The Future of Wealth Management
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The Future of Wealth Management

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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,......

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.

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  • 1. The Future of Wealth Management © Clientific, LLC 2012
  • 2. The evolution of wealth managementThe First Era of Wealth Management (1853-1980) New firms arose to serve the wealthy, focused on protecting and transferring wealth of established families.The Second Era of Wealth Management (1981-2007) Deregulation, falling interest rates and the beginning of a raging bull market ushered in a new era, focused on creating and growing wealth. © Clientific, LLC 2012 2
  • 3. The New Era of Wealth Management (2008 -?)Low Growth/ Regulatory Competitive Generational Technology Low YieldEnvironment Environment Environment Shifts Shifts New Rules for a New Era © Clientific, LLC 2012 3
  • 4. Persistent low growth / low yield environment is challenging revenue growth… “Slower growth means lower returns on capital. If real GDP grows at 1.5 percent, then a diversified portfolio of stocks and bonds would probably grow at 1.5 percent, as well.” - PIMCO’s Bill Gross 7/11/12 © Clientific, LLC 2012 4
  • 5. …ROEs are below pre-crisis levels, atrisk of not covering cost of capital. 20 15 10 5 2012 2011 0 2010 ROE 2009 2008 2007 2006 Source: Accenture Banking 2012: Revenue Growth and Innovation © Clientific, LLC 2012 (#)
  • 6. Regulatory Environment © Clientific, LLC 2012 6
  • 7. Welcome to re-regulation. And we are just getting started… 33% Not Yet Proposed Proposed Finalized 34% 33% Dodd-Frank Rules Source: Davis Polk 10/1/12 © Clientific, LLC 2012 7
  • 8. Competitive Environment © Clientific, LLC 2012 8
  • 9. Customers are at risk… 17% Recently Changed 50% Ripe for Change 33% Stable Source:: Sway Research- “Hearts and Wallets” © Clientific, LLC 2012 (#)
  • 10. …and firms all expect to take market share from one another.“Where will your growth come from in next 12 months? 79% Acquistion 49% Expansion 40% Focus on Affluent Clients 19% Lower costs 6% Unsure 5% Other3%Source: WealthManagement.com No growth expectedsurvey of 648 wealth managersfrom all channels (Oct 2012) © Clientific, LLC 2012 10
  • 11. Generational Shifts © Clientific, LLC 2012 11
  • 12. Transfer of Wealth: 2017-2052Baby Boomers $41 Trillion* Gen X Wealth of Gen X + Gen Y expected to exceed Boomers by 2018 Gen Y *90% of heirs intend to leave current firm *Up to 98% of heirs switch © Clientific, LLC 2012 advisors 12
  • 13. Keys for Success Differ by GenerationBoomers Gen X Gen Y Trust large Value conscious institutions Self-Service Mass luxury Peer advice Safety/Stability Transparency Socially Brand names responsible Prestige factors Tech literate Tech fluent New Rules for a New Era © Clientific, LLC 2012 13
  • 14. Technology Shifts © Clientific, LLC 2012 14
  • 15. This is what passes for clientexperiencein most of our industry… © Clientific, LLC 2012 15
  • 16. Today’s clients want high-tech and high-touch. Why should they have to choose? Analytics Advisors Mobile Social © Clientific, LLC 2012 16
  • 17. Clients want an ecosystem, not silos. Branches Wealth Web Management Customers Commercial Mobile Bank © Clientific, LLC 2012 17
  • 18. Skate to Where the Puck is Going“With so few wealth managersconcentrating on Gen X and Y, andthe fact that nonfinancial servicesfirms are only beginning to moveinto the wealth space, a disruptiveopportunity may exist for aninnovative wealth manager.” -Delloitte Consulting © Clientific, LLC 2012 18
  • 19. Client-Centric/Advice-Driven plan What do you want to do? Financial Planning | Estate Planning share growHow will you share your wealth? What risks are you willing to take? Charitable Gifting | Family Distributions Savings| Investments | Leverage protect How can you protect what you’ve built? Advice | Insurance | Trusts © Clientific, LLC 2012 19
  • 20. Driving efficiency through adifferentiation of tasks and roles: What can banks learn from healthcare? © Clientific, LLC 2012 (#)
  • 21. Smarter Differentiation ofRoles, Tasks and Tools, for one thing… © Clientific, LLC 2012 (#)
  • 22. Execution DiagnosisLow Touch Intimacy/EQ High Touch Nursing Psychotherapy Pharmacy Brain Surgery Standardized Process Specialized Adapted from True Professionalism by David H. Maister © 1997 David H. Maister , used by permission 22
  • 23. Are your brain surgeons handing out aspirin? © Clientific, LLC 2012 (#)
  • 24. High Touch • Standard Credit • Goal Setting • Product Advice • Financial Planning • Estate Settlement • Complex Estates • Discretionary Trust • Succession Matters • Complex Issues • Nonfinancial Issues • Moral SupportIntimacy/EQ • Account Opening • Custom Credit • Transactions • Asset Allocation • Balance Reporting • Basic Trust Admin • Basic Service Issues • Complex Assets • Funds Transfers • Basic Estate PlansLow Touch Standardized Process Specialized © Clientific, LLC 2012 24
  • 25. Or worse,Are your pharmacists performing brain surgery? © Clientific, LLC 2012 (#)
  • 26. HNW Client Insights © Clientific, LLC 2012 (#)
  • 27. How HNW Clients are Feeling “How would you describe the state of mind of your clients in 2012?” Source: WISE Gateway 2012 Executive Survey. Source: WISE Gateway 2012 Executive Survey. 27
  • 28. Clients Still Need Help! Top Six Priorities of HNW Clients, 20101. Capital Preservation2. Effective Portfolio Management3. Specialized Advice4. Transparency of Statements and Fees5. Global Asset Allocations of Portfolios6. Independent Investment Advice Source: Merrill Lynch Cap Gemini, 2011. Source: Merrill Lynch Cap Gemini, 2011. 28
  • 29. Differing Loyalty DriversDrivers of Loyalty to Advisors Drivers of Loyalty to Firms 1. Trust 1. Quality of Advice 2. Responsiveness / Pro-activity 2. Service 3. Quality of 3. Value for Advice MoneyRelated and overlapping, but clientsexpect firms to drive advice and service Source: VIP Forum Research. 29
  • 30. The Challenge of Competition77% of Affluent Primarily Use Banks for Banking 12% of Affluent Primarily Use Brokerages for Banking81% of Affluent Primarily Use Brokerages for Investments 1% of Affluent Primarily Use Banks for Investments Source: McKinsey and Co. 30
  • 31. Revenue Mix Varies by Segment Share of Revenue Wallet in Wealth Management for Various Segments, 2010 Wealth Credit Deposit Investment Segment Products Products Products$5M + 16% 31% 53%$1M -- $5M 29% 29% 42%$250k -- $1M 39% 26% 35%ExpectedChange in +8% +8% -1%Profitability Source: McKinsey and Co. 31
  • 32. Advice is the differentiator“ What product or service is most “What product or service is mosteffective at attracting NEW clients in effective at engaging EXISTING2012?” clients in 2012?” Brokerage Delivery & Model, 12% Insurance, Investment 8% Capabilities, 2 6% Loan Products, 2 0% Financial Financial Planning & Planning & Advice, 47% Advice, 32 % Specific Products Investment Offered, 27% Products, 2 8% Source: WISE Gateway 2012 Executive Survey. 32
  • 33. Wealth Managers’ Survey Operating“Most important Marginmetrics formaking decisionsand evaluating Expense/ Change inoperating Revenue Revenues Ratioperformance?” Top 5 Metrics Client AverageSource: WISE Gateway Retention Revenue Rate per RMMetrics Survey 2011 © Clientific, LLC 2012 33
  • 34. Questions? www.clientific.net @Cllientificwww.wisegateway.com © Clientific, LLC 2012