Transparency is the new “gold standard” of the industry because clients will demand more clarity and information about the state of their investments and how their wealth is being managed, said the report.

Since PwC produced its last global report on wealth management in the boom-year of 2007, stocks have slumped – the MSCI World Index of developed countries’ shares crashed by 40 per cent alone in 2008 – and the financial industry has witnessed takeovers of once-dominant players like Merrill Lynch, the bankruptcy of Lehman Brothers, and the stunning Ponzi fraud of Bernard Madoff. The Madoff scandal and credit crunch have also spawned a flurry of lawsuits from disgruntled investors.

“The trusted relationship, the very foundation of wealth management, has been damaged. Clients are feeling bruised and have become disillusioned with financial institutions. There is a sense that some wealth managers might have placed short-term revenue goals – and not client interests – at the heart of their businesses,” the report said.

“With markets likely to remain volatile for some time, clients will demand that information on their exposures is readily available. Yet many wealth managers simply cannot provide real-time data,” it continued. “In volatile markets, the inability to provide a higher level of transparency dramatically impacts on an institution’s ability to be a true 'trusted advisor'. We see this as an historic crossroads for the industry,” it said.

One of the report’s authors, Jeremy Jensen, EMEA leader, PricewaterhouseCoopers private banking and wealth management leadership team, told WealthBriefing last week that transparency was vital if the industry was to recover.

"There is no doubt that private clients have become disillusioned and have lost a lot of their money. They are saying, 'treat my money as if it were your own', to their wealth managers”.

The report found that the quality of service provided by client relationship managers was in many cases merely “average” – more than a quarter of the firms questioned said CRMs fitted this description. Meanwhile, only 20 per cent of chief executives said CRMs were of a high standard, a fact that PwC’s report described as a “very troubling statistic”. Asked for the greatest weaknesses of CRMs, 112 out of 120 weighted ranked responses said “lack of ability to adjust to change quickly”; some 93 said “lack of client relationship skills”, while 92 said “lack of understanding of risk”.

Against this background, PwC said it was troubling that relatively little time has been devoted to CRM training: 43 per cent of relationship managers said they received fewer than five days’ training in a year, compared with 34 per cent saying this in 2007’s report.

“Such a cut in training is understandable when budgets are under pressure. However, the quality of CRMs has never been more important,” it said.

To raise efficiency and CRM service, firms needed to invest more in improving support systems so that managers could devote more time to their clients, admittedly a tough call to make on firms trying to cut costs, said Mr Jensen.

“Wealth management is a sector that has been underinvested in systems, period. This is relative to other financial services firms.”

“CRMs are spending much more time with clients than they were two years ago. Some 65 per cent of them regard this time as insufficient for giving an adequate level of service,” he said.

The report also asked risk officers of wealth managers about what their firms should focus on over the next two years. The biggest share of respondents said client and product suitability was the biggest risk area, followed by operational processing errors, then mis-selling/inappropriate advice, then counter-party risk and credit risk evaluation.

Some 62 per cent of survey respondents said their risk management systems were only five years old, the report said.

Asked what would be the main driver of risk management change over the next two years, the biggest response was “changes in regulatory requirements”, followed by “increasing/changing client expectations and demands”.

Among other findings, the report revealed that firms with the lowest cost/income ratios placed far more importance on a client base in driving an organisation’s brand value than for all respondents in general: 57 per cent said the client base was key, compared with 17 per cent of the total. Among all respondents, 43 per cent said history and tradition drove a brand, while only 14 per cent of the lowest cost/income ratio firms gave this as the reason.

The report found that client acquisition and retention was the strategic area on which CEOs devoted most of their time. Asked how firms have sought to retain clients, the largest response was for the tactic, "increased client contact directly by CRMs", followed by "increase in advice to clients/portfolio rebalancing".

The report also found that 60 per cent of CEOs said they can cut their total costs by more than 10 per cent, while most CEOs said they could trim costs by at least 5 per cent, the survey found.

The PwC survey was based on information from 238 wealth managers in 40 countries, involving face-to-face interviews and online questionnaires conducted between December 2008 and March this year. Some 71 per cent of respondents were based in the EMEA region, 13 per cent in the Americas, and 16 per cent in Asia-Pacific.