TECHNOLOGY SUPPORTS
A GROWING FOCUS ON
WEALTH MANAGEMENT
Technology Update
Matt Essieh

Matt Essieh is CEO of EAI Information Systems, Inc.. Since 1989, EAI has developed software products to help financial service companies manage retail investment and insurance programs with greater efficiency and profitability.

Visit EAI online at www.eaiinfosys.com

EARLIER THIS summer, Wachovia Corporation announced that it will increase its cadre of private bankers by 125 percent to better cultivate relationships with the growing number of affluent American households who seek wealth management services.

Wachovia is not alone. Throughout the U.S., banks of all sizes are courting the 'mass affluent' market. The opportunity to sell products and services to, and manage the assets of this highly desirable demographic has created intense competition among all types of financial service companies and independent financial advisors. A quick look at the numbers explains why.

According to the 2007 World Wealth Report released in June by Merrill Lynch and Capgemini, the number of high-net-worth individuals in North America (defined as those with investable assets of at least $1 million) grew 9.2 percent last year to 3.2 million people—representing $11.3 trillion in total wealth.

Lowering the asset threshold from $1 million to $250,000 increases the numbers dramatically. Wachovia said its 2005 research showed that about 14 million American households had investable assets of $250,000 to $5 million. The bank expects that number to grow 30 percent—to 18 million households—by 2010.

The challenge of serving the mass-affluent

This upscale shift of the mass market brings great opportunity for banks to sell a far greater number of fee-based investment products and services. For example, Ken Kehrer, whose firm conducts a monthly survey of major banks, found that bank mutual fund sales totaled $61 billion in 2006, a 50-percent increase from 2005 (reported in the June 2007 issue of U.S. Banker).

Clearly, affluent clients want access to a broad array of products. Banks are obliging with investment offerings that range from mutual funds, securities, and annuities to wrap accounts, SMAs (separately managed accounts), UMAs (unified managed accounts), hedge funds, and other specialized products.

The additional products offer great opportunities for growing bank retail investment programs, but also add tremendous complexity to the sales management, processing, and compliance functions. Without careful planning and the right tools, the costs of delivering these new offerings can be difficult to contain.

Managing relationships efficiently

Relationship building is the key to attracting and retaining affluent clients, but relationship management is the key to profitability. You can't afford to give $2 million service to a $200,000 account. But you also can't afford to lose track of the $200,000 client whose assets will continue to grow.

An effective wealth-management program requires a systematic means of identifying clients in each strata of accumulated wealth so that you can deliver appropriate products and services. You also need to recognize when clients are ripe for migrating upstream from your retail bank to your private bank, to brokerage or a more elite wealth-management group, or across business units for a broader, shared relationship—introducing a corporate banking client to your wealth management services, say.

Since wealth management is all about building trusted personal relationships and delivering responsive personal service, the recruitment, retention, and rewarding of top-performing sales and client service/relationship reps is critical to success. These individuals are not the bankers of yesterday. In today's competitive environment, top-performing employees expect to have the systems and support they need in order to identify new affluent clients and build long-term relationships with them. These sales stars also want to be able to track their own sales activity against their goals and incentive plans. Banks that lack the information systems to do this are at peril of losing their best performers to competitors who do have these capabilities.

Smart use of technology

Any bank chasing the mass-affluent market will benefit from the strategic use of technology to better manage client relationships, streamline back-office processes, and attract and retain personnel who know how to sell investment products and services to affluent clients and prospects.

The investment in technology need not require a huge capital outlay to generate a solid ROI (return on investment). Today you can find technology partners with Web-enabled software that is scalable and flexible enough to be easily integrated into any size operation—from a program with a few dozen reps to one with hundreds of branch offices throughout the country. Modular systems allow you to add components as your program grows in size and product mix.

There are three critical features to look for:

• Enhanced sales-support tools designed for relationship selling

You'll want to support your high-performing sales and client service reps with a system that allows them to see, in the aggregate, all of a client's assets currently under management with your institution (and where those assets reside) across business lines. A robust account-aggregation tool removes the 'silo' problem that plagues many banks. It enables asset managers to develop better-informed asset allocation recommendations. It also allows private bankers to consider relationship pricing for clients with multiple accounts and significant assets.

Affluent clients expect you to know and appreciate their worth, and to offer products and services to meet their specific needs and investment objectives. You can't do this without a good account-aggregation tool available on the desktops of your sales reps and client service officers.

By adding automated lead identification and referral management capabilities to the system, you can reduce incidences of missed or incomplete hand-offs from one part of the bank to another. Referral incentive program details can be built in to ensure timely follow-ups with clients and prospects, as well as accurate record keeping and prompt payouts for referring staff. This is an especially effective tool for tracking sales campaigns in real time.

You'll want a system with flexible reporting features that can provide pertinent sales performance information up and down the organization. Permission-based access to data on a 'need to know' basis gives front-line sales reps the information to make effective sales calls and track client contacts. Their direct managers can see reports detailing rep or office productivity and best-selling products, and determine on a real-time basis whether they are making their revenue goals.

Program managers and bank executives can access macro-level data to better understand the strengths and weaknesses of their wealth-management program. Timely, accurate information about sales can mean the difference between modest or explosive growth when it comes to programs that serve your mass-affluent market.

• Ability to process more transactions faster

As banks add more investment products and services to their offering mix, they often must add staff to process the transactions and input data coming from clearing firms. Consider, instead, automating the processing of mutual funds, securities, annuities, and other investment sales. You'll increase processing capacity, reduce personnel costs, and reduce errors. The best transaction-processing software offers electronic workflow features and automates the integration of data feeds from the universe of product vendors.

• Sophisticated risk-management analysis

In regulated industries such as banking and insurance, effective risk management can mean the difference between a smooth-running operation or a huge fine that directly impacts your bottom line and brand reputation. Banks face more hurdles than ever because of the proliferation of new and changing regulations, new and enhanced products for the mass-affluent market, and an fast-growing, dispersed workforce selling these products.

A good technology solution automates many of the key functions related to risk management so that you can devote staff resources to other critical activities. Robust compliance technology will let you tailor surveillance rules to automatically red-flag questionable trades and have them reviewed immediately at the branch-office level. Problems get solved earlier (before an audit), and your compliance officer is then free to manage the function, rather than analyze the product suitability of individual trades.

To ensure that your sales force is appropriately licensed to sell given products, look for an automated system that will track licensing requirements by state (especially important if you have sales reps operating in more than one state), and which can allow you to set up license expiration dates and continuing-education schedules for each rep. Keeping track of this detailed information manually can be a nightmare. Integrating the rep-certification function with compliance surveillance allows you to tackle both responsibilities with one solution.

Gaining competitive advantage

In the race to acquire more affluent clients, the banks that succeed will be those that have embraced technology to streamline sales and back-office functions. With the right software, you can demonstrate to discerning clients that your organization has the product and service capabilities to meet their needs. You can attract and retain the high-quality, results-oriented workforce you need by providing them with tools to get the job done. And, you can demonstrate to regulators that you take your compliance and risk management responsibilities seriously.

There is no time like the present to make a modest investment in technology that will boost your wealth-management program above your competitors