NEW YORK, June 26, 2013 Wealth managers are struggling with the challenges posed by the economic environment and continuing regulatory pressures, according to a new PwC report published today. PwC’s report, Navigating to tomorrow: serving clients and creating value, includes findings from PwC’s 2013 20th anniversary Global Private Banking and Wealth Management Survey. Survey participants suggest that the wealth management industry is moving away from simply providing products towards delivering solutions and advice to clients. Trust, reputation and brand will likely all play a greater role in client propositions and clients’ perception of value, says PwC.
Despite the resurgence of global wealth to nearly pre-2008 levels, the industry is facing significant margin pressure caused by increasingly stringent and costly regulatory requirements, uneven growth across geographic markets, loss of certain type of fees and subdued client activity. These dynamics are further compounded by shifting demographics and existing challenges around operations, technology, and talent management. Surviving and succeeding in this environment requires changing to a more consultative business model that places a premium on “doing the right thing,” says PwC.
Overall key findings include:
Key findings for the Americas:
The report, which surveyed 200 institutions from more than 50 countries, found that the wealth management industry is at an inflection point, precipitated by continuing regulatory pressure, a challenging macro-economic environment, margin compression, changing demographics and trust challenges.
Specifically, PwC’s survey found that the industry must confront five areas of transformative change that will define business success:
Markets and Clients
With more new and innovative entrants in the field, an in-depth understanding of an increasingly diverse and disparate client base is essential to retaining a competitive edge. The industry should become more agile in using data analytics and other resources to pinpoint what clients really value and how much that value is worth to them. Findings from the survey include:
“In Western Europe growth is slow, while North America shows moderate growth, and in the emerging markets growth remains relatively high but has slowed in some areas. To these markets, we can add a further group of nascent emerging markets which are accumulating new wealth most rapidly, with net new money growth forecast as 16% in 2013. The multi-speed wealth management market is here to stay and wealth managers should embrace this,” said Jeremy Jensen, EMEA leader, global private banking and wealth management, PwC. “Retaining clients remains a focus for wealth managers. Changes in personal circumstances are cited as the greatest reason for clients leaving, but the fact that ‘a decision by the next generation’ is the third most common shows both the importance and the challenge of better managing inter-generational wealth transfer. Wealth managers should improve their understanding of clients’ extended family issues to capitalise on the inter-generational opportunity.”
Risk and Regulation
In this year’s survey, compliance replaced reputation as the top risk concern, as wealth management firms struggle to keep pace with the scale, speed and costs of current and planned regulatory change.
“Compliance and risk management is here to stay; private banks should accept this as reality, and that business as usual means doing things the right way, with the right people and right skills. The ability to understand and manage the avalanche of regulatory and risk issues, such as cross border transactions, tax transparency and sales practices will likely require private banks to continue investing heavily into systems and training to ensure that they are able to do business in a profitable, but compliant way,” said Justin Ong, Asia Pacific leader, global private banking and wealth management, PwC. “There will likely be a lot of change management happening in private banks globally as they start to build in processes and policies developed in the past few years to deal with the new operating environment.”
In light of aggressive competition and unprecedented trust erosion, attracting and developing quality client relationship manager (CRM) talent has become a critical priority for the wealth management industry. Setting the tone from the top and aligning rewards and incentives with ethical behavior is integral to rebuilding reputational equity and reclaiming “trusted advisor” status. In our survey:
“The required attributes of a successful CRM are different today - the bar is rising as business models evolve – requiring CRMs to have more specialised and detailed product knowledge. Communication and other soft skills have become increasingly important,” continued Jensen. “Wealth managers should be courageous and proactive if they are to improve external public perception and engender higher levels of client confidence. CRMs will likely play a critical role as the industry seeks to rebuild trust.”
Operations and Technology
The quest for operational efficiency and differentiation through technology continues as firms increase investments to streamline processes, improve efficiency/productivity and mitigate risk. In our survey:
“The wealthy by every demographic are more technology enabled than ever before. They tend to be part of connected digital communities who share their ideas and opinions. They are willing to do more of the background research and investigation on their own. Their relationships with their advisors have taken on a hybrid or multi-media characteristic blending the trusted advisor with advanced technology tools analytics and social media. This impacts the core technology infrastructure of wealth managers. Distinct from traditional transaction processing, which must absolutely be done correctly and profitably, technology budgets are increasingly focused on data, analytics,” said C. Steven Crosby, Americas leader, global private banking and wealth management, PwC. “Today wealth managers should be able to provide data for clients who want it anytime, anywhere and on any device.”
Products and Services
As value chain dynamics and client priorities change, firms are aiming to combat commoditisation by shifting their focus to value-added financial planning services and reconsidering how they develop products. In our survey:
“Our respondents are struggling with transformational change. The products and services the wealthy are seeking today are far different from those of the past. Clients are demanding best of breed products with fee structures they can readily understand and evaluate on their own. More importantly they are now looking for something extra from their wealth managers. Today the wealthy seek guidance and direction on investments, family, philanthropy, retirement and long term health care,” continued Crosby. “This is more sophisticated financial planning and less transaction focused. Increasingly this part of the customer experience is becoming digital with new tools and capabilities.”
Download a copy of the 2013 PwC report here: Navigating to tomorrow: serving clients and creating value
About the PwC Global Private Banking and Wealth Management Survey
PwC’s 2013 Global Private Banking and Wealth Management Survey reflects the changing industry landscape and adds our own point of view to provide the global wealth management community with an independent framework, to guide further analysis and thought around how to evolve business today to better serve the needs of clients tomorrow.
The 2013 survey gathered insights and perspectives on critical aspects of the challenges confronting participants, with a host of different operating models and businesses across all segments of global wealth management. Participants’ combined responses yield a fascinating self portrait of global wealth management both now and into the coming years.
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