TORONTO, September 26, 2011 — Two leading wealth management specialists were at The National Club this morning in a PwC client meeting to discuss evolving changes in global private banking. One of the dramatic findings of a recent survey by the presenters is that wealth managers are not focusing enough on the relationships they have with the children of their key clients. Without client attention second generation families have only a 50 percent loyalty rate in North American and in Asia this falls to 20 percent, says Steve Crosby, Managing PwC America’s Wealth Leader. “Competitors are going after the sons and daughters of your clients,” he says.
The impact of new regulations and more demanding client expectations are forcing private banks and wealth managers to change their client service infrastructures and the way they operate, says a PwC survey on Global Private Banking and Wealth Management. Companies who are able to master change will be in a position to win increased market share and lead the industry, says Crosby.
Some of the major highlights state:
PwC’s survey breaks down the industry pressures into five key areas.
1. Performance and Change
“The DNA of the wealthy investor has been transformed as a result of the global financial crisis and recent scandals,” says Raj Kothari, a PwC partner and national Asset Management practice leader. “The result is higher expectations of service and value. Clients are more active in managing their affairs and they are paying increased attention to reputation, regulatory compliance and risk management.”
He adds, “With clients taking a much more active interest, wealth managers now have to work harder to earn their long-term loyalty and trust. Delivering the clear value that clients want is contingent on understanding and anticipating their changing needs, circumstances and perceptions.”
The survey indicates that:
The survey indicates shifting patterns of world wealth which present challenges and opportunities:
3. Client Relationship Managers and Human Capital
Says Crosby: “The shortage of talent is one of the biggest barriers to future growth. Top quality people are becoming more valuable, more difficult to source and more expensive to train. However, the industry is getting better at institutionalizing client relationships with organizations. Links between performance and pay are becoming critical. New strategies, incentives and support are needed to attract and retain qualified professionals.”
The survey also found that:
4. Operations and Technology
Respondents are at different stages of their operational evolution. Many continue to run legacy systems and manual processes. Technology budgets are being directed to better support client relationship managers and the front-end client experience.
The findings also show:
Comments Kothari: “Transformation of the wealth manager business model is overdue, and this year’s report shows new urgency for change from an industry that has not needed, nor been able, to adapt swiftly in the past. We found nearly universal acceptance by senior wealth management executives that standing still is no longer an option and that there is a need for wholesale changes in the way their organizations deliver value. Those that are ahead are looking beyond the pressures of today to address operational, cultural and technology issues that are standing in the way of future growth.”
5. Risk Management and Regulation
Kothari believes that risk management systems and processes are being upgraded to provide integrated approaches to better align risk and value. The global wealth management industry is now at the forefront of regulatory change. Cross-border standards, customer protection and transparency are anticipated to impact the front-end client experience and increase costs. For example:
Participants responses indicate that the centre of gravity for wealth management is moving, and established centres are under pressure from emerging markets. In reaction to increased regulatory pressures, the report indidates that respondents see Switzerland, London and, to a lesser extent, New York, all being challenged by the rise of Singapore and Hong Kong in the coming two years.
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