A strong grasp of the financial cycle of a client's life is vital in tailoring wealth management services and can make a difference to a provider's results, a Breakfast Briefing heard recently.

Private banks can boost efficiency by developing a system to handle clients through the whole voyage of their financial life, a Breakfast Briefing heard recently.

Some relationship managers and other staff may have a strong grasp of what a high-calibre client relationship process is, but that is far from universal and there is much profit to be earned in getting the ingredients right and identifying what they are, delegates meeting at The Carlton Club, in St James’s Street, London, heard. 

Speakers at the Breakfast Briefing were James Edsberg, senior partner at consultancy Gulland Padfield; James Howell, senior manager, head of wealth, Accenture UK; Sabrina Del Prete, managing director, digital, at Coutts & Co, and Sebastian Dovey, managing partner and co-founder of Scorpio Partnership, the client journey strategy think tank; and Toby Hayles, business development manager of K2. Dovey also chaired the event, which was sponsored by K2.

The “client life-cycle” can be seen as the “moments of interaction between the client and the advisor,” Edsberg suggested to the audience. 

In considering this interaction, he said, there are three broad areas: one-off actions and moments for clients, such as inheritance, divorce and trust creation; secondly, there is the onboarding process, “often the squeaky wheel that gets most of the oil”; and third, the day-to-day issues that advisors must consider in their relations with the client.

Unless firms and advisors develop an approach in understanding this cycle, Edsberg said, “it will be left up to well-intentioned people to make it up on their own but that won’t achieve consistency or a common reference point for the institution as a whole.”

In some older and smaller institutions there can be a shared ethos around how to interact with clients, but this is much more difficult to achieve in very large organisations, not least because of the high turnover of staff and RMs. To show how diverse a firm’s client experience can be, Edsberg referred to a simple diagnostic his firm uses, namely to invite RMs to write out their idea of what "good client experience should be". This usually illustrates the lack of consistency in what one institution’s people are aiming to deliver. Edsberg added that it is important not to define things so tightly that firms constrain RMs in how they manage the client experience, but to set down some minimum objectives.

Asked if there are competitive business opportunities in how the client experience can be handled, K2’s Hayles talked about the need for agile technology systems that can keep pace with changing business models and client demands. “Core banking systems,” he noted, “are still the bedrocks of a traditional relationship-driven organisation.” 

There is probably only about an 18-month window that a wealth management firm has in using new technology and systems to carve out a competitive edge on peers before rivals catch up, he said.

Risks of the unknown
Coutts’ Del Prete said one challenge at present is that banks tend to focus on managing familiar risks, such as the risks associated with failing to meet regulatory requirements. And yet one big risk that needs to be considered in shaping strategy are the unknowns – the technologies that can rapidly overturn a whole sector in a matter of months. She gave the case of Alibaba, the Chinese e-Commerce giant that over the past two years has developed a wealth management offering with around $150 billion of client money. “One of the risks is that we don’t focus enough on whether we are actually adapting to how society is changing,” she said.

In this context, the “touch points” for clients are becoming more complex, with clients interacting with firms both at the human, RM level and through digital channels such as social media, she said.

Asked by Dovey how far digital technologies can go in changing wealth management, Accenture’s Howell said: “Right now, the majority of people in this room are being tracked by banking clients of Accenture for your propensity for becoming a client.” 

At present, use of new tech is often limited. Howell gave the example of how, according to Accenture’s banking research, 90 per cent of bank app use by clients is to check their balances, rather than anything more complex. There needs to be more attention given to how tech can liberate advisors to spend more time talking to clients. There are areas of progress, he said, citing examples such as how passport details can be quickly captured in handling KYC verifications.

Another underappreciated area, he said, is that with many so-called digital banks, some functions, such as in the back office, remain manual and have not been automated as much as the name might suggest.

One area where there has been “huge scepticism”, Howell said, is when his firm has approached banks to talk about the potential of making better use of their data in the sales organisation through analytics. Howell gave the example of how this can only be overcome through producing new leads and prospects for the relationship managers to demonstrate this works. 

Among other benefits in shifting to digital technologies when it comes to handling clients, K2’s Hayles said, is that digitising records can save enormous amounts of costly physical space. He drew parallels with what has been achieved in shifting the UK’s National Health Service records from paper to digital. From an efficiency point of view, he also argued that a lot of wealth management information is contained within emails and other one-to-one messages, which can be highly inefficient when viewed against the totality of what businesses should be doing.

Data
Gulland Padfield’s Edsberg said banks, and especially the large banks, are not short of data but what they are short of is good qualitative information that can help them understand client relationships better. And as a background issue, there is a “bone-chilling effect” that comes from compliance and fears about what regulators might do in the case of shortcomings, he said. “I have heard it said by senior executives at two major banks that there is only one client for their bank and that’s the regulator right now."

Del Prete, asked how the buy-side can make the call of whether to “make do” with a legacy system or create a new system, said: “There is no single answer to this question but when legacy systems cannot be easily replaced, it is possible to develop solutions that communicate through APIs with existing systems and still provide enhanced data, aggregate information and better user experience.”

Asked about the relative merits of “carrots and sticks” in pushing change in IT systems, one clear positive incentive is to develop platforms that are very easy to use. “Ease of use is the best accelerator for business adoption, which is key to the successful implementation of IT changes,” she said.

And on the need for technical support for RMs in using new systems when inevitable queries and problems arise, she said this is important. “I don’t think we have always focused enough on users and on ensuring that we offer them both intuitive functionality and adequate support.”

K2’s Hayles said that in today’s tech world, there appears to be a lot of assumption that people can use systems with no training straight from the start. “That needs to be thought about,” he said.

He mentioned the phenomenon of “citizen developers”, such as bankers and other professionals who have IT skills and who develop their own tech ideas for themselves.

Asked about issues such as reported large write-downs for failed IT projects in the industry and the UK regulator’s own position about what it sees as necessary technologies, Del Prete said: “The regulator is not saying to us what the right systems are but asking that as a sector we ensure that we have an IT infrastructure that is fit for purpose.” 

In the summation of the discussion, Dovey noted that the comments made by all panellists underscored that the wealth management industry is at a point where it must recognise data drives decision-making, not whether a business should introduce a digitised offering. Equally, the industry should seek to identify where it attains the core of its revenues in the customer journey while adopting a more enterprising attitude to outsourcing. “The game of the future is agility in strategy and implementation,” he said. As a note of warning for those firms that are slow to adapt to the winds of change brought by digital - their industry may leave them at the wayside with external players and new challengers taking up market share by thinking differently, Dovey added.