Thought leadership

Many wealth management firms are struggling to rebalance their business priorities in the face of social and technological change. Mapping their current position against where they would like to be is a good first step to clarify strategy, says Ian Woodhouse, head of strategy and change at Orbium

Orbium’s first Wealth Management C-Level Survey (commissioned late last year) found that only 25 per cent of private banks and wealth managers have a sustainable business model – one with both good revenues and good cost control. That means 75 per cent – three in four – need to do better to survive, let alone thrive.

Everyone in wealth management knows that the sector is under considerable pressure. There are four big challenges: clients’ needs are changing; the regulatory environment is in constant evolution; new entrants and mergers among established players have heightened competition; and all this is eroding margins.

Wealth management firms must address these challenges to put their businesses on a sustainable footing. But resources are limited, so it’s hard to know where to start. That is why we have developed the C-level Business Assessment Tool.

The tool offers a way for firms to objectively assess their current position against where they want to be in terms of business and technology. It highlights gaps where new skills, technologies and products need to be acquired or developed. The tool removes the guesswork because it is benchmarked against real industry data collected during our recent survey. As a result, it allows firms to see how their plans measure up against those of their peers.

Digitisation and clever software can certainly help improve client service as well as automate back-office functions, but neither is a silver bullet. The reality is far more complex. There are so many possibilities it is hard to know what is best for an individual firm. Limited resources and time mean firms can’t do it all. And the speed of change facing the industry is an additional challenge. Time will run out for some.

Going back to basics, success is about keeping the customer happy. Although the wealth management industry serves the traditional market well, our survey showed that newer customers are less well catered for, which is where some of the problem and much of the opportunity lie.

The wealth management market has fragmented as it has grown. Until recently, wealth managers worked with just two kinds of individuals – those with inherited wealth and baby boomers. Today, there are at least five different kinds of clients: inheritors, millennials, first-generation entrepreneurs, women, and rich professionals. A quick look at the latest Sunday Times Rich List of 1’000 wealthy individuals in the UK reveals a record 141 women.

Each segment demands different skills from their relationship manager and different products and services from the wealth manager. For example, entrepreneurs might want access to corporate finance to help them sell or grow their business. They might also want to mix with similar people – as part of a network club. This is a big new trend and one that banks such as Credit Suisse, BNP Paribas and Coutts are successfully exploiting.

Few wealth management firms are big enough to be all things to all clients. So they must choose. This choice will influence how the business is rebalanced, which is where the C-level Business Assessment Tool comes in.

By assessing their own performance and opportunity gaps (segments they aren’t serving well) and mapping these against their resources and capabilities, a firm can get a clear picture of where they are, where they could go, what they already have to get them there and what they need to develop or acquire.

So if a firm wants to target the rapidly growing and significantly underserved market of wealthy women, it needs to examine the resources it already has to offer. This might include how many female relationship managers it employs, for example, and the kind of networking opportunities it offers. In this way it will be able to leverage what it already has and focus resources on what it needs to develop.

Managing change successfully in a rapidly evolving market is always hard. When resources are limited, knowing the difference between where you are and where you want to be is an imperative. Having both positions benchmarked against your peers makes success more likely. If the 75 per cent can do this, they will soon join the 25 per cent with sustainable business models.

Carole Putallaz
Orbium SA

Rue Vallin 2
CH-1201 Genève

+41 (0)22 321 66 68
marketing@orbium.com

www.orbium.com