No digital? No joy!

Why wealth managers without an integrated digital offering are out of play

My last blog is already been quite a few weeks ago. It has been very busy on all fronts, but not with blogging on SocialFS. A recent visit to Hong Kong as well as several conversations with many interesting people in the wealth management industry from Europe, North America and Australia formed some interesting views around the use of digital tools within the wealth management industry.

Soon from now we might end up saying that wealth managers that are not meeting HNWI demands regarding digital are out of play. I had the honor to present the World Wealth Report in Hong Kong in June. This report shows that an average of 65% of the HNWI population across all age groups and wealth bands are thinking of leaving their wealth management firm when there is a lack of digital (enabled) services. For the younger HNWI population this is even 80%. This research has been conducted among over 4500 HNWI globally.

The report also shows that there is an increase in the preference for digital contact versus a decline on direct contact. (Please see the figure below).

Direct vs Digital

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Why the wealth management industry is different, or not?

Are the current challenges seriously different?

My passion for the wealth management industry is undisputed and so is my believe in wealth managers. I seriously have the believe that most of these front end advisers serve the goal of helping HNWI’s in managing their wealth.

We all know the challenges the industry is facing; increased regulatory pressure, pressure on traditional income models, changing client behaviors, digital technology and the need for a revised business model.

At the same time I am very keen to collaboratively come up with solutions that might fit some of these challenges. But instead of making this wealth management specific people should be fair in understanding that these challenges are not the issue of the day for wealth managers only. Other financial services companies face similar challenges and this evenly is the case for other industries. The only difference is that wealth managers have a (long) personal relationship with their clients.

The ability to cope with these challenges and translate this into the necessary change therefore is the actual question to be answered. Apparently this turns out to be a sensitive subject. The subject of cultural change. I remember the first organizational change I experienced. I was an intern at a large Dutch private bank and the HQ decided to change some procedures in the way investment advisers had to provide investment advice to their existing customers. This turned out to be difficult task especially for the advisers already on their job for years. Why change, I am used to work like this and happy to do it this way? At the end the organisation changed, because the leadership decided to do so.

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Wealth Management ‘Everything comes with a price’

The Segmentation Discussion in Wealth Management (part 2/2)

My previous blog ‘The importance of a needs based segmentation strategy’ mainly focused on the importance of putting the HNWI customer in the center of the service model of a wealth management firm. Fact of life is that today 99% of the wealth management firms put the relationship manager in the center of their service model. I tried to summarize it as shown below:

from selling to being bought

This article in Wealthbriefing, based on an interview with Celent, describes Segmentation: ‘Product and services based on an increasingly diverse client base’. Firms are addressing all types of customer segments, going outside their traditional investor segment, and therefore require scale and technology. Retail banks are moving to serve the HNW customers, while private banks have lowered their threshold to serve more of the lower-end of the market. They describe exactly the issue if the industry, because lowering a threshold is not the answer on the industry challenge. I would say: A needs’ based segmentation strategy, where segments are built around the needs of the clients, instead of the Assets size of the HNWI’s should drive this change. Continue reading

Wealth Management and the ‘The importance of a needs based segmentation strategy’

The Segmentation Discussion in Wealth Management (part 1/2)

In the traditional thinking of a wealth management firm or private bank there are certain products only available to a wealth management or private banking client that are not available to non-HNWI’s. As personal banking client (other definitions might be applicable as well) you are not able to buy it, because your assets size is not big enough. That is pretty strange right? A client wants to buy a product, but the ‘sales person’ says no. My point of view is clear:

“Every client should be able to buy the products they want, but everything comes with a price”

The segmentation discussion in the wealth management discussion is very actual, but also not easy to grasp. Last week I had a great conversation with two wealth management experts from our beloved Switzerland and there was clear consensus that the industry business model is going to change (because it needs to, due to regulatory pressure, need for transparency and changing client behavior), but we also agreed there is no a one-off solution. The industry is looking around.

In this first of my two blogs I will focus on the way to define the right segmentation that is different from the traditional AUM (Assets Under Management) based segmentation. In the second blog I will discuss the impact on products, services, channels and pricing!

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Rabobank offers Fintech startups a stage to develop

‘Rabobank’, ‘De Lage Landen’ (Insurer) and ‘MyOrder’ announced to partner with the Startup Bootcamp FinTech for the coming three years. Together with Mastercard and Lloyds Bank, Rabobank is the only Dutch bank participating in this European accelerator program to support startups in the Fintech to accelerate their business.

The bank wants to learn from and collaborate with participating startups. In an interview with Harrie Vollaard, Innovation Director at Rabobank, the necessity of this step and the opportunities that come with this participation in Startup Bootcamp Fintech have been discussed.

startupbootcamp-fintech-rabobank-finno

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What if a wealth manager is not offering digital services at all?

In the article “Advisor Characteristics Vs Digital Delivery: Which Is Most Important To The Future-Wealthy?”, published by FamilyWealthReport on the 27th of March, the importance of the role of the advisor versus digital is measured. All questions asked are relevant, but the way the discussion is raised might be not completely the right angle.

In short; The research describes the fact that good personal financial advice is preferred over digital interactions with customers. They are surprised by the fact that in the younger age group the digital experience score is lower than for ‘older HNWI’s’. To me this is not surprising at all due to the higher demand this group has towards digital. So the same experience scores lower within the younger age group.

Capgemini’s World Wealth Report 2013, based on research over 4400 HNWI’s globally, clearly shows the growing importance of these digital interactions. One of the key messages: The younger the group of HNWI’s researched, the higher the importance of digital contact is to them.

Digital_Wealth

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What do 59% of the adults in developing countries have in common?

…Some facts & figures based on a research executed in 2013…

59% of the adults in developing countries do not use banking services. This is the big challenge developing economies are facing. The unbanked mainly rely on cash-based financial services such as check cashers, money orders among others to handle their transaction needs. In the broader discussion we could argue the need for a bank at all, but for this research we focused on banking services, sometimes without involvement of a bank anyway.

Global

 

Globally over 40% of people living in urban areas do not have a formal bank account, compared to 56% of those living in rural areas. This split doesn’t really surprise me due to factors such as accessibility, higher income levels, adherence to Know-Your-Customer (KYC) norms among others.

This research has been executed as part of a broader discussion around reasons why people in developing countries don’t have a bank account. We identified several opportunities to approach this group of people and discussed some examples that have proven to be successful for a variety of reasons. I would like to thank Tom van de Wal (Capgemini Consulting) for doing this research with me and translating some of our findings in nice overviews.

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