Wealth Management and Private Banking
Re-inventing value propositions in response to industry pressure and client demands
Singapore, 16 April 2015 — This is the overarching conclusion of Deloitte and Efma’s joint white paper Wealth management and Private Banking – Connecting with clients and reinventing the value proposition, which is published last month. The white paper is based on the results of a survey conducted among over 60 executives from wealth management institutions, family offices and private banks across 26 countries.
According to the survey, wealth managers list the digital transition, the redesign of the advisory function as well as the introduction of tailor-made services among their top strategic priorities for the next five years.
“We believe that the industry has yet to address the challenge of redefining the complete spectrum of their value propositions, including everything from the product and service offering to the use of digital channels and the role of the relationship manager,” explains Benjamin Collette, Partner at Deloitte Luxembourg, Global Investment Management Consulting Leader and EMEA Wealth Management & Private Banking Co-Leader.
The wealth management and private banking industry has changed significantly over the past few years. Increased regulation and tax transparency requirements in the aftermath of the financial crisis have caused a significant shift from offshore to onshore wealth management. Moreover, emerging market players are targeting developed markets while developed market players are seeking growth outside of their home markets.
The survey confirms that the wealth management and private banking industry continues to experience significant economic, regulatory and technological change and that there is a considerable pressure on industry players to revisit their business models and client value propositions.
Beyond the investment portfolio
The financial crisis has made clients more sensitive to risk and their demand for transparency in terms of risk exposure, products and services is growing. Moreover, as clients’ expectations become increasingly sophisticated, standardised offerings and product-centric approaches are no longer sufficient, even though they remain the key to efficient cost management. Wealth managers now have to be able to provide wealth solutions beyond the investment portfolio, considering the clients’ personal preferences and lifecycle needs.
The digital transition is still challenging the traditional wealth management model. The survey confirms that in-person interactions remain at the heart of the relationship building. However, the survey also suggests that wealth managers should to a higher degree combine their face-to-face client interactions with the multiple digital channels available. The path to digital business is not always clear, nor is the implementation and integration with existing infrastructures.
Relationship managers from generalists to technical experts
Relationship managers will need more technical wealth engineering expertise to effectively deliver the services proposed by the institution. The client relationships are likely to become more service-oriented and less investment product-oriented.
“Relationship managers will need to adapt their expertise and embrace their new role as assemblers of competencies. They will have to act as an interface between the client and the most relevant services of the wealth manager,” adds Benjamin Collette.
Client requirements combined to regulatory developments such as MiFID II in Europe, will drive pricing models to evolve from the traditional transaction- or asset-based models to value-based pricing, including advisory fees, all-in-one models and performance fees. Going forward, the quality, value and usage of services delivered need to be translated into pricing, taking into account the needs, value perception and behaviours of different client segments.
An Asia perspective
“In Asia, key trends such as Ageing Asia, a sharing economy, transparent tax regime through amnesty programmes and Automatic Exchange of Information (AEOI)/Common Reporting Standards (CRS) regulations, coupled with uncertainties around average lifespan of skills and fragmentation/concentration of players will force private banks (onshore and offshore) to reflect on potential business models. These trends and uncertainties will impact the various elements of the business model including segments, offerings, channels and pricing,” says Mohit Mehrotra, Global Wealth Management Group Leader.
The wealth managers need to find new ways to add value through services such as wealth structuring and lifecycle management, advanced reporting, tax reporting and reclaims as well as investor support across multiple media.
To download Deloitte and Efma’s joint white paper, click here.