The value of trust 2011

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THE VALUE OF TRUSTTHE QUEST BY WEALTH MANAGERS FOR ‘TRUSTED ADVISOR‘ STATUS

SPONSORED BY

®

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2011 © BRUCE WEATHERILL EXECUTIVE CONSULTING LIMITED, TRADING AS WEATHERILL EXECUTIVE CONSULTING. ALL RIGHTS RESERVED

SPONSORED BY

®

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This report is based on the responses of 369 clients and 285 wealth managers from a questionnaire that set out to investigate the central proposition of what constitutes ‘Trust,’ and how successful wealth managers have been in building Trust with their high net worth clients.

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A NOTE TO FELLOW WEALTH MANAGEMENT PROFESSIONALS

THE VALUE OF TRUST-Trust is the cornerstone of finance, allowing banks to lend and clients to borrow. Indeed the very word ‘credit’ comes from the Latin word credere meaning to trust. The credit crunch showed what happens when this foundation of trust is shaken, yet as we emerge from this difficult period, it is not clear whether wealth managers are better placed to prevent such a run on trust from happening again.

This report has uncovered the characteristics of wealth managers most likely to inspire trust, identifying both good and bad practices. It has then developed a framework that can help organisations to achieve the ultimate goal of becoming their clients’ trusted advisor.

There is good reason to adopt such a framework, as for the first time, a value can be placed on becoming a trusted advisor:

* FIGURES ARE APPROXIMATE AND DERIVE FROM A CLIENT LIFETIME PROFITABILITY CALCULATOR DEVELOPED BY WEATHERILL EXECUTIVE CONSULTING IN COLLABORATION WITH IMPERIAL COLLEGE

FOREWORD

TRUSTED ADVISORS GET AN

AVERAGE OF TWO REFERRALS

EACH YEAR COMPARED TO

AN UNTRUSTED ADVISORS

AVERAGE OF ONE.

REFERRALS

TRUSTED ADVISORS HAVE

VIRTUALLY NO CLIENT ATTRITION,

WHEREAS UNTRUSTED

ADVISORS HAVE A 21% CLIENT

CHURN EVERY YEAR.

RETENTION

BY HAVING INCREASED SHARE

OF WALLET, REFERRALS AND

CLIENT RETENTION, TRUSTED

ADVISORS ARE ON AVERAGE

5 TIMES MORE PROFITABLE

THAN UNTRUSTED ADVISORS

OVER THE COURSE OF THEIR

CLIENT RELATIONSHIPS.

PROFITABILITY*

TRUSTED ADVISORS HAVE A 26%

GREATER SHARE OF WALLET

THAN UNTRUSTED ADVISORS,

AND MANAGE OVER THREE-

QUARTERS OF THEIR CLIENT’S

INVESTABLE ASSETS.

REVENUE

26% 114% 18% x5

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ABOUT THE REPORT-This report allows wealth managers to identify good and bad practice in terms of building trust, and importantly provides a framework in order to help them achieve greater trust amongst both their clients and their staff. In addition, the data enables comparisons to be drawn between EMEA, the Americas and AsiaPac where different service practices and business models can be compared and contrasted. At a later stage, additional analysis will be carried out at regional and at a country level and further data and findings will be made available for Australia, Netherlands, Middle East, a number of IFC’s, UK, HK / Singapore, Switzerland and the USA.

ABOUT THE SPONSOR-IBM is one of the world’s leading information technology companies with over 426,000 employees worldwide and 2010 revenues of $99.9 billion. For a century IBM has been working with the world’s leading financial services institutions, building industry capability and making research and development investments specifically tuned to the needs of the global financial services sector.

FURTHER THANKS-We are also very grateful to all those who have participated as clients and as wealth managers and to all those who have assisted in encouraging so many to complete either the client or wealth manager surveys.

FURTHER INFORMATION-For further information about the survey or Bruce Weatherill Executive Consulting Limited please go to the website www.weatherillconsulting.com or contact Bruce Weatherill on [email protected].

Bruce Weatherill, CEO, Bruce Weatherill Executive Consulting Limited

FOREWORD

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CONTENTSRESEARCH BACKGROUND

EXECUTIVE SUMMARY

INTRODUCTION

FOCUS ON THE ORGANISATION

FOCUS ON THE EMPLOYEES

FOCUS ON THE CLIENTS

WHAT THIS MEANS

AN IBM PERSPECTIVE

ACKNOWLEDGEMENTS

SURVEY BACKGROUND

ABOUT IBM AND SPONSORS

ABOUT WEATHERILL

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RESEARCHBACKGROUND

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BACKGROUND, HOW THE RESEARCH WAS CONDUCTED AND EXPLANATION OF METHODOLOGYThe research was carried out between March and July 2011 to collect quantifiable data about how successful wealth management institutions have been in regaining ‘Trusted Advisor’ status. It also identifies what further needs to be done by wealth managers to win the trust of their high net worth clients. Importantly, the research identified the key components of ‘Trust’ and compared and contrasted the different perspectives of both clients and wealth managers to identify both good and bad practice.

TwO SEPARATE qUESTIONNAIRES, ONE FOR HIgH NET wORTH cLIENTS , ONE FOR wEALTH MANAgERS-This was achieved by using two on-line survey questionnaires designed by Weatherill Executive Consulting, using their long and successful history of carrying out wealth management surveys and being prominent advisors to the wealth management Industry. The client questionnaire targeted individuals with greater than $1 million in investable assets and had responses from 369 high net worth clients of wealth management organisations. The second questionnaire profiled the answers of 285 wealth managers who provide services to high net worth clients.

RESEARCH BACKGROUND

FURTHER ANALySIS ANd cORRELATION OF RESULTS-It was an important aim of the survey and research to be able to analyse responses from different regions (EMEA, Americas and AsiaPac) as well as by different business models, type of client, seniority of wealth manager and size of organisation. It is planned that further data will be released in respect of each region, and country specific data will also be analysed and released in respect to Australia, Channel Islands, The Bahamas and Caribbean IFC’s, Hong Kong / Singapore, Middle East, Netherlands, Switzerland, UK and the USA. A separate aggregated report and / or data will be available in respect to International Finance Centers (IFC’s) highlighting differences and similarities and identifying key trends and challenges for offshore jurisdictions. Other analyses and further correlation of data can be carried out on a bespoke basis as agreed with Weatherill Consulting.

NUMBERS OF PARTIcIPANTS ANd gEOgRAPHIcAL cOVERAgE-At the time of finalising the report on 7th August 2011, there were 654 participants, comprising 369 high net worth clients and 285 wealth managers whose responses form the basis of the findings in this report. Participants were drawn from around the world and there is excellent coverage of the key jurisdictions targeted.

9 RESEARCH BACKGROUND

gRAdINg TERMINOLOgy-When reading the report it is important to understand that, unless otherwise specifically explained, the statistics used are reported using the following three aggregated gradings based upon participants responses to questions, using a ten point scale with 1 being low and 10 high. The responses were banded for analysis purposes as follows:

1-3 disagrees, unimportant, irrelevant to the question4-7 neutral to the question8-10 agree, important, satisfied with the question

Where the findings refer to either Trust or Net Promoter score (NPS) analysis or findings then the usual NPS criteria were used:

1-6 Detractors, untrusted7 -8 Neutral, indifferent9-10 Promoters, trusted advisors

To place any amount of money with a wealth manager requires a certain level of trust, however where clients have scored their wealth manager low on trust (6 or less out of 10) we have termed these advisors ‘untrusted’ as it is clear that they could do more to inspire confidence. Advisors who are ranked 7 or 8 out of 10 on trust are termed ‘indifferent’, whilst those who score highly on trust (9 or more out of 10) are ‘truly trusted advisors’. Where ‘mean’ data is referred to this is the arithmetical mean of all responses either for clients or wealth managers.

Throughout the report graphics in green relate to responses by wealth managers and those in yellow to client responses

WEALTH MANAGERS

HIGH NET WORTH INDIVIDUALS

EMEA

66%

EMEA

66%AMERICAS

26%

AMERICAS

15%ASIAPAC

8%

ASIAPAC

19%

NB: Further details about the research, methodology, terms and descriptions are in Appendix 2

SURVEY RESPONDENTS BY REGION

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EXECUTIVE SUMMARY

11EXECUTIVE SUMMARY

EXECUTIVE SUMMARYPROPOSITION: cLIENT cENTRIc ORgANISATIONS wILL BE THE MOST PROFITABLE-Client Trust helps build sustainable, long-term profit. Trusted advisors have a 26% greater share of wallet, obtain twice the number of referrals per year, and suffer virtually no client defections. As a result their profitability over the course of a client relationship, based upon a client lifetime profitability calculator developed by Weatherill Executive Consulting in collaboration with Imperial College, is 5 times higher than ‘untrusted’ advisors, and 73% higher than neutral advisors, who are neither trusted nor ‘untrusted’ by their clients. Since the survey found that trust takes an average of 6 years to build, this profit takes time to accumulate and may require some short-term sacrifice to ensure long-term gain.

wEALTH MANAgEMENT ORgANISATIONS - gAPS IN PERcEPTION REMAIN-Client perceptions about their wealth manager have improved significantly since the depths of the credit crunch with 49% indicating that they were satisfied with the performance of their wealth manager up from 28% in 2009. Further good news is that 66% of clients now report that they are unlikely to leave their wealth manager in the next 12 months. This is a significant improvement on the responses from the same question asked in the Dow Jones 2009 Report ‘Wealth Management after the Crunch’ where only 21% concluded that they were unlikely to leave.

However, this ‘good news’ needs to be tempered by the fact that many clients have changed advisors over the last few years. Despite the stereotype of a long-term relationship between clients and their wealth managers, a surprising 69% of client respondents have been with their wealth manager for 10 years or less, and 38% for 5 years or less. As demonstrated later in the report, there remain significant gaps between how clients think that their wealth manager has performed, and the rather more optimistic view that wealth managers have regarding their own performance.





AVERAGE OF ONE.

REFERRALS



WHEREAS UNTRUSTED


CHURN EVERY YEAR.

RETENTION









PROFITABILITY*






INVESTABLE ASSETS.

REVENUE

26% 114% 18% x5


12 EXECUTIVE SUMMARY

KEY PERFORMANCE INDICATORS OF WEALTH

MANAGERS AND CLIENTS ARE NOT ALIGNED

COST / INCOME RATIO-

NET MONEY IN/OUT-

INDIVIDUAL RELATIONSHIPMANAGER REVENUE TARGETS

-PRODUCT PERFORMANCE

-SHARE OF WALLET

INVESTMENT TRACK RECORD-

RAPPORT WITH ADVISOR-

“GUT FEELING”-

TAILORED SERVICE-

RECOMMENDATION BY FRIEND/FAMILY/ADVISOR

-LEVEL OF TRUST

FINANCIALINDICATORS

SERVICE ANDRELATIONSHIPS

WEALTH MANAGER PERFORMANCE

INDICATORS

CLIENT PERFORMANCE

INDICATORS

The report identified that there was a significant gap between the KPI’s of wealth managers and those of their clients, to the detriment of the quest for trusted advisor status. The KPI’s of wealth managers are largely internally focussed and relate to financial indicators, whilst those of clients are more emotional in nature and relate to service and feelings. This lack of alignment between what each side deems important does not reward behaviours by wealth managers which are conducive to building trust nor does it collect the information needed to monitor the benefits that client centric behaviour delivers. Aligning incentives and rewarding the right behaviour leads to increased satisfaction and value for all.

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RELATIONSHIP MANAGERS / EMPLOYEEScONcENTRATE MORE ON RETAININg EMPLOyEES IF yOU wANT TO gAIN TRUST-Historically high turnover of employees is a big problem for wealth managers and clients alike, as trust takes time to build. Our survey shows that 78% of wealth managers have been with their organisations for 10 years or less, whilst 56% have been there for for 5 years or less. Given that the research indicates that it takes on average 6 years for trusted advisor status to be achieved, wealth managers need to focus more on reducing staff turnover in order to increase the chances of gaining trusted advisor status. This problem is certainly not helped by the number of times clients have had their relationship manager changed over the last 10 years. Indeed, a third of clients have had 3 or more relationship managers over the last 10 years. Wealth managers need to give more attention to retention of their key client relationship managers and to maintaining their compensation packages at a competitive level. If not, many relationship managers, especially those facing the financial stresses and commitments in middle age, have no alternative but to seek alternative employment in order to mark their compensation to market.

Those organisations that lose relationship managers, then have to recruit at market levels, but lose the long-term service that is the hallmark for becoming a trusted advisor. Assuming that the relationship managers succeed in taking their clients with them, it is therefore the competitor who benefits from that status.

The research shows that there is a strong correlation between satisfied employees, satisfied clients and trust. wealth management organisations need to first create satisfied employees if they wish to create satisfied clients.

EXECUTIVE SUMMARY

HOW LONG HAVE YOU WORKED FOR

YOUR CURRENT ORGANISATION?

BASE: ALL WEALTH MANAGERS (285)

UNDER 2 YEARS

16-20

6-10

2-5

OVER 20 YEARS

11-15

WEALTH MANAGERS

3%

22%

33%

6%

13%

23%


CLIENT NEEDS

FOCUS

COMPANY NEEDS

SELLING

AVERAGE RESPONSEAVERAG

E R

ESPO

NSE

PRODUCTS SOLUTIONS

ASPIRING TRUSTED ADVISOR37%

PRODUCT CENTRIC 43%

VALUE PROVIDER11%

MENU PROVIDER9%

BASE: ALL CLIENTS (369)

TRUST LEAdS TO SUSTAINABLE, LONg-TERM PROFITS-Trust is an emotion, and emotions are driven by interactions. The research showed that empathy is the key driver of trust, and that the biggest gulf between trusted and less trusted advisors was a lack of empathy. Empathy requires that a wealth manager’s goals are aligned with that of their clients, and an important ingredient to this is that that they are incentivised not to sell product, but to provide solutions. Correlating responses of whether wealth managers are perceived as concentrating on client needs as opposed to company needs and whether they are focused on selling products rather than solutions allows us to see that just 37% of wealth managers are operating business models that promote trusted advisor status, whilst 43% are more product centric - a key bone of contention amongst clients and something wealth managers should address if they are to build trust with their clients.

HIGH NET WORTH CLIENTS

ONLY A THIRD OF ORGANISATIONS ARE CLIENT-CENTRIC

CLIENTS WERE ASKED THE FOLLOWING QUESTIONS: ‘HOW WOULD YOU RATE YOUR WEALTH MANAGER ON A SLIDING SCALE’:

1 = FOCUS ON SELLING PRODUCT; 10 = FOCUS ON PROVIDING SOLUTIONS AND

1 = FOCUS ON COMPANY NEEDS; 10 = FOCUS ON CLIENT NEEDS.

15EXECUTIVE SUMMARY

cLIENT cENTRIcITy MATTERS-Wealth Management organisations should concentrate on becoming client centric and so secure long term profitability. To do so they need to identify the gaps in their organisations that detract from trusted advisor status, close them and so bring the interests of the Company, Employees and Clients into alignment. They should encourage and support employees to become ‘Trusted Advisors’, reward them for doing so and measure progress towards this goal so that it can be continually improved. The end result will, as shown in the diagram on the following page, be a client centric organisation which will deliver sustainable, long-term results.

SySTEMS IMPROVEMENTS SEEN AS KEy TO IMPROVINg THE BUSINESSES OF wEALTH MANAgERS-The key area where investment is planned to be made is on systems improvements both in the back office but also, and more specifically, to support the front office. Overall, 72% of wealth managers agreed that further investment in IT and internal systems and re-engineering front office and client facing technology platforms would be where additional spending would be most rewarded in terms of improving their businesses. Clearly this should help with regulatory compliance and this is an important factor, but also it will help keep costs down and streamline service to high net worth clients.

GLOBAL PERSPECTIVESNOT ALL wILL SURVIVE – ExPEcT INdUSTRy cONSOLIdATION-Whilst some wealth managers have been successful in re-building trust, others have further to go, and this is affecting both profitability and future growth potential. An overwhelming three-quarters of all wealth managers agree that there will be further industry consolidation with 43% agreeing strongly.

INTERNATIONAL ASPIRATIONS OF wEALTH MANAgERS cONTINUE-International business remains a key area of focus for wealth managers. They see this as an area of growth and only 8% agree that they are planning to contract their overseas presence. Whilst the BRIC’s remain a key area of focus for a third of wealth managers, opinions are divided with 27% preferring to concentrate more on their domestic markets. A similar position emerged in respect to Asia, where 37% of wealth managers saw growth in the region as being stronger than other markets, and thus would be an area of focus, whilst 23% disagreed.

OFF-SHORE wILL REMAIN A STRONg FOcUS FOR wEALTH MANAgERS-There was an overwhelming consensus that offshore centers will on balance face a much tougher time in the next 12 months. However, despite this, off-shore remains an important focus for wealth managers and only 5% replied that they were considering cutting back their business in off-shore centers. Interestingly, clients also seem relatively unperturbed by the threat of investigations by local tax authorities into off-shore investments and banks.


UNDERSTANDING THE SERVICE-PROFIT CHAIN CAN HELP WEALTH MANAGERS ALIGN COMPANY, EMPLOYEE AND CLIENT INTERESTS

COMPANY DATA SURVEY INFORMATION

WEATHERILL EXECUTIVE CONSULTING; KIRN, S.P., QUINN R.T., RUCCI, A.J., THE EMPLOYEE-CUSTOMER-PROFIT CHAIN AT SEARS, HARVARD BUSINESS REVIEW, (2000)

VISION PROCESSESSTRATEGY

EMPLOYEE RETENTION

CLIENT RETENTION

CLIENT CONTACT

CLIENTREFERRALS

RETURN ON ASSETS UNDER MANAGEMENT

-CLIENT LIFETIME PROFITABILITY

-NET NEW MONEY

COMPANY EMPLOYEE CLIENT RESULTS

VALUES

ATTITUDE ABOUT

THE JOB

EMPLOYEE ATTITUDE

ATTITUDE ABOUT

THE COMPANY

SERVICE QUALITY

CLIENT EXPERIENCE

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There are some interesting differences in responses from the different continents (EMEA, The Americas and AsiaPac) in respect to both high net worth client responses and those of wealth managers. Some of these differences can be ascribed to the different business models used in particular regions, yet other differences are a reflection of the maturity of the markets, source of wealth and even the age and gender of respondents. There are also differences between organisations which are essentially domestic on-shore businesses and those which are international and operate in offshore centers. However, this is catered for within the questionnaires and the data will be further segmented and analysed over the following months to identify and quantify these differences so that wealth managers can learn from them.

wEALTH MANAgERS NEEd TO TAILOR THEIR BUSINESS MOdEL By REgION-Reasons for joining a wealth manager differ by region. Clients were asked what factors were important when choosing a wealth manager. In EMEA service came first whilst in US it was the strength of relationship with their wealth manager and extent of contact. In AsiaPac, where client relationships are more transactional, investment performance is the key criteria. However, despite this more transactional relationship, over half of AsiaPac respondents used client satisfaction as an important part of remuneration (58%), compared to 43% for EMEA and 37% for the Americas. Perhaps this is why wealth managers and clients in Asia appear to put more emphasis on customer ‘perks’ such as card and concierge services (35%), compared to the Americas at 26% and EMEA at 19%.

These represent just a few of the differences which will be the subject of further analysis later in the year.

DIFFERENCES BETWEEN EMEA, THE AMERICAS AND ASIAPAC

EXECUTIVE SUMMARY

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WHY DO PEOPLE JOIN WEALTH MANAGERS? SEVERAL INTERESTING REGIONAL DIFFERENCES EMERGED

RANKING BY TERRITORY

EMEA

QUALITY OF SERVICE

TIMELY AND APPROPRIATE CONTACT

PORTFOLIO PERFORMANCE

STRENGTH OF RELATIONSHIP WITH RM

REGULATORY COMPLIANCE

OVERALL FINANCIAL STRENGTH

INDEPENDENCE OF WEALTH MANAGER

ON-LINE SERVICES

EXTERNAL FINANCIAL INDICATORS

BRAND

CONCIERGE SERVICE

1

2

3

4

5

6

7

8

9

10

11

AMERIcAS ASIAPAc




QUALITY OF SERVICE






ON-LINE SERVICES

BRAND

CONCIERGE SERVICE

1

2

3

4

5

6

7

8

9

10

11


QUALITY OF SERVICE







ON-LINE SERVICES

CONCIERGE SERVICE

BRAND

1

2

3

4

5

6

7

8

9

10

11

EXECUTIVE SUMMARY

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INTRODUCTION

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THE cREdIT cRUNcH TRIggEREd A cOLLAPSE IN TRUST-The private banking / wealth management industry has long prided itself on providing a personal service to high net worth clients. The last 20 years have seen an almost uninterrupted period of growth in numbers of high net worth clients. Investment returns have been generally high and the services provided by wealth managers were rarely put under severe strain. Many wealth managers in turn have experienced double digit expansion of both revenues and profits and have widened the range, scope and complexity of services to their client base as well as reaching out and expanding in the emerging markets. The credit crunch and resultant crisis in the financial markets did not leave the Wealth Management industry unscathed. As highlighted in the 2009 Dow Jones report ‘Wealth Management after the Crunch,’ wealth managers suffered an almost fatal collapse in confidence and trust by their clients as they tried to react to complex market movements. The gap between what high net worth clients thought and how wealth managers perceived themselves was also evidenced as being worryingly different, and wealth managers appeared to have ‘lost touch’ with their clients.

BAcK TO BASIcS-The last two years or so have seen most wealth management organisations go through a strategic review of their business models as they have decided how to react to reduced revenue, reduced profitability and increased costs. The latter in particular has been compounded by the impact of higher capital and regulatory compliance combining with an ever-more demanding client base.

How to rebuild client trust has been a central challenge for management and there has historically been relatively little research into the subject. This was why such a detailed research project was undertaken by Weatherill Consulting, and the results and recommendations produced in this report aim to rebalance this deficit in knowledge and provide the industry with a roadmap of how to progress.

TAKINg THE INdUSTRy’S PULSE-In an attempt to address this issue it was considered important to collect some quantitative data about trust, including what it means for high net worth clients

and wealth managers, how to increase it and what effects this would have. This was achieved by asking targeted questions of both wealth managers and high net worth clients through separate but complementary questionnaires. The questionnaires were designed in such a way as to be able to analyse and compare the results and to ascertain empirically whether there was a meaningful link between increasing trust and improving profits. In carrying out the research, certain issues or gaps between what high net worth clients thought and the views of wealth managers were identified. The gaps were analysed and based upon the research it was possible to identify short and longer term actions that wealth managers could undertake that would close the gaps and re-build trust.

THE FRAMEwORK OF THE REPORT-Previous academic research into business structures and strategies have concluded that a common characteristic of successful service organisations is where there is an alignment of interests between clients, employees and the organisation. Better alignment of interests creates better service, which for wealth managers leads to increased trust, and improved results -- the so called service-profit chain.

INTRODUCTION TO KEY PROPOSITION, FINDINGS AND FRAMEWORK OF REPORT

INTRODUCTION

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EXCELLENT SERVICE INVOLVES ALIGNING

THE INTERESTS OF ALL STAKEHOLDERS

CLIENT VIEW

COMPANY VIEW

EMPLOYEE VIEW

SERVICE

INTRODUCTION

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COMPANY

EMPLOYEE

CLIENT

RESULTS

gAP IdENTIFIcATION ANd ANALySIS-The research and subsequent analysis sought to expand this classic model and to investigate the gaps in understanding between the organisation, employees, clients and results. Coming out of the gap analysis was not only a better understanding of how the process was currently working but the identification of both short and long term action plans to resolve the issues and improve service. Also, because of the way that the research was undertaken it was possible to quantify the benefits of undertaking a more client centric approach to Wealth Management and how this would lead to long term success for those who adopt it.

LESSONS ANd OUTcOMES-The conclusion of this report explains and supports the finding that successful wealth managers of the future will be client centric and that their business models should be designed to support this goal. Most organisational models start with a vision, develop a strategy, and adopt processes to support employees to deliver company profitability, and hopefully, client satisfaction so as to make that profitability sustainable. This Report’s contention, supported by data and findings from the research is that the natural order of this classic strategic model needs to be reversed in order to correctly respond to the client’s perspective.

THIS SURVEY EXPLORED THE GAPS BETWEEN STAKEHOLDERS

GAP

GAP

GAP

INTRODUCTION

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THE PROPOSITION-Client centric organisations will be the most successful, as high net worth clients who regard their wealth managers as their ‘Trusted Advisor’ are more profitable. Such clients give their wealth manager a greater share of their ‘wallet,’ are more likely to grant portfolios managed at the discretion of the wealth manager, do not leave, and very importantly, are an excellent source of new business in terms of referrals.

Of course, the opposite is true of high net worth clients who are dissatisfied and act as detractors of the organisations who have them as clients. In order to inspire their trust, and turn them into advocates, wealth management firms need to ensure that the interests of the organisation, employees and clients are in perfect alignment.

In order to explain how the proposition was reached this report will look at the gaps in understanding that currently exist between the Company, Employees and Clients and how this affects wealth management firms’ results. It will then present a framework to help wealth managers improve their organisational alignment, increase levels of trust with their client-base, and generate long-term, sustainable profits.

The research advises that companies should:

set financial and non-financial goals, including required returns

work back through client needs and requirements to deliver the required result

ensure that employees are equipped to deliver what clients want by designing the appropriate processes

agree this result as their strategy and

encapsulate this as the vision

The result would be a truly client centric organisation.

INTRODUCTION

1

2

3

4

5

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FOCUS ON THE COMPANY

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dETAILS ABOUT PARTIcIPANTS-The wealth management questionnaire was completed by over 280 wealth managers from around the world with all key regions well represented. (EMEA 66%, Americas 15%, AsiaPac 19%) Respondents were predominantly male (82%) as were the respondents to the Client survey (76%). Interestingly, and perhaps because a number of the questions required answers about how they felt about their wealth management organisation, 58% of wealth managers exercised the non disclosure option by preferring not to name the wealth management firm they worked for, so maintaining a high degree of confidentiality.

The mean age of wealth manager participants was 44 compared to a mean age of 54 for client respondents, with AsiaPac participants all being a few years younger than in EMEA and the Americas.

Participants were drawn from a wide range of business models and separate analysis has and will be done to analyse responses from those affiliated to the different models to see how they differ.

Respondents were also from a range of functions with 24% being CEO’s or MD’s with input from a range of other employees, including relationship managers.

WHICH OF THE FOLLOWING BEST

DESCRIBES YOUR ORGANISATION?


INDEPENDENT PRIVATE BANK / WEALTH MANAGER

21%

WEALTH MANAGEMENT DIVISION OF UNIVERSAL BANK

43%

PRIVATE CLIENT ASSET MANAGER

8%

FAMILY OFFICE

6%

INDEPENDENT FINANCIAL ADVISER

7%

TRUST COMPANY

5%

OTHER (PLEASE NOTE)

9%

STOCKBROKER

1%

WHAT IS YOUR JOB TITLE?


COO / CIO / FD

6%

OTHER DIRECTOR

22%

MARKETING OR STRATEGY MANAGER

13%

CEO / MD

24%

OTHER

17%

RELATIONSHIP MANAGER

18%


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OVERALL LEVELS OF cLIENT SATISFAcTION wITH THE SERVIcE PROVIdEd By THEIR wEALTH MANAgERS HAS INcREASEd SIgNIFIcANTLy OVER THE LAST TwO yEARS-Wealth management organisations should remember that quality of service delivery should not be measured by what effort they believe they expend but rather by the satisfaction that the client derives. Wealth managers again have a slightly optimistic picture of themselves and the service that they provide, with 65% claiming that they are satisfied with their overall performance over the last twelve months - a figure 10% higher than that polled in the 2009 report conducted with The Dow Jones Group. The gap between perceptions of wealth managers and clients remains, with 49% of high net worth clients concluding that they were satisfied with the overall performance of their wealth managers – although this is a significant increase on the 16% who were satisfied in 2009.

IMPROVEMENT IN PERcEPTIONS SINcE THE cREdIT cRUNcH-The financial strength of wealth management organisations has also improved since the depths of the global financial crisis and the research shows that this resonates particularly well amongst female and elderly clients, both of whom value financial stability more than

SOME GOOD NEWS FOR WEALTH MANAGERS… BUT GAPS STILL REMAIN

other groups. Indeed, 76% of female clients state that institutional strength of an organisation is key when thinking about joining a wealth manager, whilst 71% of clients aged 60 or over would also agree. Many large wealth managers have benefitted from this perception of stability, and 83% of their clients rate it as an important reason when choosing a wealth manager, compared to an average of 65% of the overall market.

wEALTH MANAgERS ARE cONFIdENT OF THEIR ‘TRUSTEd AdVISOR’ STATUS-Wealth managers remain confident in their own abilities and have few doubts about their status as Trusted Advisors, with 70% concluding that they are trusted, and almost a quarter giving themselves 10 out of 10. Clients are more skeptical, with only 43% agreeing with the statement, proving that wealth managers still have further to go. However, whilst the gap in perception is still large it represents a significant improvement from two years ago, when on a like-for-like basis just 22% of high net worth clients net agreed that their wealth manager was their ‘Trusted Advisor’. (Dow Jones 2009 report ‘Wealth Management after the Crunch).

cLIENTS SEEK MORE ‘AddEd VALUE’ FROM THEIR wEALTH MANAgERS-Another gap in opinion between wealth managers and their high net worth clients is in relation to the extent to which wealth managers were perceived as having ‘added value’. Whilst over 50% of clients agreed that their wealth manager added value only 38% agreed strongly, ranking their response at 8 or higher out of 10. The graphic on the following page shows the extent of the gaps between client and wealth manager’s perspectives and highlights where additional work is needed to close the gaps.


27

cLIENTS HAVE NOT BEEN SATISFIEd wITH PORTFOLIO PERFORMANcE OVER THE LAST 12 MONTHS-Another significant gap between perceptions is in relation to portfolio performance, which according to clients appears to be increasing in importance. It should therefore be of concern to wealth managers that only 26% of clients were satisfied with portfolio performance over the last 12 months compared to 47% of wealth managers. Perceptions vary by region, with wealth managers from the Americas region being less pleased by their investment performance over the past year compared to other territories. Traditionally, wealth managers have liked to think that portfolio performance is secondary to service. In the current economic environment, this assertion has been shown to be less supportable other than to less sophisticated clients or to the elderly.

A number of factors have highlighted the importance of portfolio performance. Firstly, there is the need to recoup lost ground after the fall in values during the global financial crisis. Secondly, there is the predominance of the fee component that is highlighted by the persistence of low interest rates. In such an environment, the size of the annual wealth management charge at approximately 1%-1.5% has come under scrutiny by clients as it has become a major detractor from overall returns.

A manager has to generate greater alpha if they are to overcome natural resentment for a fee that often seems to be increasingly difficult to defend, especially in a world where both liquidity and diversification are available through funds and ETFs of every variety, and good returns are available through specialist funds that are managed by top performers in their field.

WEALTH MANAGERS: % PLEASED WITH INVESMENT

PERFORMANCE OVER THE PAST 12 MONTHS

HOW WOULD YOU RANK THE PERFORMANCE OF YOUR WEALTH

MANAGER OVER THE PAST 12 MONTHS IN RESPECT OF THE

FOLLOWING:

% RANKING PERFORMANCE AS GOOD (8 OR MORE OUT OF 10)

WEALTH MANAGERSCLIENTS

OVERALL LEVEL OF SATISFACTION

INVESTMENT PERFORMANCE

COMMUNICATION AND CONTACT

INSTITUTIONAL CREDIBILITY / STABILITY

HONESTY, TRANSPARENCY. TRUSTWORTHINESS

VALUE FOR MONEY

49%

26%

53%

72%

59%

66%

38%

BASE: ALL WEALTH MANAGERS (285); ALL CLIENTS (369)

EMEA

51%

AMERICAS

39%

ASIAPAC

42%

GLOBAL

47%



64%

80%

48%

47%

66%

28

gOOd NEwS FOR cLIENT RETENTION -It is clear from the findings that the mass defection of clients from wealth managers post the credit crunch is possibly coming to an end and / or has not occurred to as great an extent as had been predicted. Clients report that 66% are unlikely to change their wealth manager in the next 12 months compared to a comparable 21% in the BWECL / Dow Jones Survey in 2009.

CLIENT LOYALTY

2009

CLIENT LOYALTY

2011

21%

66%

HOwEVER, THIS HAS NOT FEd THROUgH TO HIgHER PROFITS-It has been very noticeable in the 2011 reporting season that although revenues have generally increased strongly over 2010, profits do not appear to have followed suit, and to the contrary have all too often decreased. A high proportion of the blame can be attributed to rising costs, particularly in respect to the requirement for increased capital, regulation and compliance. However, the research shows that many high net worth clients appear to have reduced the proportion of assets under management they are prepared to commit to one institution and instead split their assets over several wealth managers. Indeed, 64% of high net worth clients have 2 or more relationships with wealth managers and 30% have relationships with 3 or more wealth managers. Clearly, not all these can be categorised as trusted advisors.

AVERAgE ‘SHARE OF wALLET’ IS AT APPROxIMATELy 50% BUT IS VARIABLE-Wealth managers believe that they manage on average 60% of their client’s assets, slightly higher than their clients where the mean is 53%.

Increasing revenue is always a key focus of any good business. However it is the increase in cost base which has been a major concern for wealth management organisations over the last two years, and it is in this area where significant action has already been taken.

FOcUS IS HOwEVER NO LONgER jUST ON cOST REdUcTION ANd IMPROVEMENTS TO RISK MANAgEMENT ANd gOVERNANcE-Whilst of course important, wealth managers do not see these two areas as being where additional spend would now be most rewarded in terms of improving their businesses. This is largely because they have been the key focus over the last two years and, in the opinion of wealth managers, have largely been completed. Only 24% see a focus on cost reduction/process improvement as providing significant improvement to their businesses and 17% share a similar opinion about risk management and governance.

CONCENTRATION ON CORE PROCESSES FOR EFFICIENCY AND EFFECTIVENESS


29

VIEwS ON ExTENT OF cOMPLIANcE wITH TcF VARIABLE-Another area of regulatory focus is in relation to ‘Treating Customers Fairly’ (TCF), which, although a UK requirement has its principles echoed in other territories. Whilst wealth managers are generally satisfied that they comply with ‘Treating Customers Fairly’ requirements, clients do not agree as strongly , especially concerning the extent to which their wealth managers understand their specific needs. For example, whilst 61% of wealth managers are satisfied (8 or more out of 10) that their fees are clear and transparent, a smaller percentage of clients at 46% are of the same conviction. Further analysis of client responses shows that it is the larger wealth managers who appear to find it more difficult to gain consistency of agreement as to compliance with TCF metrics, sometimes significantly so, which should be an issue of note for their compliance and risk management departments.

BROAd AgREEMENT wITH PRINcIPLES-Since the Credit Crunch there have been major developments in the way that financial firms are regulated, notably in: i) the capital they are required to maintain, ii) their requirements to be more transparent in relation to the conceptual nature and proportion of fees, and iii) the way in which they interface with clients. Both clients and wealth managers see regulation as an unwelcome but necessary administrative burden. On a positive note, 59% of wealth managers believe that the ‘Know Your Client rules’ add value to client relationship.

REGULATION HAS HAD A BIG IMPACT

Wealth managers were asked to rank what they saw as the biggest challenges facing their organisations and the rankings shown on the following page throw up some interesting points. Some of these have been addressed earlier in this section and others will be interpreted in further detail in the following sections.

WEALTH MANAGERS IDENTIFY BIGGEST CHALLENGES

SySTEMS IMPROVEMENTS ARE SEEN AS KEy TO IMPROVINg THE BUSINESSES OF wEALTH MANAgERS-The key area where investment is being made is on systems improvements not only in the back office but also, and more specifically, to support the front office. Overall 43% of wealth managers agreed that re-engineering front office/client facing technology platforms would be most rewarded in terms of improving their business. A slightly smaller 41%, in answer to the same question, regarded expanding IT and internal systems (data infrastructure and insight) as the next most important. Clearly this should help with regulatory compliance, but it will also help keep costs down and streamline the service to high net worth clients. A substantial number of wealth managers are also achieving this indirectly by outsourcing some of their back office services, especially since outsourcing providers have the advantage of economies of scale and therefore a greater ability to justify the needed spend on new technology.

ON-LINE cAPABILITy IS OF IMPORTANcE-Continuing the technology theme it is interesting that the availability and functionality of on-line services and functionality is more important to clients than wealth managers believe. Only 27% of wealth managers consider on-line services to be important compared to 46% of clients. Interestingly, a relatively small percentage at 37% of high net worth clients considered their wealth manager’s on-line proposition to be comprehensive. The availability of online services is therefore more than just a ‘hygiene’ factor, and is

an area that will need development over the next few years. Interestingly, US wealth managers do seem to appreciate the importance of online, with 39% agreeing that it is of vital importance maybe because their predominantly brokerage-type model is more suited to providing online services. Additional spend on IT also helps reduce costs by allowing relationship managers to concentrate on more important things like client service and personal interaction.

USE OF NEw MEdIA cOULd BE IMPROVEd-In a similar vein, new media is not used very much as a client interface. Only 18% of clients considered that wealth managers used appropriate new media (i-pad, smart-phone, apps, twitter etc) to interface with them, showing an area for possible development, particularly with the younger generation.


30

2 43%RE-BUILDING TRUST WITH CLIENTS

Rankings shown in the table to the left make interesting reading as they indicate where wealth management organisations will be focusing their resources. Following the findings of this report, more attention ought to be paid to rebuilding trust with clients, providing support so that the relationship managers can do their job more effectively. Wealth management firms’ commitment to better systems and IT go part of the way to achieving this goal. However, organisations should recognise the importance of supporting their staff: it should be noted that only 51% of wealth managers believe that they receive all the support, information and training necessary from their organisation to enable them to deliver excellent service to their clients. It is important that something is done to understand and address the issues of the other 49%. More importantly, insufficient support of staff leads to worsening morale and this invariably erodes service quality. Wealth Management organisations are therefore right to worry about how they can maintain service quality with lower budgets. Also, wealth managers can no longer disregard the importance of investment performance, a key part of their proposition for added value. Without added value in portfolio performance it will be difficult for organisations to defend the fees that they are currently charging. Given what is so often covered in the press, the rankings relating to ‘finding and retaining quality staff’ and attracting new clients are surprisingly low down the priority list.

1 49%MAINTAINING SERVICE QUALITY WITH LOWER BUDGETS

24%9 IMPROVING / MAINTAINING INVESTMENT PERFORMANCE

38%3 INVESTING IN UPGRADING PLATFORMS CAPABILITIES

37%4 MAINTAINING ACCEPTABLE PROFIT MARGINS

5 33%COMMUNICATING OUR DIFFERENCES TO POTENTIAL CLIENTS

6 29%

29%

RAISING QUALITY OF ADVICE

7 RETAINING EXISTING CLIENTS

8 25%MEETING ALL REGULATORY REQUIREMENTS

10 16%FINDING AND RETAINING QUALITY STAFF

11 13%ATTRACTING NEW CLIENTS

TOP ISSUES FACING WEALTH MANAGERS

% AGREEING THE ISSUE IS IMPORTANT

FIGURES REBASED TO EXCLUDE ‘DON’T KNOWS’


31

FOCUS ON EMPLOYEES

32

The following section will now look at a critical part of the value chain, the contribution made by employees and the effect they have on the ability of an organisation to be regarded as a ‘Trusted Advisor’.

In the previous section a number of gaps were identified between how wealth managers viewed their organisation and how clients did so. However, key to the success of any organisation and its delivery of service are its employees. This is even more the case in the wealth management industry where relationship managers are the key contact point between the company and its clients. How employees feel and react is critical to how clients feel about the organisation. The Survey asked a number of questions to gauge employee attitudes about their job and about their company. This information was then analysed to ascertain what effect increased employee morale may have on client service.

The findings of the analysis reveal a high correlation between how employees feel about their job and the level of trust that they inspire amongst their clients. The message to wealth managers is clear - support your staff, if you want your staff to support clients.

IMPORTANT FACTORS IN GAINING TRUSTED ADVISOR STATUSLONgEVITy wITH cOMPANy HELPS INSPIRE TRUST, BUT IS SAdLy LAcKINg-Continuity of the client-advisor relationship is essential in building trust. The research found that trust takes on average 6 years to build, and it therefore follows that advisors who had been with their organisation less than 5 years had little hope of being fully trusted by their clients. It is therefore worrying that 56% of wealth managers have been with their organisations for 5 years or less, and 78% have been there 10 years or less. This finding is even more important when added to the fact that clients mentioned that they have not been with their wealth manager for that long, as can be seen from the graphic on the following page. Finally when clients were asked how many times their relationship manager had changed over the last 10 years, the response was enlightening. The average number of relationships was just over 2 with 27% having had 3 or more changes. A significant percentage of relationships are therefore less than 5 years, below the 6 years which it takes for a trusted advisor relationship to arise.

HOW LONG HAVE YOU WORKED FOR YOUR CURRENT

ORGANISATION?


UNDER 2 YEARS

16-20

6-10

2-5

OVER 20 YEARS

11-15

WEALTH MANAGERS

3%

22%

33%

6%

13%

23%


33

TRUST IS cORRELATEd wITH THE SIzE OF AN INSTITUTION-There is a high correlation between the number of clients served by an organisation and the extent to which they are regarded as a ‘Trusted Advisor’. Organisations with less than 100 clients have high levels of trust, possibly because clients feel more personally looked after. Thereafter, trust decreases with size exponentially, before flattening out at 33%. However, once a company gets past 20,000 clients trust picks up again, possibly due to the brand effect, as clients feel safer with larger organisations where trust of the brand then takes over as a primary client perception.

TRUST VARIES BY SIZE OF INSTITUTION

NO. OF CLIENTS PERCEIVED TRUST OF CLIENTS


33%

34%

45%

38%

41%

33%

LESS THAN 100

10,000-20,000

1,000-5,000

100-1,000

20,000-50,000

50,000+

5.000-10,000

80%

CLIENTS: HOW LONG HAVE YOU BEEN WITH YOUR PRIMARY WEALTH MANAGER?


5%

31%

22%

10%

1%

17%

UNDER 2 YEARS

16-20

6-10

2-5

OVER 20 YEARS

N/A

11-15

14%

CLIENTS


34

WHAT DO EMPLOYEES FEEL ABOUT THE COMPANY THEY WORK FOR?

EMPLOyEES APPEAR RELATIVELy SATISFIEd, BUT NOT OVERwHELMINgLy SO-The research sought to ascertain how employees feel about their company by asking a series of targeted questions. At first glance the results would seem quite positive with 79% of employees agreeing that they are indeed proud to work for their organisation. However 1 in 5 employees are still dissatisfied in their current roles and therefore are at risk of leaving. Worryingly, 50% of these dissatisfied employees (against an average response of 34%) stated that there was no employee retention plan in their organisation, so this fact will be unlikely to be picked up by management before it is too late and staff have already left. In order to ensure employee dissatisfaction is recognised early, organisations should focus on defining a staff retention program which will help to reduce staff turnover. It should also be a concern that only 59% of employees favoured their own organisation were they to be looking for a wealth manager. If employees are not advocates of their own organisations it is no wonder that clients are not advocates either.

cLIENT SATISFAcTION NOT A KEy PERFORMANcE INdIcATOR OR LINKEd TO REMUNERATION-Less than half of wealth managers (45%) agreed that client satisfaction formed an important part of their appraisal or remuneration. This is an area that needs management attention as the research showed that aligning employee and client outcomes is statistically more likely to result in an advisor being considered ‘trusted.’

HOW EMPLOYEES FEEL ABOUT THEIR FIRM

% AGREEING WITH STATEMENT

1 I AM PROUD TO WORK FOR MY ORGANISATION

2CULTURE OF THE FIRM PROMOTES LONGTERM RELATIONSHIPS OVER PRODUCT SELLING

3IF I WERE LOOKING FOR A WEALTH MANAGER, MY FIRM WOULD BE MY FIRST CHOICE

4 I RECEIVE ALL SUPPORT NECESSARY TO DELIVER EXCELLENT CLIENT SERVICE

7MY ORGANISATION HAS A WELL DEFINED STAFF RETENTION PROGRAM

79%

72%

59%

51%

6 RETAINING AN EXISTING CLIENT IS MORE VALUED THAN WINNING A NEW ONE

39%

5 CLIENT SATISFACTION FORMS AN IMPORTANT PART OF MY APPRAISAL AND REMUNERATION

45%

34%


35

LESSONS FOR MANAGEMENTTHE RIgHT INcENTIVES LEAd TO THE RIgHT BEHAVIOURS:

Building client satisfaction into the appraisal process is important as it will help drive the right behaviour amongst relationship managers. As proof of this, trusted advisors are far more likely to have client satisfaction metrics form a key part of their remuneration and compensation structure.

SERVIcE ANd cOMMUNIcATION wITH cLIENTS IS MUcH BETTER IF EMPLOyEES ARE HAPPy IN THEIR jOBS:

Service and communication are key drivers of both performance and trust, and employees are far more likely to deliver if they are happy in their job. The message remains clear, those who have obtained trusted advisor status perform better on almost all criteria and add greater value to their organisation.

dO UNTO EMPLOyEES AS yOU wOULd HAVE EMPLOyEES dO UNTO yOU:

Employee loyalty is likely to be tested if they don’t receive enough support from their organisation. Overall, nearly a third of those employees who responded that they were not proud to work for the organisation are also likely to state that they don’t receive enough support from their organisation. As unhappy employees are less likely to become trusted advisors, employee satisfaction is an important area of focus for management in their quest for Trusted Advisor status.

WEALTH MANAGERS: % AGREEING THAT CLIENT SATISFACTION

METRICS ARE AN IMPORTANT PART OF THE APPRAISAL AND

REMUNERATION PROCESS

trustedadvisor

59%

untrustedadvisor

25%

indifferentadvisor

37%

WEALTH MANAGERS: % AGREEING THAT THEY DELIVERED GOOD

SERVICE TO CLIENTS OVER THE PAST 12 MONTHS

satisfiedstaff

80%

unsatisfiedstaff

25%

indifferentstaff

51%

WEALTH MANAGERS: % AGREEING THEY DELIVER GOOD

COMMUNICATION TO CLIENTS

satisfiedstaff

63%

unsatisfiedstaff

25%

indifferentstaff

43%


36

EMPATHY IS A KEY DRIVER OF CLIENT SATISFACTIONwEALTH MANAgERS NEEd TO SET ExPEcTATIONS BETTER -Service is intangible, and one can only truly evaluate the experience after the service is performed. Setting expectations correctly from the start is therefore incredibly important in ensuring that the client’s satisfaction is calibrated to the right levels. In this regard, whilst the mean is relatively high, only 55% of wealth managers believed that they set expectations very well, whilst there are a worrying number who are not so confident.

The graph to the right shows ‘mean‘ responses to a number of questions which seek to understand how clients feel about the services they experience.

What comes out of this analysis are the continued gaps in perception between employees and their clients. In almost all cases employees believed that they were more client centric than their clients perceived them to be. Of particular importance is the fact that they believe that they handle their clients expectations well as setting expectations is statistically related to being a trusted advisor. Greater disparity is revealed when individual scores are looked at showing that client experiences vary considerably around the mean.

HOW WOULD YOU RANK YOURSELF / YOUR WEALTH MANAGER

ON THE FOLLOWING SCALES?

CORRESPONDENCETOO LITTLE TOO MUCH

SALESPASSIVE AGGRESSIVE

OFFICESTOO BASIC TOO PLUSH

SELLING PRODUCTS PROVIDING SOLUTIONSSELLING STYLE

CLIENT NEEDS COMPANY NEEDSFOCUS

PRODUCT KNOWLEDGELOW HIGH

CLIENT WEALTH MANAGER

MANAGING EXPECTATIONSPOORLY WELL



37

BENEFITS OF ‘TRUSTED ADVISOR’ STATUS

One of the key benefits of having loyal, satisfied clients who regard their wealth managers as their trusted advisors is that they refer their friends and colleagues, and if dissatisfied they are not afraid to share their dissatisfaction with their friends and colleagues. It is therefore surprising that more management information is not available to wealth managers about their clients’ opinions regarding the calibre of service provided and their propensity to recommend or be advocates.

wEALTH MANAgERS wERE ASKEd ABOUT cLIENT METRIcS USEd IN THEIR ORgANISATIONS

It is clear from the chart to the right that approximately

50% of respondents believed their organisation had processes in place to measure a number of important client metrics, whilst the other 50% did not. Without the right client metrics it is difficult to address the emotional satisfaction clients derive from the service provided by their wealth manager. As will be demonstrated in the next section on clients, it is emotions that drive decisions and that lead to ‘Trusted Advisor’ status. Not understanding when clients are dissatisfied or at risk of leaving is not just upsetting to the client, but bad for business and bad for the profits of the wealth manager.

FEMALE wEALTH MANAgERS HAVE HIgHER EMPATHy wITH cLIENTS-For virtually all questions concerning the understanding of client needs, female wealth managers came closer to correctly anticipating the scores of clients. This appears to indicate that their level of empathy is higher. They also concentrate more on the longer term, with more female wealth managers agreeing strongly that longer term remuneration should be brought into alignment with incentives (44% vs. 27% of men). Against other criteria male employees performed better and further details will be revealed at a later stage.

HAPPy EMPLOyEES = HAPPy cLIENTS = INcREASEd SHARE OF wALLET-Employees who are proud to work for their organisation have a 13% greater share of client wallet than those who state that they aren’t. They also have 3% greater share of wallet than indifferent staff. Clearly such statistics can be quantified by wealth managers and will prove the importance and effect of the service-profit chain.

SHARE OF WALLET VARIES BY STAFF SATISFACTION


53% 40%50%

SATISFIEDSTAFF

UNSATISFIEDSTAFF

INDIFFERENTSTAFF

MANY ORGANISATIONS HAVE A LONG WAY TO GO TO REALISE

THE BENEFITS OF TRUSTED ADVISOR STATUS

Does your organisation have a clearly defined ‘on-boarding’ process?

Do you measure the number / value of client referrals?

Do you have formal process as to why clients leave?

Do you carry out Independent review of RM relationships?

Does your organisation identify clients at risk of leaving?

1

2

3

4

5

34%66%

40%60%

47%53%

49%51%

51%49%


38

FOCUS ON CLIENTS

39

The previous sections have revealed that, although the general sentiment of high net worth clients has improved from the depths of the credit crunch, there are still a number of areas where their views are markedly different from those of wealth managers. Trust is the most important of these areas, and our findings confirm that it is both the hardest thing for wealth managers to gain, and the easiest to lose.

wHy dO cLIENTS STAy wITH THEIR wEALTH MANAgER?-In assessing client satisfaction and trying to measure the extent of trust, it is useful to ascertain why clients remain with their wealth managers. As can be seen from the responses, quality of service is the key criteria for both clients and wealth managers followed by timely and appropriate contact. Also, bearing in mind the previous section, the strength of the relationship with their relationship manager is also seen as important, a fact which is agreed by wealth manager participants. Given the client responses, major attention needs also to be paid to portfolio performance as more than just a hygiene factor, but as a demonstration of real added value.

IF RELATIONSHIP MANAgERS KEEP cHANgINg, THEN IT IS NO SURPRISE THAT THEy ARE NOT TRUSTEd AdVISORS-Incidence of changes in relationship managers is relatively high, making it less easy to build trusted advisor status. Over the last 10 years 45% of clients had their relationship manager changed 2 or more times with 27% having had them changed 3 or more times.

TRUST gENERALLy TAKES 6 yEARS OR MORE TO BUILd-Analysis of the results shows that only 1 in 10 clients trust their wealth manager within the first 2 years. It generally takes 6 or more years to gain a client’s trust, and considering almost half of clients have had their relationship changed twice or more in the past 10 years this continuity is currently lacking.

qUANTITy OF REVENUE IS KEy, BUT SO IS qUALITy-The result of this is a large pool of dissatisfied or apathetic clients who will put pressure on wealth managers in terms of costs, but reward them with little profit. Identifying these clients is a key issue for wealth managers who should look to segment their client base by both loyalty and satisfaction to identify different groups. For example, the research shows that around 25% of the current client base have low satisfaction, but high loyalty, meaning that whilst they are not at risk of leaving they are net detractors for the brand. Wealth managers should identify these clients if they want to build quality, sustainable revenue streams.

WHY DO CLIENTS REMAIN WITH THEIR WEALTH MANAGER?

% STATING A FACTOR WAS IMPORTANT

QUALITY OF SERVICE82%

TIMELY AND APPROPRIATE CONTACT78%

PORTFOLIO PERFORMANCE74%

72%STRENGTH OF RELATIONSHIP WITH RM

OVERALL STRENGTH OF ORGANISATION66%

65%

STRONG BRAND 40%

ACCESS TO CONCIERGE / CARD SERVICES22%

N/A




93%

83%

69%

87%

INDEPENDENCE OF WEALTH MANAGER62%

54%

REGULATORY COMPLIANCE69%

53%

EXTERNAL FACTORS (PROFITABILITY ETC)44%

19%

QUALITY OF ON-LINE SERVICES46%

27%

51%

40

an environment where novelty is far more important than relationship, thus reducing the relevance of the concept of ‘trusted advisor’. Further analysis is needed and we expect that the geographical focus will serve to shed further light on this apparent trend. The equivalent role of trusted advisor, with its positive consequences to the business, may well be filled in AsiaPac by those relationship managers who consistently produce new products and opportunities for their clients. Interestingly, further research and additional responses from Australia post 16 May 2011 indicate that the Australian experience is much nearer the global norm.

TRUST VARIES By gEOgRAPHy-

TRUST VARIES By MOdEL-It has been demonstrated that wealth management employees have an impact on client service, satisfaction and trust. It is interesting to extend this analysis to see what types of organisation model appear to deliver the best results. This analysis is underway and will be available shortly, but already it is clear that there are some very marked variances.

10%

CLIENTS: % STATING THAT THEIR WEALTH MANAGER IS

‘TRUSTED’

EMEA

24%

AMERICAS

45%

ASIAPAC

GLOBAL

28%



As has been stated, to gain trusted advisor status requires a higher degree of satisfaction (9 or 10 out of 10). In answer to the question, ‘to what extent do you agree that your wealth manager is your trusted advisor, whilst 43% agreed with the statement, a lower 28% answered as a 9 or 10. Using Net Promoter Score analysis, and deducting the Net detractors (1-6) OF 39% from the Net promoters (9-10) of 28% gives the negative NPS score of 11. Detractors therefore outnumber advocates, which should worry wealth managers who rely heavily on personal recommendations by their clients to gain new business. Perhaps unsurprisingly, older clients are more trusting, with those 55+ being more likely to state that they trust their advisor, and that their advisor has their best interests at heart.

There is also an interesting difference in trust by region and by business model. Loyalty in AsiaPac is significantly different. In this region, perhaps it is in the nature of clients to be less emotionally engaged with the wealth manager and therefore the role of trust is less compelling. It should also be understood that relationships in Asia are more transactional in nature with a lower number of discretionary mandates. Respondents indicated that clients’ engagement tends to focus on the ability of the Relationship Manager to generate product and opportunities. However, loyalty works both ways, and clients in Asia have been largely responsible for creating

TRUST HAS NOT YET BEEN REGAINED

41

Another interesting area for focus is in respect to the increasing understanding of product and services by females and younger clients. The research shows that less than half (39% of young and 49% of females) claim to understand the products and services their wealth manager provides compared to a 58% global average.

yOUNg cLIENTS ARE ScEPTIcAL, MISUNdERSTOOd, BUT VALUABLE FOR REFERRALS -Younger clients are less likely to agree that their wealth manager understands their specific needs (32% vs. a 52% average). Younger clients are also far more sceptical, with only 27% stating that their wealth manager has their best interests at heart compared to a 50% average. However, for those who get it right, the rewards can be great – young people who trust their advisor referred an average of 2 people last year compared to 1 for older people and 1.5 for the middle aged. This is perhaps because they are still active in their business or professional lives and therefore have an active network of similar wealth producers.

MORE cOMMUNIcATION IS BETTER THAN LESS -Trusted Advisors tend to communicate with their clients more than other advisors, and clients spoke of them as more ‘proactive’ and ‘impartial’ than their counterparts. Again, quality of communication wins out on quantity, with trusted advisors tending to contact their clients with personalised communication rather than impersonal emails or statements.

A BETTER UNdERSTANdINg OF HIgH NET wORTH cLIENTS yIELdS HIgH RETURNS -Trusted Advisors are more proactive salesmen. Because they understand their clients’ need better, they are more effective and able to provide solutions to them. Interestingly, Trusted Advisors are the most likely to be rated as more aggressive sellers; however their clients do not seem to mind this approach as they trust their advisor to propose products and services that match their needs. Overall, 28% of clients believe that wealth managers are more focused on selling product than providing solutions, with a similar proportion (23%) considering that wealth managers concentrate more on their company’s needs than their client’s. If these perceptions can be changed then it will provide a huge boost to wealth management organisations both in respect of increased client satisfaction but also internal profitability.

IMPORTANT COMPONENTS THAT HELP HIGH NET WORTH CLIENTS BUILD TRUST WITH THEIR ADVISORS THERE ARE cERTAIN BASIcS yOU MUST gET RIgHT TO AcHIEVE TRUST (ScORE OF 9-10 By THOSE wHO TRUST THEIR AdVISOR) - Always available

Good communication

Treat clients fairly

When you promise to do something, follow through with it

Take time to understand a client’s needs

Have pride in organisation

gOOd SERVIcE IS RANKEd TOP IN THE REASONS wHy HIgH NET wORTH cLIENTS REMAIN wITH THEIR wEALTH MANAgERS -What is interesting about trust is that it is an emotional feeling built up usually over a period of time. As shown later in the report, using the ‘RATER’ analysis (see Appendix 2) one is able to obtain quantifiable data as to how trust is created, or destroyed.


42

BRANd ANd OVERALL PERcEPTION OF A wEALTH MANAgER IS VERy IMPORTANT -Although only 40% of clients regard brand as an important factor in why they remain a client, females value brand more - 51% vs. 37% of men. Whilst elderly clients did not explicitly mention brand as an important factor, many tended to be more risk averse and gravitate to larger institutions where brand is more of a key differentiator.

INdEPENdENcE OF A wEALTH MANAgER IS SEEN AS IMPORTANT By cLIENTS -Overall, 62% of high net worth clients regarded independence as important. Wealth managers are less concerned with independence, with a lower 54% seeing it as important. Independence is a key issue for men, with 64% citing it as an important factor when choosing a wealth manager, compared to 57% of females.

wEALTH MANAgERS ARE NOT ALwAyS PERcEIVEd AS AcTINg IN THE BEST INTERESTS OF cLIENTS -Only 50% of clients believe that their wealth manager had their best interests at heart. Interestingly the statistic is less for large wealth managers where the percentage drops to 35%.

FEELINgS MATTER -Trust depends very much on how clients feel about the way they are treated and responded to RATER as shown on pg. 59 ( see Appendix 2 for explanation) is a useful way of measuring client responses to targeted questions and reveals some interesting data which will be more fully analysed at a later stage. Failure to collect such data makes it difficult for wealth managers to appreciate the extent of any issues that arise and makes any response less easy to target.

CLIENTS: TO WHAT EXTENT DO YOU FEEL THAT YOUR

WEALTH MANAGER…

% AGREEING WITH STATEMENT (8 OR MORE OUT OF 10)


TREATS YOU AS AN INDIVIDUAL AND GIVES PERSONALISED ADVICE

54%

UNDERSTANDS YOUR SPECIFIC NEEDS

52%

57%

DEALS WITH PROBLEMS QUICKLY AND EFFICIENTLY

IS USUALLY AVAILABLE OR PUTS ME IN CONTACT WITH ANOTHER

65%

HAS PRIDE IN WORKING FOR THEIR ORGANISATION

62%

HAS YOUR BEST INTERESTS AT HEART

50%


43

TRANSPARENcy ANd ExTENT OF UNdERSTANdINg ARE VERy IMPORTANT EMOTIONAL ELEMENTS OF TRUST… AS wELL AS BEINg OFTEN A REgULATORy REqUIREMENT -An analysis was done using the UK framework of ‘Treating Customers Fairly’ since the concept is followed in similar forms around the world. The results to some of the TCF based questions are surprisingly low from clients (ranking 8 or more out of 10) , although, not surprisingly wealth managers had a much better perception of how they had performed.

cLIENTS wHO BELIEVE THAT THEIR wEALTH MANAgER IS ‘ON THEIR SIdE’ wILL HAVE gREATER TRUST IN THEM-The style adopted by a wealth manager in their interface with clients is important. In the employee section, we highlighted the different perception of styles and the differences of opinions between wealth managers and their high net worth clients. The industry has long been accused of being product centric rather than providing solutions, with a focus on company rather than client needs. As can be seen from the graphic on following page, a significant number of organisations still fall foul of this stereotype.

CLIENTS: TO WHAT EXTENT DO YOU AGREE WITH THE

FOLLOWING?

BASE: ALL CLIENTS (369), (WEALTH MANAGERS 285)

CHARGES ARE CLEAR AND TRANSPARENT

46%

61%

PRODUCTS AND SERVICES MEET MY NEEDS / CIRCUMSTANCES

71%

49%

I UNDERSTAND THE PRODUCTS AND SERVICES PROVIDED

58%

46%

IT IS IMPORTANT TO HAVE COMPLETE OPEN ARCHITECTURE

63%

56%

IT IS NOT UNREASONABLY DIFFICULT TO SWITCH PRODUCTS / SERVICES

54%

N/A



44

CLIENT NEEDS

FOCUS

COMPANY NEEDS

SELLING

AVERAGE RESPONSE

AVERAG

E R

ESPO

NSE

PRODUCTS SOLUTIONS

ASPIRATIONAL TRUSTED ADVISOR

37%

PRODUCT CENTRIC 43%

VALUE PROVIDER11%

MENU PROVIDER9%



ONLY A THIRD OF ORGANISATIONS ARE CLIENT-FOCUSED

Clients were asked the following questions: ‘How would you rate your wealth manager on a sliding scale:

1 = focus on selling product; 10 = focus on providing solutions and

1 = focus on company needs; 10 = focus on client needs.

45

PRODUCTS

cAPABILITy PUSH

STATEMENTS

cOMPLIcATEdLAcK OF INdEPENdENcE

FEESSLOw

PROAcTIVE

SELLINg

SELLINGSELF-INTERESTEd

POOR ADVICE

gOALSREPORTINg

RELATIONSHIP

ExPERTISERETURNS

ExPENSE

COmmunICAtIOnPASSIVE

UNdERSTANdINg

LAcK OF EMPATHynEEDS

InDEPEnDEnCE

ExPERIEnCE

SELF-DIRECTEDSTATE-OF-THE-ART

TIME

SERVICES

DEVELOPED

PROACTIVE

UNDERLYING

ADVICE

STRUCTURE

SENSITIVE

UNCLEAR

EVERYTHING

PAPERWORK

RESPONSE

LISTENINGSYSTEMS

PRODUCTS

OPENNESS

RESULTS

NOTHING

CLIENT


THE VOICE OF THE CLIENT IS OFTEN SPOKEN OF IN BOARD ROOMS, BUT RARELY HEARDIt is not what we think that is important for clients, nor what management think, ultimately it must be about what clients think. All clients who completed the survey were asked what their wealth manager did well and assisted them to become a trusted advisor, and what prevented them from trusting their advisor. These responses were captured and analysed thematically using word clouds - the more often a theme was mentioned, the bigger the word in the diagrams that follow. The results show the true voice of the client:

WHAT PREVENTS TRUST Too much about products

Too much selling, not about client needs

Wealth managers too self interested

Service too passive

Lack of empathy and a good relationship

Poor comunication and reporting


WEATHERILL EXECUTIVE CONSULTING

NEGATIVE FEEDBACK

46

COMMUNICATION

UNDERSTANDSNEEdS

LISTENS

dEdIcATEd ExPEcTATIONS

OPENOPTIONS

RELATIONSHIP

RESPONSIVENESS

STRAIGHTFORWARD

LISTENS

SAFETY

ASSURANCE

PROACTIVE

BRAND TIMELY

HONEST

PERSONAL

KNOwLEdgEABLE

INdEPENdENT

EMPATHy

AdVIcE

tImELY

tRAnSPAREntRELIABLE



WEATHERILL EXECUTIVE CONSULTING

It is very noticeable that some of the same words arise in both the negative and positive context. This shows that where it is done well it is a key attribute to trusted advisors but when done badly it really affects the ability of an organisation or individual to be a trusted advisor.

Good understanding

Meets needs

Good communication

Honest / transparent

Good advice

Knowledgeable

Independent

WHAT ENCOURAGES TRUST

POSITIVE FEEDBACK

47

WHAT THIS MEANS FOR THE WEALTH MANAGEMENT INDUSTRY

48

THE VALUE OF TRUST...The report has collected a substantial and wide array of data about client satisfaction and Trusted Advisor status which can be quantified in terms of results. The proposition in the introduction to the report put the case that satisfied high net worth clients who regard their wealth managers as their ‘Trusted Advisor’ are most profitable for organisations.

The research found that increased trust produced a 5x increase in long-term profitability when discounted back to present value. Increased trust is good for clients, good for wealth managers and good for the industry making it a worthy goal.







AVERAGE OF ONE.

REFERRALS



WHEREAS UNTRUSTED


CHURN EVERY YEAR.

RETENTION









PROFITABILITY*






INVESTABLE ASSETS.

REVENUE

26% 114% 18% x5

49

INCREASING LONG-TERM PROFITABILITYThe following are some of the key findings from the research which demonstrate why ‘Trusted Advisor status’ increases long-term profitability.

REVENUE-Trusted advisors have a 26% greater share of wallet than ‘untrusted’ advisors. There is a very marked variation in the statistics collected in regard to share of wallet that shows that there is a real benefit from being a trusted advisor.

REFERRALS-Trusted advisors gain one extra referral each year.

Wealth managers have long relied on referrals as a key source of new business, especially as referrals tend to be a more ‘sticky’ and loyal source of revenue, with lower client acquisition costs. Clients who regard their wealth manager as their trusted advisor make 1 more referral each year than ‘untrusted’ advisors, and 1 more referral every 2 years than ’neutral’ advisors. The revenue boost from this can and should be calculated by organisations and will put a hard monetary value on what was until now a relatively soft metric.

SHARE OF WALLET


TRUSTEDADVISOR

69%

UNTRUSTEDADVISOR

GLOBAL

43% 53%

APATHETICADVISOR

52%

2 PARASURAMAN ET AL., 1985


AVERAGE NUMBER OF REFERRALS PER YEAR


TRUSTED ADVISORS

APATHETIC ADVISORS

UNTRUSTED ADVISORS

50

RETENTION-Trusted advisors have less competition and they manage a greater share of their clients wealth.

Average number of advisor relationships clients hold for trusted advisors is 2, whereas for ‘untrusted’ advisors clients hold 3 relationships (i.e. the advisor +2 others).

TRUSTEd AdVISOR STATUS VIRTUALLy ELIMINATES cLIENT dEFEcTION-Where wealth managers are regarded as a trusted advisor the client defection rate was virtually nil (3%).

TRUST IS MEASURABLE -Trust is traditionally thought of as an intangible concept that defies measurement, and it is certainly true that it has many constituent parts. Weatherill Executive Consulting has adapted a unique methodology allowing wealth managers to measure trust for the first time, and identify areas of strength and weakness. This methodology borrows from the RATER system which can be used to rank any service on the basis of 5 comparable characteristics: reliability, assurance, tangibles, empathy and reliability.2

We asked 18 questions that related to each of these 5 RATER characteristics in order to ascertain how well wealth managers were delivering on their service promise, and therefore how much trust they were inspiring amongst their client base. As the figure on the next page shows, trusted advisors deliver much higher scores on each of these ‘soft’ measures with the largest performance gap between trusted and ‘untrusted’ advisors appearing in empathy. This is concerning, as our RATER analysis has statistically proved that empathy is the single most important driver of trust. More analysis of the RATER model, including how results vary by geography and business model will be released at a later date.

The RATER attributes measure clients feelings and emotions but most are not measured by wealth managers and do not form KPI’s which are measured and rewarded. Given the benefits of achieving trusted advisor status more effort ought to be paid to converting those in their organisations who are apathetic to become trusted advisors. They should also weed out the untrusted advisors - those who not only don’t serve their clients well but also detract form those who do. They are the ‘anarchists’ within and need to be identified and dealt with.

% OF CLIENTS LIKELY TO CHANGE THEIR WEALTH MANAGER


TRUSTEDADVISOR

3%

UNTRUSTEDADVISOR

21%

APATHETICADVISOR

4%



51

TRUST IS MEASURABLE WITH THE RATER METHODOLOGY

RATER ELEMENTS SCORE BY TRUSTED ADVISOR STATUS (TOP 3 BOXES) INCLUDING GAP BETWEEN TRUSTED AND UNTRUSTED ADVISORS

UNTRUSTED APATHETIC TRUSTED

100

90

80

70

60

50

40

30

20

10

0

%

RELIABILITY ASSURANCE TANGIBLES EMPATHY RESPONSIVENESS

20%

55%

93%

60%

16%16%

46%

89%

12%

30%

53%58%

96% 96%

92%

GAP73%

GAP76%

GAP73%

GAP84%

GAP66%


52

THE SERVIcE-PROFIT cHAIN-The research and report demonstrates that it is in the interests of Wealth Management organisations to become more client-centric, as doing so increases long-term, sustainable profits.

The previous sections have highlighted the key gaps between the Company, Employees, Clients and illustrated some of the effects these had on client service, satisfaction and how this has hampered the quest by wealth managers to achieve ‘Trusted Advisor Status’.

The end game is therefore to understand the service-profit chain, close the gaps and so increase the chances of becoming Trusted Advisors and reaping the benefits which go with such a status. Some of the information required is already available to the company other information needs to be collected, on a similar basis to this survey, and fed into the process.


WEATHERILL EXECUTIVE CONSULTING; KIRN, S.P., QUINN R.T., RUCCI, A.J., THE EMPLOYEE-CUSTOMER-PROFIT CHAIN AT SEARS, HARVARD BUSINESS REVIEW, (2000)

UNDERSTANDING THE SERVICE-PROFIT CHAIN CAN HELP WEALTH MANAGERS ALIGN COMPANY, EMPLOYEE AND CLIENT INTERESTS

PROCESSESSTRATEGY

EMPLOYEE RETENTION

CLIENT RETENTION

CLIENT CONTACT

CLIENTREFERRALS

RETURN ON ASSETS UNDER MANAGEMENT

-CLIENT LIFETIME PROFITABILITY

-NET NEW MONEY

COMPANY EMPLOYEE CLIENT RESULTS

VALUES

ATTITUDE ABOUT

THE JOB

EMPLOYEE ATTITUDE

ATTITUDE ABOUT

THE COMPANY

SERVICE QUALITY

CLIENT EXPERIENCE

COMPANY DATA SURVEY INFORMATION

VISION

53

Aligning the interests of clients, employees and the organisation creates better service and shared value for all parties. This chain is known as the service profit chain, and involves aligning internal service quality between employee and organisation with external service quality between employee and client. The diagram shows how this chain of events is enacted: the company sets the vision of what it wants to achieve, and translates this into a strategy - a plan of how to achieve their vision. The strategy provides the tools and processes employees need to achieve the vision, and results in a set of values which will influence how employees feel both about the company, and about their specific job. Employee attitude and employee retention both influence service quality, whilst employee attitude also influences the frequency of contact a client receives. Quality and frequency of service combine to form the client experience, which as this report has showed, influences both referrals and retention, as well as upwards and downwards client migration. These factors have a direct impact on results, including net new money in, return on AuM and client lifetime profitability.

By understanding and measuring each stage of this process, wealth management organisations can understand on a granular level how they are delivering service both internally and externally. These measures can act as an auditable set of soft metrics that can predict future financial performance. There are a number of retail organisations that are advanced users of this model and wealth managers would benefit from looking at their experiences in this area to see how they might be applied.

When building their strategy, a truly client centric organisation would work from right to left on the previous chart:

work out what result they want

work back through client needs and requirements to deliver the required result

ensure that employees are equipped to deliver what clients want by designing the appropriate processes

agree this result as their strategy and

encapsulate this as the vision

The result would be a truly ‘client centric’ organisation.


1

2

3

4

5

54

There are some real benefits from aligning the interests of the company, the employee ( wealth manager) and client

KEY PERFORMANCE INDICATORS OF WEALTH

MANAGERS AND CLIENTS ARE UNALIGNED

COST / INCOME RATIO-

NET MONEY IN/OUT-

INDIVIDUAL RELATIONSHIPMANAGER REVENUE

TARGETS-

PRODUCT PERFORMANCE-

SHARE OF WALLET

INVESTMENT TRACK RECORD-

RAPPORT WITH ADVISOR-

“GUT FEELING”-

TAILORED SERVICE-

RECOMMENDATION BY FRIEND/FAMILY/ADVISOR

-LEVEL OF TRUST

FINANCIALINDICATORS

SERVICEAND

RELATIONSHIPS

WEALTH MANAGER PERFORMANCE

INDICATORS

CLIENT PERFORMANCE

INDICATORS

Key to this is to close the gaps that currently exist between the company, employees and the client. The first step is to align the interests of clients and employees and to ensure that the KPI’s which management collect, monitor and reward are also aligned with those of their clients, which currently they are not.

These would help to:

Align interests of bank, wealth manager and client

Monitor and improve service delivery

Create a cohesive and consistent client experience

Improve client acquisition rates

Increase share of wallet

Reduce client churn

Increase retention of top performing employees

Better fulfil regulatory requirements

Provide set of metrics that act as a leading indicator for financial performance

CULMINATING IN AN

ORGANISATION BETTER ALIGNED TO CLIENT

NEEDS AND MEETING THEIR EXPECTATIONS

1

6

2

7

3

8

4

9

5


55

THE VOICE OF THE CLIENT MUST BE HEARD

When the interests of clients and the organisation are aligned then the organisation will move away from a transactional business model based on profit, to a relational business model based on shared values. Achieving this will involve a subtle change in focus and maybe also of systems, as current relationship management processes are largely reactive, capturing what a company knows about a client, whilst experience management systems are more proactive and capture what a client thinks about a company.

1. Client experience research; identify KPIs; monitor and

improve2. Identify which training

will lead to improved results; monitor employee

satisfaction; link employee-client KPIs and wealth

managers remuneration

5. Create client strategy; disseminate effectively to

employees; define success;

3. Re-appraise IT and technology spend

to achieve effective monitoring of client loyalty

/satisfaction; link client satisfaction empirically to employee satisfaction and

financial results

4. Align organisation behind the client; centralise the

management of the client experience; empower

front-line employees to deliver excellent service; align client touch points

ALIGNING THE ORGANISATION AROUND THE CLIENT, WHILST IT INVOLVES A TOTAL COMPANY EFFORT , WILL DELIVER SUSTAINABLE RESULTS

EMPLO

YEES

PROCES

SES

ORGANISATION

STR

ATEG

Y

CLIENTS

CLIENT


56

AN IBM PERSPECTIVE

57

IN 2011, IBM REFLECTS ON 100 YEARS OF INNOVATION, BOLD RISKS AND TRANSFORMATIVE BREAKTHROUGHS. IBMERS HAVE DETERMINED THAT “TRUST AND PERSONAL RESPONSIBILITY IN ALL RELATIONSHIPS” IS ONE OF OUR CORE VALUES AND WE ARE PROUD TO BE ASSOCIATED WITH INSIGHT THAT SUPPORTS THE QUEST FOR TRUSTED ADVISOR STATUS IN YOUR INDUSTRY.

®

AN IBM PERSPEcTIVE-This is IBM’s centennial year and like wealth managers around the world we recognise the importance of a trusted brand. For wealth managers establishing trust is not optional or a lofty aspiration. Without delivering trusted advice your clients will not engage, will not be advocates, and ultimately, will not stay.

IBM is sponsoring this survey because we believe in the value of trusted relationships. The Financial Services Industry has been through a challenging period and we know from IBM’s most recent CEO Survey that Financial Services CEO’s see integrity as the most important leadership discipline. The CEO survey also tells us “getting closer to customers” is a key organisational theme. Importantly, this must happen in an era of greater volatility and complexity. Therefore we believe the additional insight this survey provides is of great relevance to wealth managers around the world.

Whilst the number of high net worth clients who agree that their wealth manager is their ‘Trusted Advisor’ has rebounded since the depths of the crisis, the survey finds that wealth managers have identified significant challenges in their quest for trusted advisor status. “Maintaining service quality with lower budgets” and “investing in upgrading platform capabilities” were highlighted as the two biggest challenges and as a result wealth managers intend to invest in system improvements both in the back office and in the front office to support relationship managers in this journey.

The survey findings on employee longevity, continuity of relationships and how larger organisations can emulate the personal touch indicates the fundamental role of employees in building trust. Good data management and business analytics can play a powerful role in supporting relationship managers to deliver this personalised, customer agenda. If the right insight is available at the right time this will facilitate continuity of relationships and the personal touch at scale. This investment will be in the knowledge that Trusted Advisors will enjoy a far greater share of wallet and receive more referrals than detractors.

We can conclude from the survey that there is still much to do, and disparity between wealth manager and client views remain. As wealth manager and client views re-align and tangible change delivery programmes are initiated, our IBM wealth management team around the globe would welcome the opportunity to partner with you and support you on your “quest for trusted advisor status”.

AN IBM PERSPECTIVE

58

APPENDICES

59

APPENdIcES- Acknowledgements

More information about the survey and how data was processed and analysed

Further details about IBM, other sponsors and the services they provide

Key contact details

More information about Bruce Weatherill Executive Consulting Limited

1

2

3

4

5

MAIN SPONSOR-IBM

gOLd SPONSORS-See Appendix 3

dEVELOPMENT OF qUESTIONNAIRE, ANALyTIcAL ANd AdMINISTRATIVE ASSISTANcE-James WeatherillFrank CanosaPeter VerbaasCharlie MacfarlaneLucy EppsAndrew DeaneMark Mahoney

SOURcES-Weatherill Executive Consulting, Imperial CollegeDow Jones 2009 survey in conjunction with Bruce Weatherill entitled ‘Wealth Management after the Crunch’ dOcUMENT dESIgN, gRAPHIcS ANd PROdUcTION-Delivery of Thought (DoT), www.deliveryofthought.com

APPENDIX 2: MORE INFORMATION ABOUT THE SURVEY AND HOW DATA WAS PROCESSED AND ANALYSED

qUESTIONNAIRES-The majority of responses were submitted online, with the option to respond in paper form if desired. High net worth clients were asked about their experience and perception of wealth management organisations and the extent to which they met their criteria for trusted advisor status. Wealth managers were asked similar questions so that their responses could be compared with those of high net worth clients. In addition they were asked on occasion to put themselves in the shoes of their clients to ascertain how empathic their views were with that of their clients’. Wealth manager’s perspectives were also sought concerning how they were seeking to regain ‘Trusted Advisor’ status, where they were seeking to invest in the next 12 months and what their priorities were for the future.

All responses are recorded and reported in aggregate to comply with the Data Protection Act, and no information attributable to an individual or an organisation will be made public or made available to any organisation.

APPENDIX 1: ACKNOWLEDGEMENTS

APPENDICES

60

ANALySIS-The responses were processed and analysed, compared and contrasted between high net worth clients and wealth managers and differences by geography were highlighted. Further statistical analyses were run to identify correlations, enabling valid conclusions to be drawn based upon the data collected. This survey is one of the largest of its kind, and as such the data reported here only represents the summary findings. Further global data, regional and country analyses for both clients and wealth managers and custom data cuts can be made available at a cost to those who require it, subject to agreement.

The survey uses a number of tools and processes to analyse and compare responses from clients and wealth managers to identify gaps and the steps needed to close them.

In order to find a new way of measuring service quality, this report adapted the RATER approach. This methodology breaks down service into 5 key areas: reliability, assurance, tangibles, empathy and responsiveness.3

These 5 areas are then measured using client responses to 18 questions and an overall score out of 100 is produced. This score allows wealth managers to benchmark themselves not only to each other, but to any other service organisation, and identify any discrepancies in service performance on a granular level. For example: if a wealth manager identifies an issue in service performance, they can dig down to identify whether it is due to a lack of empathy, and then obtain more granular information as what particular aspect of empathy they are performing poorly on, allowing them to fix the issue.

RATER elements are common to all service organisations, and include:

AgE dEScRIPTION-Younger 18-30Middle Aged 30-60Older 60+

APPENDICES


– ability to perform the service as expectedR ELIABILITY

– knowledge and ability of staff to inspire trust / confidence

SSURANCEA

– appearance of physical facilities, reports and personnel

ANGIBLEST

– individual attention and care the firm provides

MPATHYE

– how willing the firm was to provide assistance and prompt service

ESPONSIVENESSR

61

APPENDIX 3: FURTHER DETAILS ABOUT IBM AND OTHER SPONSORS

MAIN SPONSOR-IBM

gOLd SPONSORS-ComPeer Limited (UK)Retail Finance Intelligence ( AsiaPac)SHOREXStandard & Poor’sWealthbriefing (Media)

OTHER SUPPORTERS-American Express ICC , CenturionThe Bahamas Financial Services BoardChartered Institute of Securities and Investments (CISI)Roman Scott / Vo Ha, (Calamander, Singapore)Jersey Finance Limited Nyenrode Business University (Netherlands)Elmer Rich III (Rich and Co, USA)

APPENDIX 4:KEY CONTACT DETAILS FOR FURTHER INFORMATION

BRUcE wEATHERILL ExEcUTIVE cONSULTINg LIMITEd-The survey, questionnaires, attracting participants, administration, analysis and the writing of the report was performed by Bruce Weatherill Executive Consulting Limited. Further information about the company and its services are shown in Appendix 5.

There is a substantial amount of data and further analyses are being prepared for release at a later date. The responses to both the high net worth client and wealth manager questionnaires are available for purchase so that organisations can carry out their own analysis. Data packs will be available at the global, regional and at certain country levels where adequate numbers of participants have been obtained. Confidentiality will be maintained and data will not be released other than in aggregate format, ensuring confidentiality of participants.

dATA PAcKS ANd FURTHER RESEARcH-REgIONAL ANALySES-Data packs for both high net worth clients and wealth mangers will be available for EMEA, The Americas and AsiaPac.

cOUNTRy REPORTS-Data packs will be available for Australia, Channel Islands, The Bahamas and Carribean, Hong Kong /Singapore, Middle East, Netherlands, Switzerland, UK and the USA. A separate aggregated report and / or data will be available in respect to International Finance Centers (IFC’s) highlighting differences and similarities and identifying key trends and challenges for offshore jurisdictions. Client data packs will be available where adequate responses have been obtained.

wORKSHOPS-Company briefings or workshops can be organised to investigate the findings of the research in more detail using the expertise of Bruce Weatherill Executive Consulting Limited.

BESPOKE RESEARcH-Bespoke research to further analyse or correlate data collected by the research can be undertaken as required and there are many more data cuts that will provide additional insights into the issue of Trusted Advisor Status.

For further information contact: Bruce Weatherill at [email protected]

APPENDICES

62

IBM cONTAcTS-Key wealth management contacts

Likhit Wagle IBM Global Industry Leader: Banking & Financial Markets [email protected]

Paul BettsIBM Senior Partner, Financial Services [email protected]

Robert Steedman IBM Wealth Management Practice Lead, [email protected]

Philippe JuliaIBM Wealth Management Practice Lead, [email protected]

Ron LeffertsIBM Wealth Management Practice Lead, [email protected]

Rohitha PereraIBM Financial Services and Wealth Management Leader, Greater [email protected]

MEdIA SPONSOR -wEALTHBRIEFINg -Founded in 2004, ClearView Financial Media is the leading provider of business intelligence in the private banking and wealth management space. Our market-leading publications are regarded not only as a source of business-critical information, but also as providing a real voice for this dynamic industry.

ClearView’s portfolio of publications together boast a global subscriber base of over 45,000 professionals worldwide. Our flagship publication, WealthBriefing, is the world’s premier wealth management business intelligence service, providing indispensable updates to a global readership comprised of wealth managers, private bankers, fund and asset managers, family office executives, stockbrokers and other professional advisors, including private client lawyers and accountants, along with high net worth individuals themselves.

www.wealthbriefing.comwww.wealthbriefingasia.comwww.familywealthreport.com

Media sponsor

APPENDICES

63

APPENDIX 5: MORE INFORMATION ABOUT BRUCE WEATHERILL EXECUTIVE CONSULTING LIMITED

Bruce Weatherill, CEO and founder of Bruce Weatherill Executive Consulting Limited is a Chartered Accountant with over 35 year’s financial services industry experience around the world.

Bruce was a Financial Services Partner in PwC for 20 years providing both audit and a wide range of consultancy services to global Private Banking / Wealth Management, Investment Management, Private Equity and Alternatives clients. He was lead partner and a trusted advisor to a number of PwC’s global clients and has been an adviser to the Governments of two offshore centres. He was for over 10 years Global Leader of PwC’s Private Banking and Wealth Management practice and key driver and author of their widely acclaimed bi-annual Wealth Management Report.

From July 2008, upon leaving PwC, Bruce formed Bruce Weatherill Executive Consulting Limited to provide consulting services to Boards and Senior Executives of Wealth Managers and Investment Managers around the world in the following areas:

Challenge to business strategy, business plans and client propositions

Advice on how to respond to issues identified by Clients and the credit crunch

Wealth management and investment management benchmarking, in co-operation with ComPeer Ltd.

Client satisfaction survey design and execution

NPS analysis for private banking councils around the world in co-operation with Retail Finance Intelligence Ltd

Best practice Corporate Governance, reporting, compliance and risk management

Efficiency and effectiveness of client delivery through systems and core processes

Financial analytics, balanced scorecards, KPI’s, segmentation advice

Facilitation of Board / management discussions, manage ‘away days’ or workshops

In 2009 Bruce carried out a Global wealth management survey in conjunction with the Dow Jones Group: ‘Wealth Management after the Crunch’. A new report, sponsored by IBM, was undertaken in 2011 called ’The Value of Trust - the quest by wealth managers for ‘trusted advisor‘ status’ and was based upon the responses to detailed questionnaires by 369 high net worth Clients and 285 wealth managers around the world. The report is available on line at www.weatherillconsulting.com.

Bruce is a member of the British Bankers Association Private Banking Advisory Panel, a member of the Chartered Institute of Securities and Investments (CISI) Wealth Management Group, Chairman of RFI’s private banking Councils around the world, a Non-Executive Director and advisor to a small number of international Financial Services Companies.

He continues to write articles in books, magazines and specialist publications, and his views are sought and reported in the press as a subject matter expert and is regularly a key note speaker or Chairman at conferences around the world.

[email protected] +44 (0) 7889 123 255

APPENDICES

64

dIScLAIMER-The report is based on the survey results of 369 high net worth clients and 285 wealth managers on data collected and analysed as at 7 August 2011. This report is as current as at the date of publication,1 September 2011, but is subject to change without notice. Weatherill Executive Consulting Limited is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Permissions should be sought for use of this report or any of the graphics or data within it by third parties. The views and opinions contained in this report are based on the results of the survey and do not necessarily represent the views of Bruce Weatherill Executive Consulting Limited nor does Bruce Weatherill Executive Consulting Limited take any responsibility for reliance on the information contained in this report, nor for its accuracy and completeness.

65

WWW.WEATHERILLCONSULTING.COM

SPONSORED BY

®

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