Review: PwC industry report: re defining ways to give trusted advice

Date: 24 Jul 2009


In this survey season, PricewaterhouseCoopers have recently released the Global Private Banking and Wealth Management Survey 2009.

The survey reports the finding of attitudes among 238 wealth managers across forty countries. The survey canvassed the views of a range of senior management in the organisations as well as client relationship managers. Respondents were mainly from EMEA with 71%, 16% from Asia Pacific mostly Australia and Singapore and 13% from the Americas.

As the report states, wealth management is dealing with damage to its very foundations, the trusted relationship is strained. The focus of respondents is on how that relationship can be re-established and what models are appropriate to deliver what the client is essentially looking for today, something very different from the last report two years ago.

The client has switched from a concern about investment performance to a demand for wealth preservation. Wealth preservation requires a re-evaluation of what the client is offered in terms of service levels, package and reporting. With 25% of respondents reporting client attrition this is going to be key to maintaining client levels, assets under management and profitability. The sense that the survey picks up is that some wealth managers put short term goals ahead of client interests and are reaping the consequences.

This re-evaluation is summed up in something PwC term as ‘Nouveau Banking’. In essence this includes a return to simple trusted advisor relationships with high levels of client relationship management and transparency. The problem arises because wealth managers are simply not equipped to provide the levels of transparency being demanded, particularly such things as real time reporting. The survey points out that historic underinvestment in IT systems means that real time aggregated reporting is something 42% of respondents were unable to provide. This in turn leads to client dissatisfaction in times of market volatility when all that can be provided is a faxed statement.

Part of the issue is the high turn over of client relationship managers with respondents reporting that 47% of CRMs had been with organisations less than five years. If the move is to engender client loyalty through relationships this is something that will have to be addressed. However CRM remuneration and consequently interest is focused on issues such as revenues and assets under management rather than long term organisational objectives. 55% of respondents reported no plans to change remuneration structures to address this issue despite strong evidence that doing so enhances performance. Of those who had altered remuneration structure to longer term organisation goals, 81% reported improved staff performance and 78% reported a greater ability to retain high performance employees.

The problem faced in the short term by many of the respondents is that their business model is under strain. Revenues have fallen sharply. Part of this is due to a move to less sophisticated asset classes with lower fees attached. One way that is being taken to deal with this is the increasing replacement of commission based models with service charges and fees. This also has the advantage for the wealth managers of providing a more stable business model in market downturns.

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