The document discusses segmenting wealth management clients based on geography, gender, source of wealth, life stage, and sophistication. It proposes: 1. Segmenting geographically to focus on fast growing markets like India, China, and Southeast Asia. 2. Further segmenting by gender, source of wealth, life stage, and sophistication to better understand clients' needs and calculate lifetime value. 3. Implementing this segmentation requires investing in technology and data collection, training wealth managers, and improving client communication. The goal is to develop tailored offerings that drive performance.

1. Geographical Segmentation
Apart from the major growth region of China and the
Number of wealth individuals (APAC ex China Japan)
existing wealthy clients in Japan, we will see most markets
140.0 growing by 100% in 4 years’ time.
India
120.0
Major growth centres are India, China, Hong Kong, Taiwan,
100.0 Taiwan
Australia, Singapore, Thailand as well as Indonesia. Growth
Hong Kong in mature economy like Japan will be moderate.
In thousands
Australia
80.0
It is therefore advisable to segment the market based on
60.0
the geographical location of these clients and beef up
40.0
Singapore
Thailand
operations in largely young markets like India, China as
well as Taiwan, Hong Kong and South East Asia.
Indonesia
20.0 New Zealand
Malaysia
Philippines As most HNWI are internationally mobile, local teams
0.0 Pakistan
2009 2010 2011 2012 2013 2014
comprise of local language speaking wealth managers
should be stationed at international banking and
commercial hubs like Singapore and Hong Kong to better
Number of wealth individuals (China, Japan and Total APAC)
serve these HNWI. For example a Non-resident Indians
3,000.0
Total team can be stationed in Singapore to address NRI needs
2,500.0 out of India (in South East Asia).
In thousands
2,000.0
China
1,500.0
1,000.0
Japan
500.0
0.0
2009 2010 2011 2012 2013 2014
Source: Datamonitor
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2. Gender, Source of Wealth, Sophistication & Life Stage Segmentation
Entrepreneurship
(First and second generation business owner)
Sophistication Lifetime Value
Income & Investments & Life stage (Build CLV models based on
projected revenue contributed by
(different kind of HNWI would display customers according to the type of
(inclusive of property, stocks, and other instruments) different level of sophistication and instruments they will purchase,
dependent on their life stage, they frequency, amount and personal
would prefer different sets of asset class network, for e.g. friend referrals)
for investment)
Inheritance
(marriage, family inheritance)
Source of wealth
After segmenting the market by geographical location, we Entrepreneurs who lack experience in investments have
would ideally want to be able to ascertain the customer different level of sophistication and also less
lifetime value with the bank. knowledgeable in financial products, they will value simple
products that offers capital protection.
To achieve this, we can first segment by gender, then
determine their source of wealth to construct a profile of the Bear in mind that at different life stages, both males and
HNWI. We can group them into different levels of females might have varying needs and interests in
sophistication and orientation. For e.g. HNWI who different types of instruments. This kind of segmentation
accumulated their wealth thru income and investments could look subtle, but as wealth management is a
would have better understanding of products and hence relationship business, it is good to segment by gender as
value information like macroeconomic insights, world equity well to offer men or women specific products. For e.g.
markets outlook and other research materials to help them education trust for female HNWI might go well with them
decide on the products that they will eventually purchase. because women are historically more nurturing and always
plan ahead for their children’s education.
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3. Why segment like this ?
Why do we segment like this? The need for personal relationships
Based on a recent survey by Datamonitor, HNWI want better Investment portfolio performance
personal relationships with their wealth managers. On top of their
needs also include good investment portfolio performance as Where are the investments opportunities ?
well as advisory information on the various investment
Expressed needs of HNWI
opportunities available in the market. (source: Datamonitor)
By segmenting in such a way (geography, gender, source of
wealth, life stage, sophistication & orientation), we are able to 1 > 50% of clients have face to face contact with
address the needs more accurately as depicted in the survey. relationship managers less than once every
Different country have different profile in terms of needs, one clear quarter
example, Singaporean HNWI have lower need for tax advice than
their region peers because of Singapore’s transparent and efficient
taxation system. 2 What clients want to discuss
1. Performance of their overall portfolio (56%)
In the segmentation process, the bank can also identify the most 2. Where the investments opportunities are
profitable group of customers (based on the CLV) and create the now (53%)
necessary positioning for the target group(s). This will help in the 3. Portfolio allocations (44%)
overall process in the process of acquisition of new customers
and even client retention.
3 Typical needs of a HNWI (vary by country)
We can utilize the set of information of our segmentation to 1. Asset management services
develop intimate customer relationship and understanding, and 2. Tax advice
using these to build models for the CRM. 3. Inheritance advice
4. Simple transparent investments
Insights
“Sophisticated” clients buy products & services (1)
“Unsophisticated” clients are sold products & services
(1) source: Oliver Wyman
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4. Implementation Consideration
Develop suitable Drives superior Achieve better
client offerings proposition performance
Deep understanding
of clients
Steps Bottleneck
To implement this, investment in a proper technology Without strong participation from the WM, it is difficult to
architecture is needed. Private banking systems deal with a get enough insights to make the segmentation a success.
lot of highly sensitive and confidential data which every Another main obstacle is the ability to collect useful data.
bank should protect for its own interest. In view of this, high Hence, a reliable market research agency is needed to
security standards need to be in place. provide valuable insights in this area to facilitate the
segmentation exercise.
Once the technology problem is solved and data has been
input to the Business Intelligence system (with masked As the motive of segmentation is to help the bank in
data), the segmentation can then be carried out. A identifying potential customers, a strong team of wealth
sophisticated Customer Relationship Management (CRM) managers need to be built to help manage the potential
system is needed to help improve the bank’s intimacy as influx of customers. (Competition for talent is getting
well as calculating CLV of the customer. more intense in this region in recent times).
Apart from this, to ensure the segmentation exercise works, A key point not to be forgotten is that the bank should
wealth managers (WM) need to be educated that the improve communications with customers by creating
segmentation process is to help the bank to build deep multiple touch points and ensuring customers have easy
understanding of the clients, thus able to develop suitable access to contact the WM. Strong understanding of
client offerings that will in turn increase their personal clients will enable the bank to improve the quality of its
income. segmentation.
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