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Branding and Segmentation in Wealth Management
VRL Financial News Publishing, Feb 2010, Pages: 148
This new report sets the benchmark in the strategy and practice of attracting, servicing and retaining wealth management clients. It includes: the role of new web technology in attracting clients, the rise of the boutique practice and the family office, and strategies for banking customers in emerging wealth markets.
High net worth banking has been subject to the seismic events of the credit crunch, which in addition to the sustained fall in the value of AuM, has also seen the Madoff and Stanford scandals, increasing regulation and demands for transparency, and the fall from grace of leading market players, in a way that once would have been unthinkable.
Case studies including; Barclays Wealth, Credit Suisse, HSBC, Rothschilds and Route Group
Key points contained in the report:
- Why wealth management firms have been late adopters of client segmentation, inhibiting factors and some potential catalysts and solutions
- Facilitating factors such as harnessing the support of relationship managers, effective IT systems and aligning segmentation and regulation
- Moving beyond AuM as the main method of segmentation
- Best practice from outside of the industry
Since the publication of the industry defining reports: Creating a Private Banking Superbrand and Client Segmentation in Wealth Management, high net worth banking has been subject to the seismic events of the credit crunch, which in addition to a fall in the value of AuM, also saw the Madoff and Stanford scandals.
Two years on and with AuM now approaching pre crisis levels Emma Rees assesses the changed landscape in an era of uncertainty and diminished expectations. This new report sets the benchmark in the strategy and practice of attracting, servicing and retaining wealth management clients. In 2008 Creating a Private Banking Superbrand reported that the main issues facing wealth management were:
1. The need for a strong corporate identity and marketing strategy as without it client growth is unlikely. The entry of numerous firms with an institutional or retail banking background plus a multitude of niche firms have created fierce industry competition. Retail banking institutions, in particular pose a considerable threat as many of the new wealthy already use and have a familiarity with the services they offer.
2. The transformation in the wealth landscape presents both new issues and threats, but also significant new opportunities. Increasing numbers of wealthy individuals from diverse backgrounds means that traditional providers of services to the rich, from luxury goods companies to private banks, must adapt if they are to succeed.
3. Whereas one of the key purposes of marketing is to increase awareness, some wealth managers have prided themselves on discretion and maintaining a low profile. Industry players will have to open up to using new marketing techniques in order to raise awareness of their existence and communicate the benefits of their services to a new audience. Although inherited wealth is set to play a smaller role, the transfer of wealth from the ‘Baby Boomers’ to Generations X and Y is a crucial factor. These generations are set to become the beneficiary of the largest global wealth transfer in history with an estimated US$500 bn to be handed over by 2015. For banks looking to capture this sector, the challenge is to adapt their communication and marketing strategies to meet the needs of the younger generation rather than provide the service offerings designed for their parents and grandparents.
4. While the amounts of money spent on branding by private banks grew, in 2006-2008 this expenditure had yet to effectively crystallise “breakaway brands”.
5. As many private banks and wealth management firms have high cost-income ratios, in order for marketing to be taken seriously, marketing initiatives must quickly impact on the bottom line.
The main conclusion of the report was that:
‘With estimates suggesting that only a tiny proportion of those who could use a private banking or wealth management service currently do so, arguably confidence in the banking industry has never been lower in recent years, there has never been a bigger opportunity for individual banks to clean up through investing in brand communication’.
This new report reviews how the industry has performed in the interim period and assesses the likely future direction for branding and segmentation in wealth management.
Questions include:
- The changing role of scale in wealth management….have middle ranking players gained as a result of the crisis?
- Placing the high net worth client in the wealth management context, which segments have the strongest growth prospects?
- The client and their changing needs, have clients really demanded additional transparency from wealth managers?
- What constitutes an excellent client experience?
- Have alternative providers been damaged or enhanced by the events of the credit crunch?
- Is the banker still the brand or has it become the bank?
- Does increased regulation offer the chance to create new customer segments?
Findings include:
- As the sources of global wealth continue to diversify, international wealth managers face stiff competition from local players. BRICs markets do not offer easy pickings, and firms who have failed to do their cultural due diligence have failed to make their brands connect with new customers.
- As marketing techniques to reach wealthy individuals have become ever more sophisticated and bespoke it is increasingly possible to reach potential clients, but it needs skill, dedication and investment. Investment has not been forthcoming and as a result marketing in wealth management continues to lag behind best practice in all manner of comparable services ranging from luxury goods to legal and accounting services.
- CRM system investments remains not fit for purpose and in many organisations the level of I.T spend has fallen over the past few years.
- Adoption of web 2.0 and social networking tools remains sporadic and low in comparison to both luxury good and retail financial service industries.
- How firms have prospered by building brand into their product offerings.
* Price shown is for a 2 user licence
** Hard Copies available upon request. Please 'Enquire before buying' to find out more.
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