reported, "as Mellon continues to grow we wanted to have consistency on the sales and service side."

"The number-one challenge we have is that people are going to have their workflow change," said Tully. Onyx is essential in order to get data into the system, he added.

A real hindrance to adoption is convincing financial advisors to enter their data into the system, noted Forrester's Punishill. Tying data entry into compensation won't work, because advisors will challenge the system, he contended, adding that there's confusion over "who owns the data." Firms encounter resistance from advisors because they don't want to give the firm control of their customer if they leave the firm. Another issue is whether or not it is possible to make a business case for CRM based on "productivity lift" for advisors.

Meanwhile, Merrill Lynch is moving ahead with a $1 billion deal to build a wealth-management platform with Thomson Financial (Stamford, Conn.) that includes Siebel as the CRM component. "We have a $25 million marriage with them. I'm not as anxious to separate as I am to get it to work," said Byron Vielehr, CTO, Merrill Lynch Global Private Client Group. Merrill already has a 2,000-seat Siebel implementation in call centers around the world and plans to roll out 25,000 seats to financial advisors and support staff. "We've been working with the tools and understand the warts and issues with the product," said Vielehr.

Acknowledging Siebel "has its quirks" with data loading and redundancy, Vielehr said Merrill "is jumping through hoops to get it to work" and that it's spending a lot of time with Microsoft, IBM, Hewlett-Packard, EMC and other hardware companies to build fail-over and enterprise monitoring tools.

Because not everybody has Merrill's resources and staff to do this kind of integration, Forrester's Punishill said he expects to see the emergence of a few single-vendor models, such as those offered by Thomson, SunGard and a few others. "You'll be happy to take an all-in-one solution even if you make trade-offs, because the integration bear is too much," he said.

Vielehr used cost cutting as an argument to sell the business side on building a new wealth-management platform. Even though the Merrill platform is a $1 billion dollar deal, the CTO said he's taking $60 million a year out of the spending for outsourcing. And the $1 billion deal is less expensive than the $1.5 billion Merrill spent to build Trusted Global Advisor-a monolithic, client/server system-which "wastes one or two hours a day," he said. "TGA was sold on a productivity lift; we dropped that." Merrill also intends to "white label" the new platform and resell it to regional broker/dealers for use as client Web sites. Vielehr said it fits in with the servicing side of Merrill's retail correspondent clearing business. "We think we can make some money there," he added.

Editor's Note: This article originally appeared on Wall Street & Technology Week, a sister property of Bank Systems & Technology.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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