Banks are pouring significant sums into upgrading their front-end systems to satisfy growing client demand. How is this going to affect the traditional banker-client relationship and will this lead to lower fees? Alison Ebbage talks to seven IT providers to discover the cutting-edge trends in front-end systems.
Clients want changes to interacting with wealth managers, and they want them fast. From a high-touch based model to a demand for more continuous data feed over a variety of channels, all must be delivered in detail and as close to real time as possible.
Private banks now need to equip their advisers with front-end systems to meet this demand and let them take a more proactive stance to relationship management.
PwC’s biennial Global Private Banking and Wealth management survey, published in June 2011, highlighted that banks were grappling with an overload of manual processes which are poorly aligned to business priorities.
The priority is meeting client needs with a CRM (client relationship management) service model focused on tools to support advisers, improve client reporting and better process automation.
The importance of data management in the core banking system comes further down the list.
Duncan Ash, financial services marketing manager at business analytics software firm SAS, says front-end service provision needs to be second to none for private banks to retain clients.
“The front-end needs to add value through presentation and system content and tools for both clients and advisers,” he says.
Total client recall
A good CRM service has a number of key functionalities. It must be able to manage the client when first taken on, perform KYC (know your customer) checks, risk-profiling to provide best advice and then give links to the trading and portfolio management systems.
Finally the CRM system needs to be able to generate customer reporting.
Essential to this is having a single customer view. This means seeing a holistic picture of the client is terms of risk, wealth, existing holdings held within and external to the private bank, as well as personal circumstances and preferences.
For example a high net worth client may have a series of high-worth loans, perhaps held with different institutions and not easily adaptable into a traditional risk matrix.
Having a single view of overall debt and assets means the adviser can make a more accurate assessment and a more informed decision.
Single customer view
HSBC is known to have invested widely in its single customer view capability. Barclays Premier Banking is also in the process of upgrading its capabilities in this area.
Peter McKenna, market development director at data management and distribution solutions provider DST Global Solutions, says the single customer view is essential when dealing with clients who have large amounts of assets in different places, for example anything with a value can be recorded into a system such as horses, fine art, etc.
“Being able to run analytics on the data helps the adviser see where the most potential in the relationship lies,” he says.
Segmentation is also a very desirable function, especially as banks look to move up or down the value chain and offer a service that is appropriate to, and tailored to, their target market.
Having a system that can offer different permissions, service levels and reporting styles, depending on the segment in question, makes sense and makes for a better client experience.
“Many banks are choosing to move lower down the value chain and need to segment clients at the front end, offer the most appropriate service at that level and hopefully keep the client as he or she moves up into the high net worth arena,” says Lynne Landau, product manager for private wealth management at packaged banking software provider Temenos.
A single customer view and robust client profiling also contributes to compliance. Advisers need the tools to prove to both regulator and client that they have been thorough and demonstrate why they have reached a particular conclusion or investment recommendation.
Client profiling is a really big area of development says Martin Engdal, director of business development and product marketing at portfolio management and front-end solutions supplier Advent.
“Firstly the burden of compliance is much greater, the banks must be able to demonstrate that they have been thorough from a KYC perspective and that the risk-profiling is appropriate to that client’s needs,” he says.
“But doing this also enhances the client relationship and influences profitability as the advisers can make a more targeted assessment of that client’s investment needs and have a better idea of what is and isn’t likely to appeal to the client.”
Ramping up reporting
Improving trust between client and wealth manager relies on decent reporting.
One reason for trust breakdown between private banks and clients after the 2008 Lehman collapse was banks were unable to give clients accurate, up-to-date views of holdings.
Banks need to up the ante. Clients expect greater frequency and more depth from reporting.
“Client should be able to see overall holdings and exposures and get a 360° view of their relationship with the bank, including things like corporate services and loans,” Ash says. “This is what makes customers sticky.”
Reporting systems must also improve to help advisers engage with clients. Systems should send out prompts after corporate action or other significant market event.
It allows the adviser to contact the client to suggest a course of action based on ‘what if’ scenarios, or follow the client’s lead, adding value to the relationship and helping client loyalty.
Making information availabile to clients
It is all about making data that already exists in the bank available to clients. Instead of holding the information on a repository basis, banks need systems to push reports out to the front end on a real-time basis.
“Reporting is a big focus as a direct response to client demand,” says Landau. “Information needs to be more up to date and detailed than before – not only the performance itself but also the risk analysis and the ability to see the overall holdings at any time.”
“The time when clients would sign a discretionary mandate, then have minimal contact is long gone,” says Daniel Bardini, president of SunGard’s Ambit Private Banking business unit.
“The onus is on banks to have a continuous connection, reactive in a reporting sense and proactive in anticipation of the client.”
Multi-channel access – a top priority
Increasingly multi-channel access is coming top of the list for private banks – although banks have been slow to react to changing user demands.
Clients, old and young, now demand access to their accounts and holdings in real time, or as close to it as possible, and over any channel they choose.
PwC’s survey noted that as smart phones, tablets and other devices become common place, use of mobile and online channels will become more important in providing clients with internet and mobile access.
“One of the biggest demands from a client viewpoint is the link via iPads and iPhones,” says Engdal. “It is all about letting clients access the system wherever and whenever they want.
“The connectivity is not very sophisticated but that will improve and it’s all about the availability in the first place,” he adds.
Keeping data updated
The Advent system, for example, builds intraday trades into its iPad offering, but crucially has a disclaimer which recognises that this is new, and that joining all the data up over a multitude of channels is no mean feat.
The other function of multi-channel access is that it allows better interaction between bank and client. This is important given the trend to move away from a discretionary to an advisory relationship.
By taking social media by the horns, advisers can develop a reputation for thought leadership via online forums and the provision of cutting-edge research.
But will a front-end focus alter the way private banks maintain relationships away from the high-touch personal to a reliance on continuous contact facilitated by technology?
Mark Dunleavy, financial services manager at data integration provider Informatica, thinks so. “The focus on the front end is a result of the nature of relationship management and the service changing,” he says.
“The old model was based on high-touch management, but we are moving away from that to a model based on rapid access and lower fees.”
Further training needed?
The PwC survey highlights the fact that some advisers will need further training to make the most of new technology and rely less on contact lists and old methods, with the emphasis on systems that feed the client, so it is no surprise that the current focus is directed here.
“Private banks know they really need to do something about the various systems and have started with the front end as that is where they see the most issues,” says Dominic Sanna, sales manager at investment management systems and services provider Simcorp.
“If you can get a really good front end then you can make better and more timely investment decisions, respond to alerts and contact clients as an event unfolds. This can then be fed back down the line to get better STP (straight through processing),” says Dominic Sanna.
“This translates into better quality face to face time, better levels of transparency, ongoing appropriateness checks and, all in all, a better level of service.”