Posts Tagged ‘wealth management’


Clients Do Not Want Help. Until They Do.

November 27, 2012

(This was originally published as a guest post for my friends at the management consulting and strategic communications firm Beyond the Arc: Understanding how customers really want help.)

On the same day I published a post on the Clientific blog about the sometimes disappointing allure of technology (Technology is Not a Silver Bullet), the always insightful Discerning Technologist Brad Leimer shared a a post from The Financial Brand on LinkedIn (Big Study Examines Retail Channel Preferences).

The study, sponsored by Cisco, showed strong consumer preferences for non-branch channels such as web, mobile, phone and ATM for many types of interactions. However, branches were the preferred channel for such things as “Apply for a loan” and “Support from banking representative”. (See below)

What explains the stark differences? First of all, as Ron Shevlin of Snarketing 2.0 says,  just because a person visits a branch for help or to complete a transaction doesn’t necessarily mean that they prefer to do it that way. It may mean that the web site or phone representative was inadequate to meet the client’s needs.

Secondly, and not to get all snarkety myself (that’s Ron’s sole province), but clients really don’t want your help. Until they do.

Results Not Process

Much has been written about the so-called “customer experience”– everything that a customer comes in contact with during their lifetime interaction with your brand; direct and indirect, obvious and subtle, conscious and unconscious.

Successful firms correctly attempt to measure the expressed and latent needs of clients. The best keep in mind the words of the great ad man David Ogilvy, who has been variously quoted as saying multiple versions of “People don’t want quarter-inch drill bits, they want quarter-inch holes.”

I have long found inspiration in the work of now-retired Harvard Business School professor David H. Maister, and I have been using some variation of his 2×2 matrix below for at least a decade.

Maister uses a healthcare analogy to describe the key operational and profitability metrics of different departments, and I have found it useful to help financial firms think through their various activities and how they provide value to their clients.

Pharmacy (Low Touch/Standardized Process)
For a financial firm, these are the things that just need to get done quickly and accurately. For the most part clients have little preference as to how.
• Account Opening
• Transactions
• Balance Reporting
• Transfers
• Basic Service Issues
Nursing (High Touch/Standardized Process)
These are items that might need a little more hand-holding, even though the processes and protocols are still well defined, and good client-service skills can go a long way to improving client satisfaction.
• Standard Credit
• Product Advice
• Estate Settlement
• Discretionary  Trust
• Complex Issues
Brain Surgery (Low Touch/Specialized Process)
These activities require specialized skills, but the real value comes from applying the expertise, not necessarily from the advisor/client relationship.

• Custom Credit
• Asset Allocation
• Basic Trust Admin
• Complex Assets
• Basic Estate Plans
Psychotherapy (High Touch/Specialized Process)
For financial firms (and especially wealth management firms), this is the top of the value chain. It’s what happens here that drives most loyalty/at-risk measures. Diagnosis is key, and it is from here where brain surgery may be prescribed.
• Goal Setting
• Financial Planning
• Complex Estates
• Succession Matters
• Nonfinancial Issues
• Moral Support

Bringing it All Together

Clients may well be willing to use your new app for certain things, utilize your web site to download transactions and contact your call center to change their address. Those things may improve your operating margins– as long as they work.

The face-to-face interactions that do the most to improve the client experience are not the ones that solve the issues that could have been (and should have been) solved via other channels. It’s the ones where they are really receiving the time and attention from someone who understands their situation and their goals and is helping them get to where they want to be.

Clients don’t want your help. Until they do.


Secrets of Successful Wealth Managers

November 15, 2012

Firms that succeed with affluent clients over an extended period of time do a number of things well. Through the work of my consulting firm Clientific we have distilled the twelve core principals that successful wealth managers follow.

The 12 C’s work like building blocks, from the bottom up. Begin with the first four, components of a strong strategy. Once those are set, work on the next four, the key elements of executing that strategy. Finally, the final four are the things that differentiate top firms from their competitors.

A solid strategy and strong execution provides a fulcrum upon which your differentiation can be leveraged. I have listed some sample questions to ask yourself for each point, but this is in no way an exhaustive list. Feel free to contact me at if you have any questions or would like a custom assessment.

Strategy- What are you trying to accomplish?
  • Clientele– Who are your target customers? Who are your best customers today? Are you targeting high net worth clients, with over $1 million in assets? Or the ‘merely affluent’, those with $100,000 to $1 million? What about the ultra high net worth– those with $25 million or more? All are attractive segments, but the keys for success are different for each segment.
  • Clarity– What exactly is your value proposition? What problem(s) are you solving for your clients? What do you stand for? What do you not stand for? If you don’t have clarity about why you’re in the business and why others should do business with you, how will you expect your clients to know?
  • Context– How does your firm fit in to the competitive landscape? Are your competitors big banks? Community banks? What about independent brokerage and money management firms? How do the legal and accounting communities address wealth management needs– are they referral sources or competitors? How will you balance all of your stakeholders– clients, shareholders, employees, community, centers of influence?
  • Culture – What’s it like to work with you? What’s it like to work there? What kinds of things do you reward? How do you make decisions? What roles do you expect your team members to play, and how do they fit with one another? What kind of individual and team incentives do you have?

Execution- How are you going to do it?

  • Competence– ‘Great service’ alone is not enough in wealth management. Your team has to have the technical skills needed to meet the complex borrowing, investing, financial planning and estate planning needs of your clients. They also have to have the ‘EQ’ to attract, retain and grow client relationships. How will you assess your team’s talent? How will you develop skills and hold people accountable? Are your current processes adequate, or will you need to adapt new talent management protocols?
  • Consistency– Having great technical and interpersonal skills will only matter to your clients if you deliver results consistently and in a way that meets or exceeds their expectations. How will you manage consistent delivery and a consistent client experience?
  • Client Intimacy– It’s easy to assume that positive, friendly client relationships are close and intimate; yet their are countless examples of advisors being shocked to learn important details from a client that are already well know by a competitor. How will you advisors move from information to insight? Think of the difference between a monaural AM radio broadcast and a Dolby THX surround sound experience. Often the difference involves understanding and addressing non financial goals and issues of your clients.
  • Courage– It takes managerial courage to truly execute. The best plans and strategies are worthless without the tenacity and discipline to execute and make necessary course adjustments. General George S. Patton said “A good plan violently executed now is better than a perfect plan executed next week.”  Change management, sales management, coaching– all kinds of leadership– require courage and discipline.

Differentiation- What makes you different?

  • Client Advocacy– The old saying “They don’t care how much you know until they know how much you care” is trite, but true. Clients have to trust you, and the most important element of trust is truly looking out for your client’s best interests. Character and integrity are table stakes, but you must be a true advocate for your client’s best interest. How do you demonstrate this to your clients?
  • Client Experience– What’s it really like to be your client? What are all the touch points clients have with you, and do they represent your brand the way you want? What about the automated letter they will receive if they accidentally overdraw their account that typically maintains six figures? Will they receive the same letter as every other customer? What will that do to their perception of your relationship? Do your call center, web presence and mobile offerings support your brand or detract from it?
  • Content– How do you communicate your ideas? You have already established what your company does and does not stand for, how do you demonstrate it? How do you present yourself as a thought leader? Do you have and communicate a distinctive viewpoint?
  • Connection– Content is usually outbound, but you have to have inbound communication channels too. What kinds of events do you attend and organize? How do you use social media to engage your clients? How do you really understand what your clients think about your brand, what they like and don’t like about your policies and practices?

We have entered a new era and the days of simply ‘build it and they will come’ is over. Firms that successfully address these and similar questions will be the ones that will succeed in this complex new era of wealth management.


Five Shifts that Define the New Era for Wealth Management

November 6, 2012

(This post was also published today on the blog of my consulting firm clientific,  follow me there too.)

Five massive foundational shifts are impacting financial service providers of all types, and they are impacting those that serve affluent clients in especially unique ways. Many of the strategies, skills and behaviors that enabled success in the past are now at best ineffective, and completely irrelevant in some cases. Advisors and firms serving affluent clients must adapt to these new realities to be successful in the future.

“If you don’t like change, you’re going to like irrelevance even less.” 

— General Eric Shinseki, Chief of Staff, U. S. Army

The first shift is economic. The global financial crisis begun in 2008 is still having a long-term impact on the creation, growth and preservation of wealth. Today’s low growth, low yield environment will likely stick with us for some time, and today’s advisors have to be able to help their clients navigate the realities of the new economy. Firms cannot count on rising portfolio values to increase revenues.

The second shift is regulatory. Partially as a result of the financial meltdown, central banks and regulators all over the world are the in middle of redefining the rules and regulations that today’s financial advisors will likely have to live by for the rest of their careers. Some of the important revenue streams of the past have been curtailed or eliminated—think overdraft fees, payday loans, interchange fees, some mortgage fees, etc. And we are not even close to done, as of October 1, 2012 only one-third of the provisions of Dodd-Frank had been finalized, and another third have not yet even been proposed.

The third shift is demographic. Various research projects that anywhere from $18 Trillion and $56 Trillion of financial wealth will be passing down from the Traditionalist and Baby Boomer generations to their Generation X and Generation Y children and grandchildren over the next several years. Gen X and Gen Y could have a combined wealth that exceeds that of the Baby Boomers as early as 2018, and they do not want “their father’s Oldsmobile”. Even with the more conservative estimates, this is a huge threat for those advisors and firms who don’t adapt to the changes. And it is a massive opportunity for those that do.

The fourth shift is competitive. The global financial crisis caused the weakest firms to disappear while the biggest and strongest got bigger and stronger. (In some cases, only bigger.) It is more important than ever for smaller firms to differentiate themselves in ways that are really relevant. Simply being “the bank” of, say Cozad, for example is no longer enough.

The fifth shift is technological. The tools are already here to radically improve client intimacy and client engagement. The rapid adoption of the iPad and other tablets give wealth managers the opportunity to change the dynamics of the across-the-desk transaction into the shoulder-to-shoulder collaboration that really engages the client. Big data and analytics give firms the power to better understand client behaviors and preferences, if they bother to listen. Social media opens up whole new avenues of client contact.

The challenge will be for firms to adopt the right strategies and then have the discipline to execute. As in every era, we will have winners and we will have losers, and success will go to those who embrace the possibilities of the future while staying relevant to their clients.

You might also like:

Wealth Management 3.0 is Here, Are You Ready?

The Convergence of High Tech and High Touch in Wealth Management

© 2012 JP Nicols. All rights reserved.


Why More Experienced CEOs Will Stay At the Forefront of Tech Innovation

September 5, 2012

This is as encouraging to me personally (“the average age of founders of technology companies is a surprisingly high 39 – with twice as many over-50 executives as those under 29 years old.)”, as it is generally (“The United States might be on the cusp of an entrepreneurship boom—not in spite of an aging population but because of it.”).

But I especially like the described “four character traits of a successful CEO – Sensemaking, Relating, Visioning, Inventing.” I couldn’t agree more, and I have seen an abundance of these traits in the CEOs I admire the most (and a dearth in those who leaving me scratching my head).


Wealth Management 3.0 Is Here– Are You Ready? (Part 2 of 3)

July 17, 2012

Last week in Wealth Management 1.0, we explored the origins of the wealth management business in America. As in that post, I will again disclaim any notion of deep academic research and thorough economic analysis in favor of getting to the point.

The most important formula in banking used to be the 3-6-3 rule. Bankers brought in deposits by paying 3%, they lent that money back out at 6%, and they were out on the golf course by 3PM. Economic conditions were generally supportive of this plan. Periods of high unemployment had the good manners not to be associated with such distasteful concepts as high inflation. But they joined the same commune in the 60’s and 70’s, and Keynesian economists shook their heads and clucked their tongues as disapprovingly as if a Jefferson Airplane concert had broken out down at the local VFW hall.

Things got so bad that we had to invent a new formula to describe the economic mess– the misery index, which combined the unemployment and inflation rates. It peaked in 1980 at 20.76 (7.18% unemployment + 13.58% inflation), as did the U.S. Prime Rate, at 21.5%. Bankers, particularly those of the S&L variety, found themselves stuck with paying double digit deposit rates while they still had 4% 30-year mortgages on the books. Presumably, golf handicaps spiked as well.

Wealth Management 2.0 (1982-2008)

A 1982 reduction of income tax rates, combined with various rounds of deregulation for financial firms and markets, ushered in the next era of wealth management; amidst a booming stock market and falling interest rates. Most experts agree that the launch of MTV on 8/1/81 did not have an appreciable impact on  financial flows, even as it was implicated in the death of the radio star.

Demographics also came in to play as Baby Boomers moved into the management ranks and characteristically began to make sweeping changes to the institutions they encounter– financial institutions, in this case. Formalized bank training programs were cut in favor of higher profit margins, and branch banking became more focused on the mainstream consumer. Branch automation– everything from ATMs to electronic ledgers and loan accounting systems meant that you could now sell home equity lines to suburbanites without having to spend 10 years working your way up from Assistant Cashier to Associate Loan Teller.

This rapidly grew the profitability of consumer banking, but it also meant that the wealthy business owner who was used to his three martini lunch with the local bank VP down at the club was now seeing his 23 year old ‘Branch Sales Manager’ carrying his tuna melt into the branch break room after the owner renewed his term note.

The rise of comprehensive wealth management

Those local businesses were important to the commercial side of the bank, so teams of experienced bankers were assembled to take care of those business owners and other VIPs, often as a loss leader. ‘Private banking’ departments for the affluent became widespread in U.S. commercial banks, though they were not typically built for purposes of secrecy and private investment arrangements like their Swiss inspiration. A typical day in a U.S. firms was much more likely to involve converting a Kroger executive’s bonus into a Swiss chalet style vacation home, rather than converting Krugerrands into Swiss Francs.

Before long, private banking departments were being merged with trust departments and investment operations (many of which also managed the investment of the banks’ own assets), and even brokerage and insurance subsidiaries. Bank trust departments whose most sophisticated investment strategies to date were a couple of variations of domestic stocks, bonds and cash now had to confront the rise and proliferation of mutual funds. Financial innovation continued on throughout the era to include a panoply of packaged and structured products– hedge funds, funds of funds, separately managed accounts, unified management accounts, etc.

The more innovative firms began separating ‘manufacturing’ of financial products from ‘distribution’. This meant a tremendous expansion of choice and capabilities; as if the local diner with a blue plate special and three standard entrees on the menu could now suddenly serve you virtually any meal, prepared by your favorite celebrity chef from the other side of the country. This was great news for the clients, but the advisor now needed a lot more than a green ticket pad and a pen behind her ear to be successful.

Exogenous factors

Consolidation was a driving force in the industry throughout the era– banks, brokerage firms, insurance companies, investment advisors and financial planners established competing operations and bought one another in every combination imaginable. As in other industries, the strong bought the weak and the big got bigger, but there were lots of strategic drivers as well. Firms sought capabilities they didn’t have to retain and attract clients.

Other factors exogenous to the industry also begin to chip away at traditional ways of doing business. Large firms established modes of self-service during the era such as ATMs and online banking and brokerage, usually to reduce operating costs. Now, Generation X , whether through their stereotypical skepticism of large institutions or by necessity, embraced the control and flexibility of doing things themselves. Technology pioneers such as Quicken, Fidelity, Schwab, Ameritrade and others began to build new business models. Suddenly many traditional firms were bloated with too many people who couldn’t do enough of the things their clients were actually willing to pay for.

Some of the best advisors established their own Registered Investment Advisor (RIA) firms to cater to niches and the industry simultaneously became even more fragmented even as it continued to consolidate.

Key attributes of Wealth Management 2.0

  • Key characteristics: Consolidation of services into ‘financial supermarkets’, separation of manufacturing from distribution, rise of self-service
  • Key firm capabilities: Distributing and coordinating a broad array of products, eventually from multiple partners
  • Key client goals: Accumulation of wealth, rise of investment niches and specialists, philanthropy for the masses
  • Key advisor skills: Holistic financial planning, coordination of multiple specialists and strategies, sales  and ‘cross-selling’ skills
  • Key advisor activities: New client acquisition and expansion of existing relationships from transactions to fee-based business, dealing with the pressure of sales and cross-sell goals

Up Next: Wealth Management 3.0 (2008-?) Where do we go from here?


Wealth Management 3.0 Is Here– Are You Ready? (Part 1 of 3)

July 12, 2012

Most banks today have wealth management clients with an average age somewhere between 70 and dead (no offense, Mom). Their books of business were largely built in bygone eras, from fortunes made in companies and industries that no longer exist.

These clients (and many of their advisors) are really not sure about this whole “interweb” fad, and they think Betty White is a great young talent.

The fact is, the world has changed and most banks have not caught up. Most probably never will. They will instead quietly slide off into obscurity like Don Johnson. Or worse, Philip Michael Thomas. At least Don Johnson had Nash Bridges. (Warning: if you readily recognize those names, you may very well be part of the problem.)

The segment of financial services we think of as ‘wealth management’ in the U.S. banking and brokerage industries today has evolved over a couple of broad eras, and too many advisors and executives don’t even realize that we’ve already entered another new era– one I call Wealth Management 3.0.

The term ‘wealth management’  is, of course, Latin for ‘don’t lose my pile of money, and make it bigger if you can’. It is also a term that was coined by the industry without its clients’ permission. Multiple surveys show that clients don’t like the term. Surveys also show that most clients define ‘wealthy’ as someone who has a pile of money at least twice as high as theirs. Maybe that’s because, as P.J. O’Rourke says;

Everyone enjoys pretending to be what he isn’t. It’s poor men who wear flashy and expensive clothes, pretending to have money. Rich men wear sturdy and practical clothes, pretending to have brains.

Nonetheless, today we begin an exploration of this industry evolution that is rapidly becoming a revolution, and we will lay out some imperatives for firms and advisors who want to survive and thrive in the new era

Meticulous researchers and conscientious historians labor considerably to deeply understand precipitating events and underlying causes. Readers of this blog know that I am neither, and therefore not burdened with such inconvenient details. I am purposely ignoring the long history of true ‘private’ banking in Europe and lumping many generations and iterations of evolution into three distinct (if arguable) eras for purposes of brevity and general laziness. Besides, sweeping generalizations are real time-savers.

Wealth Management 1.0 (1853-1982)

In 1853, some 61 years after the stockbrokers first began trading under a buttonwood tree (and presumably had since moved to more sensible indoor trading floors), some of the wealthiest men in America decided that their control of their respective piles of money ought not to cease with such trivial nonsense such as their own deaths. So they founded U.S. Trust, the first financial firm to act in a fiduciary capacity on the behalf of its clients’ trusts and estates.

Wealthy men hate to be left out of good ideas to protect and grow their own piles of cash, so over the next hundred years, other firms sprang up to facilitate all sorts of services related to the accumulation, preservation and distribution of personal wealth.

The wealthy denizens at the turn of the 20th century had to endure such annoyances as trust-busting, the advent of personal income tax in 1913 and the stock market crash of 1929. These indignations created many opportunities for firms to put their best ideas into practice to help the rich stay that way.

Much to the chagrin of more than one plutocratic robber baron, the post-World War II financial boom began to spread the wealth. The number of millionaires mushroomed from a few thousand to more than a half million by 1980, and wealth management practices spread beyond the ‘white shoe firms‘. Even to, egads, mere commercial banks.

Key attributes of Wealth Management 1.0

  • Key characteristics: Fragmented offerings- banking, trust, investment, brokerage and insurance services provided largely by specialists
  • Key firm capabilities: Creating and selling proprietary products and strategies, stock-picking, trust administration
  • Key client goals: Preservation of wealth, with eventual distribution to family members or large endowments
  • Key advisor skills: Narrowly focused subject matter expertise, membership in the right private clubs
  • Key advisor activity: Client retention, tying their rep tie into a perfect half-windsor knot

Evolving to 2.0

Most firms have had to evolve their business models beyond 1.0 to survive to this point; but as we shall see, many still depend on revenue streams attached to legacy clients that is not self-sustaining. Depending on which research you read, anywhere between $18 trillion and $54 trillion of assets owned by the Traditionalist Generation (those born before 1946) and Baby Boomers (born 1946-1964) will pass down to Generations X and Y (no doubt with nary a trace of appreciation).

Business models and value propositions that worked for older generations are, at best, punch lines to the younger generations. At worst, they are powerful motivators to innovate their own disruptive start-ups to put grandpa’s firm out of business. Yet, many firms and advisors continue to whistle past their own graveyard.

Up next: Part 2– Wealth Management 2.0 (1982-2008)


Banker Jones and the Last Crusade: Is Wealth Management the New Holy Grail?

June 14, 2012

In my June 6 post 9 of 10 Banks Are Mulling an Overhaul I linked to the American Banker article that cited the findings from a KPMG study that also said:

Forty percent of the respondents said that asset and wealth management would be essential to expand revenue over the next few years.

But another article in the same issue of  American Banker (Missed Opportunities Abound in the Bank Channel) reported from the Prudential Wealth Management Leaders Forum in New York, which I also attended:

…banks haven’t exploited the opportunity too well. From 2009 to 2010 banks’ and insurance broker-dealers’ assets under management shrank to $600 billion, less than 5% of the $14.5 trillion wealth management market. Meanwhile, discount brokers grew to $2.5 trillion, cornering 19% of the market. Also growing in that time were registered investment advisors, which command 13% of the market, and private banks and trust firms, which command 8%.

Is Wealth Management the New Holy Grail?

Bankers seem to be acting like Indiana Jones in his Last Crusade (…well, last until he sought the Kingdom of the Crystal Skull, but that’s another post… OK, probably not.) in their pursuit of the Holy Grail and its promise of immortality.

A flat (and further flattening) yield curve, low loan demand and regulatory pressures on fee income and capital needs are causing bankers to seek new avenues for growth. (See also Is Bank Merger Mania Imminent?)

It’s easy to be attracted to the net overall growth of the affluent, high net worth and ultra high net worth segments and the impending transfer of $17 trillion in wealth from the baby boomers to younger generations.

But as the American Banker article points out, there is a huge gulf between “opportunity” and “success”. Over the past thirty years, a ‘build it and they will come’ strategy worked at some level for nearly everyone. Those days are long gone and they won’t be coming back.

No Easy Fix

Firms that want to gain market share from others will need to deliver true value to clients.

At the same Prudential Wealth Management Leaders Forum, Wallace Blankenbaker of the VIP Forum described the key drivers to loyalty– serve, tailor and teach. Clients want firms that are easy to do business with, firms that look out for their best interests and firms that can help them make better decisions.

If firms fail to deliver on those key drivers, funds will continue to flow from them to competitors that can deliver.

Wealth management isn’t the Holy Grail. It’s a specific set of services designed to solve the unique issues and meet the unique goals of a specific set of clients.

As I have said before, Don’t repaint the walls when you need to fix a cracked foundation.

“You must choose, but choose wisely. For as the true Grail will bring you life, the false Grail will take it from you.”

-The Templar Knight guarding the Holy Grail in Indiana Jones and the Last Crusade

%d bloggers like this: