Meeting diverse clients needs in high net worth growth markets requires flexible service models and technology strategies
The 2008 World Wealth Report has revealed that High Net Worth (HNW) population has risen to over 10 million.
24 June 2008
The worldwide pool of high net worth individuals (HNWIs) is shifting as global economic and demographic trends bring entirely new investors into the HNW bracket, creating strong growth potential for wealth management firms that can best adapt existing market strategies to meet the unique needs of new markets, according to the 12th annual World Wealth Report, issued today by Merrill Lynch (NYSE: MER) and Capgemini.
Leading wealth managers recognise the extraordinary growth opportunities presented by new markets of high net worth individuals, yet they understand that gaining market share and transitioning their business service models accordingly will be highly challenging. To meet the challenge, wealth management firms need to address a host of complex factors, starting with an effective service model and technology strategy that will enable them to pursue growth rationally, flexibly – and ultimately, successfully. To effectively make the transition, firms are “getting back to basics” and need to:
- Define short- and long-term growth strategies by first making an assessment of their current strengths and liabilities, and then clearly defining their future aspirations;
- Comprehensively understand client needs in new target markets and identify a highly tailored approach to meeting those needs;
- Assess their existing business strengths and unique heritage and capitalise on those assets in developing unique tools and service offerings for both existing and new growth markets;
- Align their service delivery models with the right technology applications and infrastructure.
“Some wealth management firms are already successfully growing and transitioning into new markets, but for many others, the transition is far from easy—or viable—given existing service models and infrastructures,” said Chris Gant, Head of Wealth Management, Capgemini Financial Services UK. “To accommodate the needs of diverse clients and advisors in both established and new market segments, firms must design flexible service models. Service models that align IT and growth strategies will enable wealth managers to leverage their current business platforms and enhance their operational capabilities, which substantially reduces the risks of entering a new market. Ultimately, those firms that best understand their clients will be most effective at capitalising on existing strengths to transform and adapt their service delivery to meet the needs of clients in a target growth market.”
In designing a winning growth strategy, the Report found that wealth management firms need to look at six complex dimensions: target-client needs, firm identity, service delivery model, operations and technology, the external environment and their products and services.
Some keys to successfully capturing growth opportunities include:
1) Growth Depends on Winning Over the Client
Wealth management firms should make strategic investments that are tailored to local client needs, and which differentiate their service offerings, particularly when expanding into new regions. For example, firms can make investments in “client experience” initiatives to bring a more personalised, family office-like service to HNW delivery, or introduce customisable client solutions to respond to the growing demands of clients, who want benefits, such as improved visibility into embedded risk and a holistic analysis of their assets. Reporting capabilities with a detailed analysis of clients’ comprehensive holdings enable firms to distinguish themselves and better serve HNWIs. Furthermore, a qualitative understanding of clients’ traits enables firms to tailor their investment approach, complementing client retention and offering potential for organic growth.
2) Growth Can Elude Firms that Aim to Be Something They are Not
While many firms claim to be capable in all aspects of wealth management, they tend to excel in one area or another based on firm heritage. Additionally, the approaches and models that have driven success in one market may not form the best basis for an appropriate and effective strategy for targeting growth in new markets. Before targeting a new market, firms must first understand their perceived identity, capabilities and the value proposition they offer clients. An honest self diagnosis provides insight as to what capabilities are missing or underdeveloped. Once their offering is bolstered, firms can showcase the value and product offerings for prospects and existing customers.
3) Aligned Service Delivery Models Can Drive Significant Value
Since service delivery models can be directly influenced, they offer significant potential for driving value in new markets. Leading firms have always known one-size-does-not fit all in the HNW segment, but the imperative is that service models must be flexible enough to accommodate advisors and their diverse pool of clients. Additionally, as firms move into new markets and adapt existing service models –or deploy new ones –proper management of different advisory approaches is essential to delivering clients excellent service.
4) A Rightly Sized and Executed IT Strategy Can Reduce Risks of Entering a New Growth Market
IT strategy and deployment must meet operational objectives and deliver service excellence in new markets. Pinpointing the extent to which existing capabilities must evolve, or which capabilities are needed to support the service delivery model for the target market, enables firms to determine the best go-to-market option. Wealth managers can also adopt a service oriented architecture (SOA) approach, a business-driven paradigm that injects operational flexibility through a framework of business activities, services, policies, practices and software.
Spotlight Conclusions
As global economic and demographic trends continue to open new markets and create opportunities to gain new clients, wealth management firms must adapt their service models and technology strategies in ways that will clearly differentiate themselves in the minds of HNWIs and Ultra-HNWIs. Ultimately, the most successful firms will be those that aggressively pursue a growth strategy that rationally addresses their target-client needs, firm identity, service delivery model, operations and technology, the external environment and their products and services.
About Merrill Lynch
Merrill Lynch is one of the world’s leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories and total client assets of approximately $1.6 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide.
Merrill Lynch owns approximately half of BlackRock, one of the world’s largest publicly traded investment management companies, with more than $1 trillion in assets under management. For more information on Merrill Lynch, please visit www.ml.com.
About Capgemini
Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working - the Collaborative Business Experience – and through a global delivery model called Rightshore®, which aims to offer the right resources in the right location at competitive cost. Present in 36 countries, Capgemini reported 2007 global revenues of EUR 8.7 billion (approximately US$12 billion) and employs over 83,000 people worldwide.
Capgemini provides deep industry experience, enhanced service offerings and next generation global delivery to serve the financial services industry. With a network of 15,000 professionals serving over 900 clients worldwide, we move businesses forward with leading services and best practices in Banking, Insurance, Capital Markets and Investments. For more information, please visit www.capgemini.com/financialservices.
Note to Editors/Reporters: To download the 2008 World Wealth Report, please visit www.capgemini.com/worldwealthreport.
Gain even greater insight into the complexity and competitiveness of the global wealth management market with the recently released book “WEALTH: How the World’s High-Net-Worth Grow, Sustain, and Manage Their Fortunes” by Merrill Lynch and Capgemini at www.wealththebook.com.
Capgemini Contacts:
Tom Barton (UK)
+44 870 238 2491
Peter Sigrist, GCI
+44 20 7072 4145
Merrill Lynch Contacts:
Sara-Louise Boyes (EMEA)
+44 207 996 3557
Peter Ogden, Maitland
+44 20 7379 5151
