This is the second of three articles covering the recent WealthMatters Hong Kong conference, hosted by the publisher of this website, Clearview Financial Media, in association with Coutts.

This is the second of three articles covering the recent WealthMatters Hong Kong conference, hosted by the publisher of this website, Clearview Financial Media, in association with Coutts. The third report on the final panel of the event will be published in due course. (To view the previous article, click here.)

This article shares the highlights of the second panel: Enhancing the Client Experience.  

The move away from the bespoke wealth management model; implementing innovative client-banker communication, embracing mobility and protecting the wealth manager were among the themes that were discussed by senior representatives of ClearView Financial Media, Equipos, Accenture and Herbert Smith Freehills.               

Stephen Harris, Clearview Financial Media’s managing director, opened discussions around client experience by sharing some research a survey his firm sent to a database of over 50,000 wealth professionals.

A standout finding was that 34 per cent of respondents said their clients think of wealth managers as “facilitators of life goals”, highlighting a shift away from a purely financial function of advisors, Harris said.

In turn, wealth management firms are indeed becoming more attuned to enhancing customer experience levels - the survey found some 40 per cent of the respondents employ a dedicated client experience head, for example.

Homogenisation and segmentation

However, as a result of worryingly high cost-income ratios, and an ever changing regulatory landscape, private banks are increasingly looking to homogenise their product and services, moving away from the traditional bespoke service model.

“The current business model [of bespoke offerings] is not sustainable,” Harris said.

One way to get benefit from a more streamlined offering without “pigeon-holing” clients is through “correct segmentation”. This allows wealth firms to standardise products and services but in a way that they are still customised to specific segment groups.

Most firms segment clients according to asset base, geography and sometimes, potential asset base. What they’re neglecting is age, gender and type of business, the research showed.

Harris proposed observing other industries that practice effective segmentation and who in turn are able to provide largely homogenised offerings, yet still enhance customer experience. For example: Starbucks. It has individual cafés operating as one-stop shops but offers clients 87,000 variations of one product: beverages.

Adding value

“Effective segmentation offers the chance to provide value added services in a standardised and cost effective way,” Harris added.

Another criteria that is key to maximising customer experience is understanding what services clients really value. However, to find this out, wealth professionals must start asking the right questions, which it seems they are not. “A staggering 36 per cent of correspondents don’t collect any feedback on what the client really wants,” Harris said.

This lack of knowledge then leads private banks to choose directions based on “anecdotal evidence” with no real justification behind the decisions. “Like jumping on the philanthropy band-wagon,” said Harris. While some wealth institutes excel in this area, it is not suited to all firms in the industry.

At the same time, if clients aren’t asked for their opinions then the wealth managers can miss out on value-added service opportunities that high net worth individuals demand.

Communication

Innovative communication is one way that wealth managers could push customer experiences to another level.

For Andrew Sutcliffe, senior vice president at client communications and client reporting solutions provider, Equipos, “it’s all about making sure everything you [the wealth manager] do is centred around the client – communication needs to be delivered in the form that clients prefer”.

According to findings by research firm Tower Group, 92 per cent of private bankers believe face to face meetings are the most important [form of communication], yet when you talk to clients, 82 per cent of them prefer to receive electronic communication, Sutcliffe said.

In fact, according to Equipos, many banking clients expect support and services via the web as standard.  “It’s not an added-value attraction,” he added.

So how do private banks differentiate themselves in the field of technology and communication to increase client satisfaction?

“The [RBC Wealth Management] Capgemini World Wealth report found that 84 per cent of people want more frequent and innovative communications, so it’s about enlivening the client experience and giving them a much more interactive view of their portfolios,” said Sutcliffe.

In addition, wealth managers need to recognise that clients now use multiple devices, Sutcliffe said.  “On average high net worth individuals have 3 devices. 83 per cent have a laptop, 67 a smart phone, 41 per cent a tablet,” said Sutcliffe, presenting the need to have “a consistent communication strategy across these channels”.

Research from Scorpio Consulting demonstrates that effective communication strategies actually generate favourable results - The firm found that clients who use their wealth manager’s website most frequently report the highest levels of loyalty. “This evidence shows that increased interactivity does actually have an impact on loyalty,” Sutcliffe added.

Mobility

Meanwhile, embracing mobility is key to boosting client satisfaction according to Accenture’s managing director, capital markets lead ASEAN, Sigrid Seibold.

“If wealth management firms want to be where their clients are then they need to think mobile,” said Seibold.

The wealth management client is a mobile client - even more mobile than the classical retail client - not only because of his ability to access and purchase the newest technology but also because he is on the move, she added.

But what does mobility in financial services and specifically in wealth management actually mean?

“In essence, it all boils down to the creation of a holistic customer experience - anywhere. That means that the main objective has to be the consistency between ‘in-the-office and out-of-the office which is the mobile user experience, resulting in ‘anywhere client experience’,” Seibold said.

According to Accenture, “the wealth customer, and especially the much younger wealth generation in Asia, is very open to mobile technologies. The average tech-savvy customer today spends 20 hours per week online and would probably never leave home without her or his mobile device”.

Yet still, Seibold said there is very little adoption of mobile services and channels in the wealth management industry today.

Private banks could turn to their retail banking peers for inspiration in the field of mobile innovation in banking. For example, Seibold spoke of a “virtual mobile wallet” which is an “iPhone app that offers many unique features including a Money Bar, Calendar and Danger Days (Danger Days are colour-coded in red and it shows up on the clients calendar indicating a cash flow issue.)”.

Another example is “an augmented reality application that enables users to view property listings and sales data through the camera of their mobile handsets,” said Seibold.

The role of the wealth manager

Meanwhile, the role of the relationship manager will also need to change over time.

The wealth management provider has the opportunity to become a “one-stop shop” and satisfy all relevant customer needs (financial and non-financial) starting from a unique point of contact built on partnership and customer trust, said Seibold.

“He [the relationship manager] needs to move much closer to really managing the personal interface of the client; social skills will become more important as some traditional relationship manager activities will be taking over by mobile channels,” said Seibold.

However, the wealth manager also needs to protect himself, and can do this by recording the banker-client dialogue through all the different mediums of communication that are available to the customer, Kevin Yam, senior associate at legal firm, Herbert Smith Freehills said.

“We as lawyers tend to see client relationships in the wealth management sphere when things go wrong, more often than perhaps most of you dealing with clients on a day-to-day to basis,” he said.

“At a most simplistic level, all you need to do to enhance the client experience is keep making them lots of money and they’ll never complain, they’ll always be very happy with and that’s pretty much the end of the story,” said Yam.

However, since market conditions don’t always allow this, private banks invest vast amounts of effort it forming long-lasting, personal relationships with their clients, which can act to their detriment, according to Yam.

Protect the wealth manager

“While private bankers need to be close and understand what clients are doing, we sometimes see that they risk getting so close that the banker will do whatever the clients ask, and think that because they’re ‘so close’ there won’t be any problems,” Yam said.

For example, Yam added, a client might say “I’m very busy, I don’t have time to hear you (the wealth manager) out on every single investment product, but if you see the right opportunity, just buy it for me – I’ll be fine with that, I trust your judgement.”

However, Yam explained that when the market turns sour, the client can turn around and refer the banker back to the client service level agreement which might be non-discretionary and profile the individual as having a “medium or conservative” risk appetite, conflicting with any verbal encouragement the client may have given the banker during his “investment spree”.

Advice

If alarm bells are not ringing with wealth managers at this stage, then they will be loud and clear in-front of the largely “pro-customer” courts. Yam has seen cases where clients suddenly claim to be “unsophisticated; illiterate; unable to read, speak or hear English or Chinese; or can’t actually read numbers”, in a bid to worm their way out of investment authorisation they have given outside the original client service contract.

“One key word to wealth advisors: communication. Keep electronic records of what was discussed and data that the client has accessed,” said Yam. “The client needs to understand that when they buy more investment products, they’re taking on more risk and their risk profile is changing – the client must know and acknowledge this,” he added.