This article looks at a run of strong results from the US and whether the optimism in the industry is based on solid ground or a sign of complacency.

The following commentary is from David Lo, associate partner at Scorpio Partnership, the global wealth management consultancy.

The quarterly financials have recently been released in the US, painting a very positive picture of the industry. A myriad of wealth management firms are experiencing strong growth, with some firms, such as Citi, reaching profit levels unseen since the financial crisis.

Internally the results have not gone unnoticed, with the majority of chief marketing officer’s revealing they are set to significantly increase their marketing budgets. Optimism in the US wealth market is high.

But is this positivity well-founded or could it be the start of dangerous complacency?

Well one positive sign is that firms seem committed to an ongoing investment in marketing. At Scorpio Partnership we recently surveyed the opinions of CMO’s in the US and it was revealed that rather than rest on the laurels of two financially good years, the majority of our CMOs, 54.5 per cent to be exact, expect more money to be added into their marketing budgets [Figure 1].  

A further 27 per cent expressed confidence that they would have a similar amount of money to invest in client acquisition tomorrow, as they do today.

Figure 1: Marketing budget forecast

Source: Scorpio Partnership US CMO Survey
Client experience is moving centre stage

According to our diverse group of CMOs – drawn from across the wealth management spectrum, including global private banks, national and regional broker-dealers, and family offices – they are also paying significant attention towards client retention, adding value, and investing in technology.

This is good news for clients and makes sound business sense. According to Scorpio Partnership’s Futurewealth 2015 study, client satisfaction has a direct influence on wallet share. Clients who gave their wealth manager a “good” satisfaction score go on to place more than 50 per cent of their total assets with that provider. When satisfaction grows to “very good”, wallet share rises to as much as 62 per cent [Figure 2]

Figure 2: The link between satisfaction and wallet share

Source: Scorpio Partnership, Futurewealth 2015

So, it looks eminently sensible for US commercial marketing officers to focus on client experience, and yet, there is a “but”.

We are what we measure
The saying, “we are what we measure” has grown familiar in recent years as study after study shows that tracking the progress of goals – be they professional or personal – hastens our achievement.

iPhones, Fitbits, and a plethora of wearables and digital tools have become a second-skin for digital converts intent on tracking every aspect of daily life. We track sleep, exercise, calorie intake, almost anything we can.

So it’s both a surprise and disappointment that many of the wealth manager’s intent on improving client experience do not intend to properly measure the results of their efforts.

Around half of the CMO’s surveyed have no formal client experience program in place, and among those who do, about one-third don’t track the client experience.

Does this matter?

Absolutely!

US wealth managers are operating in an era of unprecedented change, treading new paths and pushing the frontiers of new technologies is difficult. Clients, meanwhile, are becoming polarized in their demands.  As older, more traditional clients live longer and continue to value a certain style of wealth management, the younger generation is snapping at their heels, wedded to a very different way of managing their money. It is clear that one size no longer fits all.

Measurement, application, and accountability must be embraced
Fortunately, our CMOs realize this and one of the challenges they identified was the creation of “customized solutions rather than mass product pushes”.

However, such efforts will only pay dividends if they are closely attuned to the client’s needs and preferences. A continual process of test and learn evolution must be embraced if wealth managers are to truly harness future growth.

The client is at the heart of improving performance. Trends and technology may change how this manifests in the delivery, but the fundamental goal of keeping clients happy doesn’t ever change.  It is vital to understand the drivers of client satisfaction and track performance over time.  How else can progress be measured?

The world of wealth – indeed the world in general – is simply moving too fast for “wait and see” marketing to suffice. Measurement, application, and accountability have already become the watchwords for so much in our digital lives.  Now, these standards must be embedded in wealth management. A failure to do so will create the risk of the increased marketing spending falling on deaf ears.