Redefining Ways To Deliver Advice

Financial Services
A new era: redefining ways to deliver trusted advice

Global Private Banking and Wealth Management Survey 2009
July 2009
PricewaterhouseCoopers Global Private Banking and Wealth Management Survey 2009
1
Contents
Contents
Foreword 2
Key survey headlines 6
01 Performance in crisis – what to do now? 8
02 Client service – disciplined segmentation lifts quality 16
03 Products and services – delivering ‘Nouveau Classic’ banking 22
04 The people agenda – a new strategy required 26
05 Operations and technology – delivering client value and cost efficiency 34
06 Risk management – protecting the client promise 40
Background to the 2009 Survey 46
Contacts 50
PricewaterhouseCoopers1 services 53
1 “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
2
Foreword
Foreword
The PricewaterhouseCoopers PricewaterhouseCoopers is delighted to bring you this latest edition of our Global Private Banking and
Private Banking and Wealth Wealth Management Survey, ‘A new era: redefining ways to deliver trusted advice’.
Management Leadership Team
Since our 2007 Survey, the world of the retain leadership during the subsequent
wealth manager has become far more economic upturn. The logic is simple and
challenging. With asset values down, compelling: businesses have to plan to
lower trading volumes and clients focused succeed in a downturn if they are to have
on lower margin products, revenue any realistic chance of winning when good
prospects are severely reduced. Clients times return.
C Steven Crosby are expecting more from their wealth
Americas Leader manager, are asking difficult questions and The current environment offers real
looking for assurance. Client relationships opportunities for those wealth managers
appear less secure. Additionally, with the agility and ability to adapt their
governments and regulators are increasing strategies, people and processes to
the pressure on wealth managers in a address gaps in the market. In our view
variety of ways. there are three underlying themes that will
define the future of the industry:
Jeremy Jensen As a reaction to this, wealth managers are
returning to their core – focusing on • The emergence of ‘Nouveau
EMEA Leader Classic’ banking;
trusted advice and the long-term client
relationships that have traditionally been at
• Adaptation of business models,
the very heart of the business. In an
specifically the drive for process
economic downturn, companies move up
efficiency and improved service; and
and down performance and profitability
league tables more than at any other time. • Increasing political, fiscal and
Wealth managers who successfully regulatory pressures.
Justin Ong redefine their business models now will
Asia Pacific Leader
3
Foreword
Emergence of ‘Nouveau Clients are not looking for complex Adaptation of business
Classic’ banking products, promising high yield, but rather
models – the drive for process
trusted and independent advice that can
The trusted relationship, the very address their needs both in the short term efficiency and improved service
foundation of wealth management, has and longer term.
With a natural gearing to financial
been damaged. Clients are feeling bruised
The economic crisis has presented markets, wealth managers’ revenues have
and have become disillusioned with
Client Relationship Managers (CRMs) with fallen sharply.
financial institutions. There is a sense that
some wealth managers might have placed challenges that they have neither the
Wealth managers will increasingly look to
short-term revenue goals – and not client experience nor the skills to deal with.
introduce new revenue models that are
interests – at the heart of their businesses. If quality of advice is the real differentiator,
more predictable over the long term by
As a consequence client loyalty has then wealth managers need to arm their
replacing commissions with service
declined. Clients are now raising the bar, CRMs with the relevant skills, tools and
charges and fees. Such changes will be
demanding higher standards of service training so that they can fully meet the
challenging, but managing revenues in this
and advice, coupled with simplicity and needs of their clients.
way will help avoid making deep cuts in
transparency. They want to understand times of market distress.
precisely what they are investing in, where Wealth managers can no longer afford to
it is held and how it is valued. This poses be all things to all people. They need
With revenues falling, there is great
challenges for wealth managers, not least to be clear both on where in the market
pressure to cut costs. Yet wealth
of which is the level of transparency that they can win and where they want to
managers’ relatively fixed cost bases
clients require. participate. Service offerings need to be
make substantial reductions difficult to
tailored across all segments. Only then
achieve without removing people.
With markets likely to remain volatile for can wealth managers deliver services in a
To manage costs, wealth managers need
some time, clients will demand that profitable manner, which meet the needs
to evaluate their business models: hard
information on their exposures is readily and expectations of clients. It is a time
decisions need to be taken on what
available. Yet many wealth managers for change – redefining the delivery of
wealth managers focus on within their
simply cannot provide real-time data. In trusted advice.
own businesses – what it is that
volatile markets, the inability to provide a
differentiates them – and look to cease
higher level of transparency dramatically
impacts on an institution’s ability to be a or outsource non-core activities and
true ‘trusted advisor’. We see this as an processes. Technology infrastructures and
historic crossroads for the industry. processes within wealth management
4
Foreword
have traditionally been an area of under- Increasing political, fiscal and engage in or support ‘unacceptable’ tax
investment, and have resulted in a planning and institutions will be required
regulatory pressures
host of one-off solutions and manual to enforce client compliance.
workarounds. Operating models will need Two years ago it would have been
to be reshaped and processes improved if There is a complicated set of political,
unthinkable that governments would have
wealth managers are to succeed in the fiscal, social and regulatory drivers at play
substantial stakes in banks, many of
long term. here. The implications of such change will
which have large wealth management
be far reaching: many mainstream
operations. State ownership and wealth
The successful wealth manager will financial institutions might find that
management do not naturally sit together
maintain investment, and prioritise connections with ‘light-touch’ financial
but many clients now actually view state
long-term efficiency gains before centres will no longer be commercially
ownership as providing welcome stability
short-term cost cutting. With most Chief viable, and some wealth managers will
in the short term.
Executive Officers (CEOs) still anticipating look to reduce the number of centres they
mergers and acquisitions in the market, History indicates that a financial crisis use to limit potential risk. While there has
the challenges of integrating operations leads to new regulation. Following an not been a change in OECD policy, there
and people within those organisations will unprecedented financial crisis, it is logical has been a very considerable step change
be considerable and require a long-term to anticipate an unprecedented regulatory in the level of political pressure being
view on investment. Those that continue response. New regulations will impact brought to bear. IPBCs without the
to invest sensibly, while making the on wealth managers both directly and political clout to stand up to such pressure
significant cost reductions that most CEOs indirectly. For example, the European are particularly likely to feel the impact.
participating in the Survey believe are Commission is proposing to regulate
attainable, will protect their margins. Some are predicting the end of offshore
alternative investment fund managers
Finding and leveraging the ‘sweet spot’ banking. However, while the era of
and similar measures could be introduced
of profitability has never been more competitive advantage via secrecy is
elsewhere.
important. drawing to an end, and we move to
With governments facing unprecedented an era of ‘compliant confidentiality’,
fiscal pressures, a consequence is that so IPBCs will doubtless adapt over time to
called ‘tax havens’, international private these new challenges, and new centres
banking centres (IPBCs), have increasingly will also emerge.
come under the spotlight. Governments
now expect financial institutions not to
5
Foreword
We would like to take this opportunity to thank all the organisations

who participated in our Survey
Wealth managers need to plan for a tax- Thank you to all who
transparent world, taking steps to ensure
contributed
that product ranges, sales techniques and
messages are fully compliant with new Our Survey would not be a success
regulations. Organisations need to think without significant industry participation
carefully about where they place clients’ and we would like to thank the 238
funds, as well as the vehicles and organisations based in 40 countries that
techniques they use to serve their clients. took part. We hope that you find this
Exactly how this will play out over time Survey insightful and thought-provoking
remains to be seen, particularly with and we would be delighted to discuss
government very much ‘inside the tent’. in detail your feedback on the issues
raised within it. Please do not hesitate
A new era to contact us or your usual
PricewaterhouseCoopers contact.
Against the current background of
financial turmoil, the wealth managers that Finally, we would like to thank the
emerge as leaders will not only do what is entire PricewaterhouseCoopers team
required for survival in the short term. who have worked together over
They will also be agile and innovative many months to produce such an
enough to respond to the demands of the insightful report, in particular the
new wealth management landscape in a Global Editorial Board.
way that builds long-term competitive
We are looking forward to the
advantage. The business of wealth
next edition.
management has changed for good and
some of yesterday’s business models The PricewaterhouseCoopers Private
have clearly failed. Only those wealth Banking and Wealth Management
managers that understand this will thrive Leadership Team
in this new era.
6
Key survey headlines
Key survey
headlines 01 02 03
Performance in crisis – Client service – disciplined Products and services –
what to do now? segmentation lifts quality delivering ‘Nouveau
Classic’ banking
After several years of accelerating Servicing strategies must define and Wealth managers are seeking to redefine
growth, the economic crisis has brought address specific client segments, with trusted advisor status.
wealth management’s expansion to a differentiated offerings designed to
screeching halt. support clients’ needs throughout all In the wake of investment frauds,
stages of their lives. transparent product offerings, together
Placing clients at the centre of the with robust suitability and due diligence
business model, providing objective Disciplined segmentation will not only processes, are critical not only to drive
advice and possessing a strong brand help wealth managers tackle today’s client customer value but also to protect the
are now key to success. service challenges, but also allow services reputations of wealth managers.
to be offered to specific clients in a more
Taking care of the client provides cost-effective manner. Product and service offerings need
its own rewards – the most profitable to be clearly aligned with client
wealth managers have significantly lower preferences and financial goals,
ratios of clients per CRM across each while also being operationally
wealth segment. efficient for the wealth manager.
7
Key survey headlines
04 05 06
The people agenda – Operations and technology – Risk management –
a new strategy required delivering client value and protecting the client promise
cost efficiency
Today’s economic crisis presents COOs at successful wealth managers Robust risk management is the guardian
challenges for which CRMs have neither must make changes to their operating of every wealth manager’s reputation.
the experience nor the training. models to reduce costs, while
simultaneously investing to support Poor risk management when selecting
If quality of advice is to be the real and drive business growth. products for clients has been an evident
differentiator, CRMs need to develop weakness – undermining many
stronger advisory skills, as well as Many COOs surveyed believe there are established wealth management brands.
expanding their knowledge in areas such significant cost savings that can be made
as tax and risk. over the next two years and place process In this new era, risk management
efficiency towards the top of their agendas. must come of age. Its application
As governments and regulators drive must be holistic and driven by clients’
change in reward structures, long-term With two-thirds of CEOs identifying expectations.
compensation and development packages acquisitions as continuing to be a part of
must encourage client-centric behaviours their growth strategy, there will certainly
and CRM loyalty. be significant challenges around the
integration of operations.
8
Performance in crisis – what to do now?
Performance in crisis –
what to do now?
01
After several years of accelerating growth, the economic crisis has brought wealth management’s expansion
to a screeching halt. Placing clients at the centre of the business model, providing objective advice and
possessing a strong brand are now key to success. Taking care of the client provides its own rewards –
the most profitable wealth managers have significantly lower ratios of clients per Client Relationship
Manager (CRM) across each wealth segment.
The business model of wealth managers assets, clients have become more risk
has been designed primarily for growth. averse, moving into cash and less risky
The strategy of growth is realised through instruments (with lower margins for wealth
the aspired ‘relationship of trust’ between managers). This also reduces trading
the client and his CRM or externally activity. As a result, wealth managers’
through the acquisition of CRMs and/or revenues have shrunk considerably.
competitors. In recent boom years this
growth has accelerated and at the same In addition, clients require much more time
time yielded high levels of profitability that and attention from their CRM. Poor
fuelled the attractiveness of the wealth performance needs to be explained and
management sector. In the 2007 edition of efforts to retain clients intensified. These
our Survey, prior to the current financial developments should not have come as a
crisis, Chief Executive Officers (CEOs) surprise to most veterans of the industry,
were still convinced that more than since wealth management is not a pure
30% growth would be achievable in the growth business, but is exposed to
coming years. significant cyclicality. The last downturns
(the oil crisis, the internet dotcom bubble
With the benefit of hindsight this turned and several local crises) and their
out to be a fallacy. The growth story came repercussions ended the independence or
to a screeching halt in 2008. Assets the existence of a number of small and
under management (AuM) have shrunk mid-sized wealth managers.
considerably. Disillusioned by the
negative performance of their invested
9
To make things tougher, the relatively fixed

Figure 1: The cost distribution of an average wealth manager
cost base of institutions cannot easily be
adjusted in the near term. The effective
Front office staff
wealth manager would first start by
looking at the largest cost block, which 5% Other internal staff / personnel
is the front office (see Figure 1). Cutting 8%
IT systems and processes
there could, potentially, expose the wealth
manager to the risk of further client 34% Property and facilities
9%
attrition, since fired CRMs might take Other
some of their clients with them. This could
Sales and marketing activities
also threaten to overload the remaining 10%
client advisors and further exacerbate Outsourcing
revenue decline.
Our Survey suggests, however, that the 10%

large majority of CRMs take significantly
24%
less than 40% of ‘their’ client assets when
they change employer. This is significantly
less than the perception in the industry.
Source: PricewaterhouseCoopers
In the back-office, costs are largely
fixed and therefore controlling unit
costs is challenging. The only meaningful
way to reduce cost would be to close
down locations and centralise or
outsource back-office activities. Such an
exercise could, however, prove very
expensive in the short term and pay-offs
might arise only in the distant future,
if at all.
10
The best way to escape from this cost Smaller wealth managers have a unique Figure 2: Average number of clients served per CRM across wealth segments
trap is to grow through acquisition of new opportunity to profit from the damage to
clients or increasing the share of wallet large global wealth managers, hit by the
350
from existing clients. In the current current financial crisis. Indeed, across the
environment, where most markets are industry we see CRMs both moving to 300
273
Average clients per CRM

contracting and competition is fierce, this rivals and starting up their own boutiques.
is something of a predicament. There are, 250
however, still wealth managers that were For most wealth managers, new ways
200
able to grow in 2008, mainly through of regaining acceptable levels of
performance have to be found. What 149
growth of share of wallet from existing 150 137
clients. This shows that a good client has determined the winners and the losers
100 90
of the present crisis? Many things have 83
relationship rewards even in difficult times.
been said in the marketplace. But what is 50 42 41
The wealth managers with the best myth and what is real? Our respondents 18
5 2
performance, however, poached CRMs highlighted several key elements of 0
$100,000 to less $500,000 to less $1 million to less $20 million to less More than
twice as much as the average. future success. than $500,000 than $1 million than $20 million than $50 million $50 million
Client net worth
All participants Average of the 10% of participants with the lowest cost/income ratio
11
Taking care of the client pays dividends. The most profitable wealth
managers have significantly lower ratios of clients per CRM in all
wealth segments.
Putting the client first Furthermore, CRMs need to develop

Figure 3: What are the most important factors driving your organisation’s brand value?
much stronger advisory skills, as well as
A wealth manager’s core business is to raising their knowledge in areas such as
60 57
develop and cultivate the client tax and risk. Long-term remuneration and
relationship, but very few firms can truly management development packages must
50
live up to that promise. Our Survey shows be redesigned to encourage responsible
43
that the most profitable wealth managers behaviour and delivery of consistently
40
have significantly lower ratios of clients good client advice.
% of CEOs
per CRM in the different client segments
30
(see Figure 2), which shows that taking Brand is key 23
care of the client really does provide its 20 17
own rewards. Brands in wealth management are usually 14 14
12
built up over time, often steeped in history 10 14
In a crisis context, the main concern and rich with tradition, showing a long and 5
1
should be the sustainability of the client successful track record in the industry. 0
relationship. This goal can be achieved Brands must convey a feeling of security History/tradition Client relationship Client base Other Products
more easily, if the client base is clearly to their clients that allows them to commit managers
defined and clients feel emotionally their money to an entity existing for All participants Average of the 10% of participants with the lowest cost/income ratio
attached to the CRM. Clients must, decades, or even centuries. The majority
therefore, be placed at the core of of the most efficient and fast-growing Source: PricewaterhouseCoopers
business models. Servicing strategies wealth management firms in our sample,
must address specific client segments, however, define their brand mainly through
with differentiated offerings and effective their client base (see Figure 3). A strong,
delivery channels. brand-defining and marketable client
base is an important success factor for
wealth managers.
12
Successful wealth managers use a That said, many wealth managers still Figure 4: Number of segments within the wealth pyramid served by wealth managers
strategy of differentiation and emotional consider growth attractive. Almost
elements to market their brand, as two-thirds of CEOs place acquisitions in 1%
1 client segment served
opposed to only stating who they are and their growth strategy for the next two
what they do. There is a need to be more years. Interestingly, these acquisitions are 4% 2 client segments served
than exquisite premises, walnut panelling limited to the home markets. Very few 3 client segments served
and crystal – it is about trust, security and respondents envisage acquisitions across
performance. In an industry where trust is borders, preferring to probe new markets 4 client segments served
the foundation of the business, winning by sending CRMs on visits. In the new era 5 client segments served
players consistently rely on a strong 31%
of tightened regulations, the fly in/fly out 46%
brand. The financial crisis has shown us model increasingly appears questionable.
the soft underbelly of a strong brand:
it takes decades to build but can be Cross-border expansion could also
destroyed in a moment. expose wealth managers to additional
regulatory and tax risks. In general,
Size really does not matter acquiring another wealth manager might 18%
not always be the best option to take
Many claim that economies of scale help capacity out of the market, since
in building a high performance wealth synergies are not always obvious.
management organisation. Our Survey Source: PricewaterhouseCoopers
suggests very clearly that there is no
direct link between size and profitability
(in terms of cost/income ratio). How large
an organisation is has little bearing on how
profitable it is and size simply for size’s
sake does not appear an attractive goal
for wealth managers to pursue.
13
The financial crisis has exposed the soft underbelly of a strong brand:
it takes decades to build but can be destroyed in a moment.
Stick to the core segment required sophistication and demand for Figure 5: Percentage of products currently produced in-house by wealth managers
lower margins. For catch-all players,
Many wealth managers have adopted an UHNW and VHNW individuals might add
opportunistic catch-all strategy covering a to a wealth manager’s prestige but not
broad range of client segments. 46% of necessarily to profitability. Wealth All sourced third party 13
wealth managers provide services across managers seeking to operate in these

the five wealth segments (see Figure 4). segments must have the necessary scale, 1-20% 27
Profitability of the segments varies systems and product mix to do so
considerably. However, our respondents profitably.
clearly state that the segments of wealth 20-60% 30
management covering clients from Overall, organisations must continually
US$ 0.5m to US$ 20m, are most profitable optimise the profitability for each segment:
60-99% 26
(see Figure 31 on page 49 for wealth products/services mix, staffing ratios and
pyramid). This raises the question: what level of operational support.
has happened to ultra high net worth All in-house products 4
(UHNW) and very high net worth (VHNW) Products – quality advice
individuals (AuM >US$ 20m) as well as is required
0 5 10 15 20 25 30
affluent clients (AuM <US$ 0.5m)? % of participants
Most wealth managers offer a wide variety

The affluent boom of the late 1990s seems Source: PricewaterhouseCoopers
of products and services. They buy most
to be declining. Wealth managers have
of these from other providers, although
realised that their over-serviced clients
they produce some themselves. Indeed,
often add little to profitability. The hopes
4% of respondents even claim to
that their AuM would grow, allowing
produce all offered products in-house
organisations to see this segment as a
(see Figure 5). Our Survey suggests that
captive channel for core wealth
wealth managers producing their own
management, were rarely justified, and the
products are not necessarily any more
segment has become even less attractive
profitable than the pure ‘product sourcers’.
during the crisis. At the other end of the
Additionally, in-house products bear the
client range, UHNW and VHNW individuals
potential dangers of conflicting interests
should be seen almost as small
and higher reputational risk.
institutional clients in terms of both
14
The crisis shows us that high-margin

products, often produced in-house, can Figure 6: In your opinion, as CEO, by what percentage can your organisation cut its
be too complex for both CRM and client. operating costs?
If complex and specific products (eg,
absolute return products) have a very
negative performance, not only the client, 18
0% – 5%
but also the wealth manager can suffer,
since reputation is ultimately at stake.
28
Open architecture combined with quality, 5% – 10%
40
independent advice increasingly seems to
be a value-adding proposition for both the 36
client and the wealth manager. If products 10% – 20%
50
are manufactured in-house, they must
address a specific market or client need
18
and should be fully aligned with the > 20%
10
strategy and the specific client base
of the organisation.
0 10 20 30 40 50
All participants Average of the 10% of participants with the lowest cost/income ratio
15
Among the most profitable respondents, CEOs consider they can cut
more than 10% of their operating costs.
Attacking your cost structure It is an opportunity to manage out

activities and services that do not add
The easiest way to address challenges to value and to focus more consistently on
profitability seems to be an increased the needs of profitable clients. In addition,
emphasis on cost cutting. Most CEOs it is an opportunity to address the
report the potential to cut costs by 5% cyclicality of the wealth business.
or more in their own organisations Cost structures need to be made more
(see Figure 6). Among the most profitable flexible, allowing wealth managers to
respondents, 60% of CEOs indicate they adapt quickly not only to market upturns,
can cut more than 10% of the total but also to downturns.
cost, which would increase their
profitability even more. Given the cyclicality of financial markets,
one can be sure that fortunes will always
However, just saving cost is not enough. ebb and flow. Attacking the structure of
A crisis is a unique opportunity to rethink costs is not easy, but it could be the best
the array of issues surrounding services way to be prepared for whatever the future
and clients, and to decide which ones has in store.
add value to the business and which ones
do not.
16
Client service – disciplined segmentation lifts quality
Client service –
disciplined segmentation lifts quality
02
Servicing strategies must define and address specific client segments, with differentiated offerings designed
to support clients’ needs throughout all stages of their lives. Disciplined segmentation will not only help
wealth managers tackle today’s client service challenges, but also allow services to be offered to specific
clients in a more cost-effective manner.
After a slump in asset prices and a Disciplined segmentation of the client

number of investment scandals, many base, accompanied by tiered service
wealthy clients have lost significant offerings, is an ideal way to do so.
trust in their customer relationship
managers (CRMs) and their institutions. By differentiating between the needs of
Clients are demanding higher standards the diverse wealth segments, and
of service from their wealth managers. thoroughly understanding them, wealth
If they do not receive this service, they are managers can significantly improve their
far less forgiving. ability to give clients the high levels of
service they require. Yet while our Survey
Indeed, indicating the client’s degree of shows wealth managers are becoming
scepticism about the quality of CRMs’ increasingly more sophisticated when
advice, 53% of the private clients we segmenting their clients, only 19% match
surveyed said that their primary source this with distinct tiered offerings – clearly
of financial advice was now their own this provides an opportunity for further
independent research and knowledge. evolution in the quest to meet clients’
expectations.
Faced with such difficult client
perceptions, wealth managers need to
significantly raise their standards.
They must focus on placing clients at the
very heart of their business models.
17
‘potential assets’ as a key element of There are also variations by the maturity
Figure 7: In segmenting your organisation’s client base, what criteria are you segmentation. This demonstrates the of wealth and also by geography.
currently using? increasing importance of segmentation for Entrepreneurs account for a rising
clustering client relationships according to proportion of clients – an average of one
their revenue potential and calibrating third of our respondents’ client bases.
Current assets 86
servicing levels accordingly. They tend to be the most sophisticated
Potential assets 53 and demanding clients, whereas inheritors
Geography
When addressing varying client needs, are often more conservative and focus on
50
wealth managers indicate that they serve advice about transferring wealth between
Investment style 46
distinct client bases. For example, the the generations.
Client attitude to risk 43 highest wealth segment is a very
Profitability by client 33 concentrated asset pool, representing Interestingly and as a highlight of the
13% of respondents’ assets under changing multi-polar nature of financial
Income levels 23
management (AuM), with just 5% of services as global wealth shifts eastwards,
Product mix usage 19 clients holding these assets. In contrast, Asia Pacific appears to have the highest
Language 18 the lowest two segments (US$ 100k to share of entrepreneurs at 43%. Inheritors
Age / life cycle 18 US$ 1m) represent 60% of the global have greater importance elsewhere,
client base and account for 39% of AuM. especially in the EMEA region where they
0 20 40 60 80 100
represent 24% of clients and continue to
% of participants The core segment of wealth management be a major source of opportunity.
(US$ 1m to US$ 20m) is represented by
Source: PricewaterhouseCoopers 36% of AuM and 28% of clients. While the wealth pyramid is more
diamond-shaped in Asia Pacific, with
Tailoring services to well- current assets, many respondents are now Family offices and multi-family offices are participants servicing mostly High
applying behavioural criteria, such as more difficult to define. While at a macro
defined client segments Net Worth and Very High Net Worth
‘investment style’ or ‘attitude to risk’ (see level they are the very top of the wealth individuals, it is more traditionally pyramid
Servicing excellence depends on CRMs’ Figure 7). This is an increase of more than pyramid, they are often not included in shaped in EMEA and the Americas,
abilities to capture and to understand 40% since 2007 and represents a clear routine analysis when viewed at individual where the percentage of mass affluent
client needs and expectations. Here, our step forward because it gives CRMs a far levels. Obviously, these distinct wealth clients is higher.
Survey shows increased sophistication. more complete and multi-dimensional bands have considerably different
While 86% of respondents are still picture of clients’ values and behaviours. servicing needs, while representing a rich
segmenting their client bases according to We also report the increasing use of and diverse set of relationships.
18
Figure 8: Which of the following are the most important strategic areas on Figure 9: How has the current economic crisis impacted on
which you as CEO currently spend time? your organisation?
Acquisition and retention of clients 268 58

Asset attrition
Managing through economic downturn 246

We have taken this opportunity to strategically grow 49
Managing risk 152

Across-the-board budget cuts 43
Improving profitability 134

We benefited from a flight to quality 43
Cost reduction/business refocusing 103
Head-count reduction 26
Investment performance 73
Client attrition 25
Acquisition and retention of key staff 64
40 Business divestment 6
Entry into new markets
0 50 100 150 200 250 300 0 10 20 30 40 50 60

Sum of weighted ranked responses % of participants
Source: PricewaterhouseCoopers Source: PricewaterhouseCoopers
This highlights the difference between an With client acquisition and retention now
Asia-Pacific market mostly driven by first topping Chief Executive Officers’ (CEOs)
and second generation wealth and the agendas (see Figure 8), we contend that
maturity of the US and EMEA wealth rigorously defining client segments and
management markets. Correspondingly, providing tiered service propositions that
we also observed differences in the are profitable and of high quality will help
investment goals of the wealthy according wealth managers to tackle today’s client
to their geographical origin. service challenges.
19
Client attrition has been reported by 25% of respondents while 43%

have benefited from a flight to quality.
Clients are rewarding unannounced transfers of assets by

Figure 10: Given the current global economic crisis, what have been your concerned clients. Indeed, following
organisation’s tactics to retain clients? high-quality and trusted
recent investment scandals, referral
service networks have become somewhat brittle
in the face of greater demand for
For all wealth managers reviewing their
Increased client contact directly by CRMs 92 transparency and increased due diligence.
‘go-to-market’ strategies, our Survey
Increase in advice to clients / portfolio rebalancing 69 indicates that CRMs are struggling to More contact with the client is today’s
provide sufficiently high levels of client most common retention tactic.
Increase in reporting and research information to clients 49 service. With our participants ranking More than 90% of wealth managers
reputation and word of mouth as the surveyed have seen their CRMs increase
Investment in services to clients 44 primary reasons why new clients join them interactions with clients and for 69% of
and the source of 53% of net new clients, organisations the frequency of advice to
Marketing the ‘flight to quality’ of our organisation 41
there is clearly scope for improvement. clients has increased (see Figure 10).
Educational events for clients 40 Some 49% are providing clients with
Client referrals have, traditionally, been the
additional insights on market trends
reward for excellence in relationship
Reduction in fees charged to clients 13 and product performance, while just
management and their importance will
13% have reduced fees – confirming that
0 10 20 30 40 50 60 70 80 90 100 continue to rise, especially as clients
in the current market pricing is not a
% of participants continue to seek asset protection and
primary differentiator.
trusted relationships. Clearly, failure to
Source: PricewaterhouseCoopers understand client needs today is likely to
result in a loss of market share tomorrow.
Client attrition has been reported by 25%

of respondents, while 43% claim to have
benefited from a flight to quality over the
period surveyed – indicating that some,
but not all, wealth managers have suffered
from a combination of brand attrition and
ineffective client service (see Figure 9).
Gains in some cases are a result of
20
Evidently, few wealth managers are using Even though CRMs are spending more want their needs and expectations taken Wealth managers must, therefore, work to
proactive tactics to address issues arising time today contacting their clients (40% of care of and are less tolerant when this understand their current and target client
from the crisis, as only 55% of their time against 30% in 2007), 65% of does not happen. For their part, wealth segments, leveraging business intelligence
respondents appear to have formal client them regard this as insufficient to provide managers are striving to bridge any and management information to better
retention programmes – a dangerous an adequate level of service. This is a expectation gaps, retain clients and appreciate investment patterns, share of
omission in current market conditions. major threat in a client-driven market, optimise revenues. wallet, channel preferences and
Informal communication with CRMs where the front office needs to profitability. Only through rigorously
remains the key metric for measuring demonstrate better than ever before that it Our Survey shows that client-centric evaluating their existing client base, and
client satisfaction, followed by the reactive genuinely understands client needs, and servicing can successfully satisfy both the ensuring that clients are placed in the
monitoring of client complaints. has the ability to increase share of wallet client and the wealth manager. appropriate segments, can wealth
on a trusted advisor basis. managers truly optimise their
When we surveyed private clients, 59% Yet this year’s Survey also reveals
segmentation strategy.
reported that they were rarely asked to Our experience confirms that in wealth a gap between CRMs’ perceptions of
comment on the quality of service they management CRMs will not be able to excellence and the reality of delivery. With CEOs identifying the strength
received, while 35% said this only elevate service levels sustainably without This is illustrated in an analysis of those of client relationships as their
happened about once a year. Prospective significant investment. Such investment respondents that believe in being organisations’ main differentiator, and the
client relationship management is a should support a true client-centric client-centric and those that really are. majority of our Survey respondents
far more effective tool than after-the-event organisation that addresses multiple For example, although the majority of appearing not to tier their product
analysis of why assets were lost. channels with robust front-office CRMs believe they have reached ‘trusted offerings to clients effectively, the potential
technology tools. advisor’ status, some 20% admit they for improvement can not be ignored.
But are these tactics enough to ensure do not completely understand client
clients’ loyalty? No they are not, as only expectations and investment objectives.
38% of respondents are able to retain Few wealth managers are
more than 50% of assets upon truly client-centric The benefits of focusing on client
inter-generational wealth transfer. requirements are clear, as 64% of
Systematically capturing client Market turbulence has caused clients to respondents report that doing so has a
disengagement signals not only limits switch their goals from investment positive influence on gross margins. In our
attrition but can also improve client performance to wealth preservation. view, these discrepancies highlight the
revenue potential. This is the essence of ‘Nouveau Classic’ difficulties some players have in clearly
banking. Consequently, clients now expect understanding their clients and building
more attention, keener insight and much sufficiently client-centric models.
greater transparency. Quite simply, they
21
PricewaterhouseCoopers Viewpoint: Transparency – the new gold standard
We see the move to greater transparency as a part of the critical shift to more holistic that preparing themselves for this kind of client interaction and reporting will take
client service and a much more proactive level of risk management reporting around time and require investment.
private clients’ wealth. We believe this shift will define successful client relationships
in the new era. Clients will demand transparency in how wealth managers keep them Going forward, wealth managers will face increased challenges around how they
appraised about their wealth, their holdings, and how these are being transacted, manage the cost and efficiency of different service delivery options. Clients of wealth
processed and managed. We see transparency as the new currency that clients will managers are already sharing their frustrations. They tell us in the Survey, they would
use to judge whether wealth managers are delivering true value as trusted advisors. “like to receive statements more regularly and…. ideally online”. These challenges are
in reality choices around cost, and the level and quality of what is delivered to
In essence, transparency is about different types of data and information, viewing specific client segments at all levels of the wealth pyramid. Clearly one size does not
wealth from the client’s point of view, and putting the two pieces together. Private fit all. Wealth managers will have to make tough business decisions around which
clients tell us that they want their wealth managers to “…treat my money as though it client segments get which services and where to best deploy robust tools and
were their own”. Transparency will ensure that clients see a much richer degree of expensive data.
detail and a more immediate perspective on their wealth.
All ‘interested parties’ – clients, stakeholders, regulators, investors and governments
Clients across all wealth segments are asking for a more comprehensive view of their – want to better understand the quantitative and qualitative aspects of transaction
personal balance sheet and net worth. For wealth managers, this means increasingly processing. Interestingly, it is governments that ultimately might drive the move to
moving from data-specific and ‘end-of-cycle’ reporting to near real-time client greater levels of transparency as part of their asset remediation programmes with
information flows. Transparency includes comprehensive client reporting of advanced their demands for new and different kinds of information.
analytics (risk, forecasting, customised benchmarking and other balance sheet level
types of analyses) matched to specific client needs and delivered through effective It is not just quantitative valuation information but also insight into the circumstances,
channels, including online. The more complex a client’s wealth profile, the more potential risks and fiscal health of those providing service throughout the transaction
important a truly transparent perspective becomes to ensuring that a wealth manager and investment lifecycle. Transparency also encompasses qualitative factors around
will meet their clients’ expectations. the strategies wealth managers use to protect their clients’ assets in vulnerable
market situations. The days when end-of-month statements and paper-based
The service expectation is clearly around sharing greater and more detailed reporting around positions would serve as acceptable levels of client service are
information about market, credit and operational risks. We see clients seeking gone. The reality of today’s new era is that transparency will come to define brand in
increased assurance from wealth managers. They are looking for answers about the terms of winning new business and retaining assets.
integrity of networks, personal data and security, as well as the soundness of
processing counterparties. Wealth managers are struggling to decide how to respond
to these client demands for increasingly greater insights around the strengths and
weaknesses of often globally distributed processing. Increasingly, we see risk
management being extended to capture more data around operational performance.
This shift also manifests itself in changes to investment vehicle preference.

Aggregated reporting and a rise in tailored product vehicles such as wrap accounts
globally, and separately managed accounts particularly in the Americas, are all a
response to demand for vehicles that can be identified as belonging to specific
clients. These represent a significant evolution from traditional point in time ‘snapshot
reports’ of pooled client information. The real wake-up call for wealth managers is
22
Products and services – delivering ‘Nouveau Classic’ banking
Products and services –

delivering ‘Nouveau Classic’ banking
03
Wealth managers are seeking to redefine trusted advisor status. In the wake of investment frauds,
transparent product offerings, together with robust suitability and due diligence processes, are critical not
only to drive customer value but also to protect the reputations of wealth managers. Product and service
offerings need to be clearly aligned with client preferences and financial goals, while also being operationally
efficient for the wealth manager.
Respondents recognise that becoming

the client’s ‘trusted advisor’ is the best Figure 11: Which of the following best describes your business model, now and
way to acquire and retain assets in today’s in two years’ time?
volatile environment. Some 60% of
Chief Executive Officers (CEOs) anticipate
moving to an advice-led model Advice-led model 53
with a full open architecture for externally (fully open architecture) 60
sourced products within the next two
years, contrasting with the 53% that use Both producer and 24
this approach today (see Figure 11). distributor models 26
With open architecture increasing

commoditisation and driving down fee Primarily 12
producer-led model 7
levels, CEOs are doing what they can to
protect profitability. For this reason, 26%
of CEOs believe they will still leverage a Primarily 11
combination of producer/distributor distributor-led model 7
models. By bundling proprietary and

0 10 20 30 40 50 60
third-party products together – assuming
% of participants
in-house investment performance allows Now In two years
this – CEOs can avoid paying away
margins to third-party product providers. Source: PricewaterhouseCoopers
23
Globally, clients currently favour more Putting advice first

transparent and less risky products with Figure 12: What do you, as CEO, consider to be your organisation’s current top
lower margins. For wealth managers, there There is a trend for wealth managers to differentiating factors?
are some ways of mitigating the damage move from transaction-driven to advice-
to profit margins. For example, our Survey driven businesses, with a likely associated
shows some specialist investment shift from commission-based revenues to Strength of client relationships 286
products, which tend to be higher margin, fees. In certain markets, and especially
are growing in popularity for specific for the lower end of the wealth pyramid, Brand value 210
clients. There is also some evidence that they are creating new advice-centric
Quality of CRMs 127
respondents are beginning to charge for processes. While there is no single
advice. Furthermore, we have found that standard model, these processes Provision of comprehensive, integrated wealth
122
some wealth managers are seeking to management planning approach for clients
often include:
increase the efficiency with which they Access to best of breed open architecture products 106
deliver products and services. • Comprehensive and recurring financial
planning; Global presence and knowledge 82
Where it is profitable to do so, wealth
managers are also making family office-type • Robust up-front and ongoing Investment performance 62
offerings available to less affluent clients investment product due diligence;
0 50 100 150 200 250 300
while still seeking to exploit the potential of
• Customised portfolio modelling; Sum of weighted ranked responses
the concentrated assets of Ultra High Net
Worth clients and family offices. • Crisp statements of goals and
objectives; and
Yet the trusted advice part of this new
model remains elusive. As our Survey they generated more revenue with lower By contrast, respondents viewed
• Comprehensive client reviews, rates of attrition. ‘dissatisfaction with service/advice
reveals, only 53% of client relationship facilitated by aggregated reporting.
managers (CRMs) believe they have received’ as one of the main reasons for
Such advice processes reinforce the client attrition.
attained trusted advisor status. Aware of Through doing so, these wealth managers ‘strength of client relationships’ that CEOs
the need to improve the quality of advice, aim to improve both their clients’ results identify as their organisations’ foremost For less wealthy clients, wealth managers
wealth managers are increasingly and their own profitability. For example, a differentiating feature (see Figure 12). They are increasingly directing that CRMs follow
concentrating on ensuring that large US-based institution recently found cite brand value and quality of CRMs as specific advice-centric processes. At the
consistently high-quality advice lies at the that where CRMs made financial planning the second- and third-most important same time, they are investing in front-
heart of every client relationship. the cornerstone of client relationships, differentiating factors for wealth managers. office technology and leveraging more
24
inexpensive support staff to optimise Meeting client demands

CRM productivity. Comprehensive Figure 13: How important do you, as business head, rate the following product/
for transparency service offerings in terms of serving your clients over the next two years?
financial planning processes are
increasingly becoming the foundation The natural consequence of more open
of client relationships, and include architecture and advice-driven business Tax and
-1 40 51
ongoing reviews for changes in goals models is greater transparency. The estate planning
-2
and circumstances. financial turmoil and various investment Trust and
-4 -8 43 27
fiduciary services
scandals have highlighted operational risk
In this way CRMs, and wealth managers New investments -2 53 26
issues never considered before. As a -2
as a whole can have more effective tools Hedge funds and
result clients are demanding transparency structured products
-2 48 22
for managing and growing client -4
at a level never considered before.
relationships. Furthermore, wealth Family office -4 -7 45 20
managers are, increasingly establishing Clients want greater disclosure around Sustainability -2 -8 45 10
explicit guidelines supporting how client investments
areas such as products, services and
portfolios will be managed. These business relationships. As far as products Philanthropy -6 -19 30 3
essentially document and formalise the are concerned, wealth managers are Shariah products -28 -25 15 3
‘trusted advice’ process. and advice
increasingly avoiding more esoteric and
-60 -40 -20 0 20 40 60 80 100
less liquid products such as derivatives or
In selecting products that fulfil target % of participants
alternative vehicles. Consequently, these
allocations, wealth managers are seeking Very unimportant Unimportant Important Very important
products are less likely to be found at the
to develop robust client suitability and
core of client portfolios – instead they tend
due diligence processes. The goal is to Source: PricewaterhouseCoopers
to be used more as diversification tools.
ensure that recommended products are
suitable from both risk and fit For wealth managers, this adds a layer of Developing tailored products
In terms of business relationships, clients due diligence. They need far more detail
perspectives. It is critical that wealth want to know more about operational
managers continue to develop these than ever before about the operational and With open architecture meaning that
details that were rarely considered before. counterparty risks of the products in which similar products can be available to many
processes in the wake of recent Which organisation, for example, has
high-profile incidents in financial services. they invest client assets. institutions there is increased downward
custody of their assets? What is the pressure on fees. To differentiate their
creditworthiness of that organisation? offerings, wealth managers need to tailor
What are the implications of the terms of their product offerings to specific client
the custody agreement? needs and segments. For example, some
25
In the wake of recent scandals, wealth managers are seeking to

develop robust due diligence processes to meet the increasing
demands of clients for transparency.
are putting emphasis on entrepreneurs, activities of several large global players, their
professionals and specific ethnic groups, importance appears likely to grow. Figure 14: Which of the following services has your organisation invested in
as well as retirees and their beneficiaries. providing to family offices?
Wealth managers targeting specific
Wealth managers that do so effectively segments, particularly the mass affluent,
will deliver and meet clients’ needs and are looking to combat fee pressure Strategic asset allocation 71
achieve greater asset stickiness for their through products that are operationally Estate and tax planning 71
organisation. efficient and inexpensive to distribute, Access to open-architecture products 56
while being transparent and clearly aligned Trust / estate administration 51
In our Survey, 87% of CEOs say they with client preferences and financial goals. Family succession planning 43
regard inter-generational products and Aggregated reporting - statements 41
services to be a priority and 68% consider Providing high-value Multi-jurisdictional tax preparation 37
retirement products to be key. Providing
estate- and trust-planning services and products and services Custody 35
Philanthropic services 33
vehicles, and identifying and understanding
In addition to the core advice processes Aggregated reporting - online 27
the target beneficiaries’ investment
wealth managers employ to achieve Family education 21
preferences and risk tolerances will be
trusted advisor status, many are offering Lifestyle management 17
crucial to wealth managers. There is clearly
an array of supplementary services.
room for improvement in capturing 0 10 20 30 40 50 60 70 80
Targeted at specific segments of clients,
inter-generational wealth transfers, with just % of participants
these offerings aim both to improve trust
38% retaining more than 50%.
and to create additional revenue streams. Source: PricewaterhouseCoopers
Socially conscious investing is a growing
For example, 37% of respondents have Furthermore, to address family hierarchies growing area of opportunity for wealth
investment theme: 55% of respondents
developed products and services tailored and the importance of catering to managers as they embrace emerging
view sustainability products as at least
to family offices. Family offices, together beneficiaries, some wealth managers are family relationships. In terms of execution,
‘important’ over the next two years
with the Ultra High Net Worth and Very offering ‘softer services’ such as family only 7% of respondents have partnered
(see Figure 13).
High Net Worth segments, are also being education, succession planning and with family office technology vendors but
Just 18% regard investments complying with targeted with separate and distinctly ‘lifestyle management’ (see Figure 14). this trend is likely to increase.
Islamic Shariah law as at least ‘important’, branded offerings such as aggregated In some markets such as the US these
but based on what we observe in the reporting for transparency and risk services are increasingly being offered
management. online, which we see as a significant and
26
The people agenda – a new strategy required
The people agenda –

a new strategy required
04
Today’s economic crisis presents challenges for which Client Relationship Managers (CRMs) have neither
the experience nor the training. If quality of advice is to be the real differentiator, CRMs need to develop
stronger advisory skills, as well as expanding their knowledge in areas such as tax and risk. As governments
and regulators drive change in reward structures, long-term compensation and development packages must
encourage client-centric behaviours and CRM loyalty.
People management practices need to be Demand for CRMs becomes

reviewed to ensure that appropriate
less urgent in the short term
training is provided and, where possible,
experience can be hired to help navigate With Chief Executive Officers (CEOs)
through these turbulent times. fighting to salvage the reputations of their
If quality of advice is to be the real organisations and retain disillusioned
differentiator, wealth managers need to clients, the people agenda is no longer a
provide CRMs with relevant tools and top priority – in the short term at least.
skills – and do so quickly. Acquisition and retention of talent has
fallen from being their number two priority
The people agenda needs to remain one
in 2007 to seventh today (see Figure 8 on
of the priorities of senior management to
page 18).
ensure a sustainable foundation for
growth. Success will depend on how well Falling profits have dulled demand for
businesses can adapt to the new CRMs in the front office. As a result of the
economic environment and provide their increased need for CEOs to focus on
CRMs with the right incentives to develop operational issues, such as improving
and deliver client-centric behaviours over finance and risk functions, there is a need
the long term. to hire better quality middle- and back-
office staff to manage these functions.
Making these functions increasingly robust
will support credibility with clients in the
long term.
27
economic slowdown has created a far

Figure 15: Expected average increase/decrease of CRMs greater need to reduce headcount.
over the next two years That said, evidence from the industry
suggests recruitment is not following any
regional trend but is firm-specific at
Global Decrease of 24% present, reflecting an organisation’s ability
to perform through the crisis.
Clearly the balance of power has

changed, and currently rests with
EMEA Decrease of 45%
employers and potential employers.
For those wealth managers still hiring,
and many are, the focus is on selective
poaching of CRMs who have the talent
Asia Pacific Decrease of 17%
and experience needed to navigate
through these difficult times. From a
defensive perspective, wealth managers
need to be careful to retain such
The Americas Increase of 1%
valuable individuals.
The CRM perspective:

re-skilling is essential
There is no longer a danger that an are expecting a negligible increase
inability to recruit sufficient CRMs will slow of 1%. This is in stark contrast to 2007, Many CRMs have neither the experience
business growth. Consequently, demand when demand for CRMs globally was nor the training to deal with the challenges
for CRMs is expected to fall by 24% expected to grow by 32% over two years. that today’s economic crisis brings to
globally over the next two years wealth management. Aside from the
(see Figure 15). Regionally, EMEA and Generally, the fall in EMEA can be obvious difficulties of managing volatile
Asia Pacific are anticipating falls of 45% explained by the fact that recruitment of investment portfolios, their communication
and 17% respectively, while the Americas CRMs there was more aggressive than skills have been found wanting as they
elsewhere during the boom years, thus the have to deliver bad news to clients and
28
Figure 16: In your opinion, as business head, what are the areas of greatest Figure 17: In which of the following areas would you, as CRM, like to receive
weakness for your organisation’s CRMs? further training over the next 12 months?
Lack of ability to adjust to change quickly 112 Softer skills including client handling 195
Lack of client relationship skills 93 Taxation updates 170

Lack of understanding of risk 92
Inter-generational wealth transfer 166
Lack of global experience 91
Financial markets updates 129
Lack of business experience 84
Product training 135
Lack of product knowledge 79
Strategy update 105
Lack of ability to lead others 64
Lack of understanding of tax issues 57 Compliance and regulatory updates 62
Lack of ability to collaborate 45 Philanthropy 40
0 20 40 60 80 100 120 0 50 100 150 200

Sum of weighted ranked responses Sum of weighted ranked responses
respond to mounting frustration and relationship skills and poor appreciation same view in our 2007 Survey, it is clear average ability. Given that CRMs are the
increasing demands for greater of risk (see Figure 16). wealth managers need to review their public face of their organisations and that,
transparency. training programmes. after history and tradition, even CEOs
Indeed, CRMs realise they have recognise them as the most important
Given this backdrop, it is perhaps not shortcomings. They identify client CEOs recognise the weaknesses of their drivers of brand value, this is a very
surprising that wealth managers identify relationship skills and taxation as the two CRMs, with only 20% considering their troubling statistic. Evidently, this is another
the three most common areas of areas where they would most like to CRMs of high calibre in meeting the needs indication that CRMs’ training and
weakness for CRMs as an inability to receive additional training (see Figure 17). of clients. Indeed, more than a quarter of development programmes need
adapt to change, lack of client Considering that CRMs expressed the CEOs confess that their CRMs are of only to be revised and strengthened.
29
The three most common areas of weakness for CRMs, cited by

business heads, are: their inability to adapt to change; lack of client
relationship skills; and a lack of understanding of tax.
Yet the number of days CRMs spend on Redundancies, publicly tainted brands and
training has dropped, with 43% saying that forced ‘shotgun’ acquisitions have taken Figure 18: How important are each of the following criteria in the measurement of
they receive fewer than five days’ training their toll. There is a danger that as soon as your performance as CRM?
in a year, against 34% in 2007. Such a cut recovery occurs and confidence improves,
in training is understandable when budgets CRMs will reassess their commitment to
Growth of assets under management 355
are under pressure. However, the quality of their organisations.
CRMs has never been more important. Meeting revenue targets 231
If quality of advice is to be the real Wealth managers need to ensure that they
look after their talented CRMs now, Number of new clients 155
differentiator, wealth managers need to
improve their CRMs’ skills – and quickly. building up levels of engagement to Client satisfaction with service of the CRM 141
prevent an exodus of talent later. Even in a
Client retention levels 105
To their credit, CEOs do appear to crisis, steps to engender a positive work
recognise this need for investment in environment and help increase loyalty to Cross-selling of other products / services 40
CRMs. Some 95% of them back the the organisation are critical.
development of a specific wealth
management qualification. Indeed, they Revising performance measurement Complaint levels 25
name graduates with wealth management metrics and linking these directly with
Number and volume of transactions 19
qualifications as the second most preferred individual reward, will help create clear
source of recruitment for the next two career paths for CRMs. 0 50 100 150 200 250 300 350 400
Sum of weighted ranked responses
years, after poaching from competitors.
Currently, the top five factors used to
measure CRMs’ performance are Source: PricewaterhouseCoopers
Talent needs to be nurtured increasing assets under management,
for the long term meeting revenue targets, attracting new
clients, satisfying clients and retaining
While training is important, the broader clients (see Figure 18). In the current
issue of long-term talent management climate it is difficult, if not impossible, for
cannot be ignored, even in these turbulent CRMs to perform well against most of
times when there is a strong urge to focus these criteria – indeed they are making
on short-term survival. Market evidence is CRMs demoralised and disengaged.
that morale at many wealth management Wealth managers need to focus on the
companies is at an all-time low. factors that make a successful CRM
30
in the current market and take steps to For 47% of wealth managers, the
Figure 19: Please rank your top three reasons for leaving your measure their CRMs against a new, average length of CRMs’ service is fewer
previous employer more relevant set of criteria. than five years. CRMs need to stay for
significantly longer if they are to develop
Having defined performance measurement long-term client relationships, particularly
criteria, the next step is to ensure that at the higher levels of the wealth pyramid.
Needed fresh challenge 36
individuals are rewarded for their Similarly, as graduate recruitment
performance against these criteria. becomes a more popular way of hiring
Lack of career path 22 Wealth managers continue to struggle with CRMs, there is a greater need to build
removing or minimising discretion from career paths that retain talent and build
individual reward. The objective is to have experience over the long term.
Did not agree with corporate strategy 21
a transparent system where CRMs are
objectively assessed and this assessment Only 25% of CRMs have personal
Size / structure of remuneration package 19 directly affects their levels of reward. medium-term career and development
plans in place that have been agreed with
With so much emphasis on long-term management. Unless CRMs understand
Unrealistic expectations / pressure to meet targets 16 client relationships, the HR function needs what their objectives are, and these are
to focus on building long-term career aligned with the strategic aims of their
0 5 10 15 20 25 30 35 40 paths for CRMs. When those who had left organisations, they are unlikely to stay for
% of participants a wealth manager in the past two years long periods of time. In fact, just 39% of
were asked for their two top reasons for wealth managers have formal employee
Source: PricewaterhouseCoopers leaving, CRMs stated the need for a fresh retention programmes.
challenge, and the lack of career path –
they ranked remuneration only a distant
fourth (see Figure 19).
31
Only 25% of CRMs have personal medium-term career development

plans agreed with management.
When it comes to leadership, there compensation structures can reward

are similar shortfalls in development. CRMs for the kind of behaviours that
While building leadership capabilities is foster long-term relationships. Indeed,
cited as the third most important people wealth managers increasingly recognise
issue, it is telling that 71% of wealth the misalignment between reward
management organisations do not have structures and business objectives – only
formal succession planning even at the 29% of HR managers agree that the way
corporate board level. Indeed, 61% do not their people are rewarded contributes to
have it in place for middle management. desired business outcomes.
Regulation could likely enforce formal
succession planning at board level, but Governments and regulators are fast
failure to plan for continuity creates becoming a key driver for change in
long-term risk and at worst it can lead reward structures across financial
to serious business issues and result in services. They are demanding improved
loss of clients. compensation structures in response to
the perception that short-term bonus
schemes partly contributed to the financial
Reward comes under crisis by encouraging excessive risk
the microscope taking. Aside from the make-up of
compensation, regulators are also pushing
With CEOs recognising that quality of for a much stronger alignment between
advice is increasingly the key differentiator business and client objectives and
for wealth managers, only long-term compensation.
32
Some wealth managers realise they By changing reward structures,

Figure 20: How does your organisation plan on changing its remuneration structure should change compensation structures to organisations can achieve real benefits.
in the next two years? drive more client-centric behaviours and Of the wealth managers who changed
to encourage CRM loyalty. These compensation structures in the past two
organisations will focus on aligning bonus years, 81% saw an improvement in
Amendment of current bonus structure 78 and remuneration with desirable staff motivation and 78% reported a
organisational behaviours, and rewarding greater ability to retain high-performance
Greater percentage linked to long-term goals 48 long-term client service, rather than employees. Obviously, this helps
focusing strictly on revenues and assets wealth managers to provide clients with
47
under management (see Figure 20). excellent service.
Larger long-term incentive awards to fewer employees
Remuneration structures with long-term
pay outs will also encourage CRMs to stay Disappointingly, though, the appetite for
Move from discretionary to more formulaic bonus schemes 38 change is mixed, with 55% of wealth
in place at organisations, reducing the
amount of CRM poaching. managers having no plans to change their
Increased use of equity awards 19 reward structures over the next two years.
There is a strong sense of ‘first mover
Increased one-off retention payments 10 disadvantage’. We should not, though,
underestimate the possibility that
0 10 20 30 40 50 60 70 80 regulatory pressure will force
% of participants organisations to act.
33
PricewaterhouseCoopers Viewpoint: Moving to a new reward model
Wealth managers might not appear directly involved in the apparent compensation Regulators must ensure rigorous and sustained oversight of compensation and, by
excesses that have stimulated political and regulator involvement in financial services, working through the FSF, ensure even application across institutions and jurisdictions.
yet they are inevitably swept up in the widespread change taking place. Material progress in the implementation of the principles is required by the 2009
remuneration round – full implementation must take place as soon as possible.
In the wake of the credit crisis, searching questions are being asked about whether
compensation systems helped to fuel excessive risk taking. The FSF clearly believes that the power of incentive systems at times over-rode
internal risk controls. Risk needs to be aligned with compensation in order to
We have conducted extensive research into how financial services organisations are prevent this happening again. Given labour market pressures in the industry, the FSF
planning to change remuneration structures. What is clear is that there is support for considers this can only happen through sustained external pressure, co-ordinated
longer term compensation strategies, but no one wants to move first – particularly with at the global level.
more ‘draconian’ measures such as bonus claw-backs and deferrals.
Whether or not smaller wealth managers are directly impacted by the FSF guidelines,
Yet governments, regulators and shareholders are putting the financial services sector it is certain that they will be affected eventually as compliance with the guidelines
under renewed pressure to improve remuneration practice. becomes common practice.
Regulation Reward in the new environment

With the notable exceptions of the UK Financial Services Authority, the Swiss Federal Ultimately, all wealth managers should aim to achieve best practice. When considering
Banking Commission, the Australian Prudential Regulation Authority and the US remuneration strategy for 2009/2010, there are a number of structural and strategic
Treasury, regulators have yet to take direct action regarding executive compensation. issues to keep in mind:
The G20 asked the Financial Stability Forum (FSF), however, to review the supervision • Incentive payments should be based on performance measures that adequately
and oversight of compensation. Those expecting a vague set of principles from the FSF account for the risk taken in producing profits over the long term;
will be surprised by their hard-hitting and specific nature. Applying to all significant
financial institutions, these include: • Bonus pools should not be struck below the level at which cost and risk
can be allocated;
• Boards of directors must take responsibility for overseeing and reviewing
compensation and must have appropriate expertise to do so; • Rewards should be aligned with the risk profile borne by the organisation;
• Financial and risk control functions must take a significant role in compensation • Deferrals should be linked to the realised profitability of the business on which the
design and oversight, and be appropriately and independently remunerated; bonus was based;
• A mixture of judgment and quantitative measures should be used to adjust • A significant proportion of managers’ remuneration should be based on divisional or
compensation for all types of risk, including difficult-to-measure risks; group-based bonuses; and
• Compensation design should mitigate imperfect risk adjustment through balancing • Compensation design should be considered a key business competence and
individual, business unit and overall firm performance, with compensation deferred integrated into wider people management.
where appropriate and a suitable mix of cash and equity used; and
With the 2008 reward round completed, now is the time to consider how future reward
• Enhanced disclosure about compensation to key stakeholders. strategy will adapt to this new and challenging environment.
34
Operations and technology – delivering client value and cost efficiency
Operations and technology –

delivering client value and cost efficiency
05
Chief Operating Officers (COOs) at successful wealth managers must make changes to their operating
models to reduce costs, while simultaneously investing to support and drive business growth. Many COOs
surveyed believe there are significant cost savings that can be made over the next two years and place
process efficiency towards the top of their agendas. With two-thirds of Chief Executive Officers (CEOs)
identifying acquisitions as continuing to be a part of their growth strategy, there will certainly be significant
challenges around the integration of operations.
Investing for client value and

Figure 21: What are the top objectives for your business currently and
continued growth in two years’ time?
Supporting growth is the number one
objective on the agenda (see Figure 21) 312
Supporting and enabling business growth
for COOs. This was also observed in our 353
previous Surveys. Operations need to Cost reduction through enhanced efficiency
219
support market initiatives that can drive 152
revenue growth. They also need to deliver 161

Risk management
112
client value and ensure that cost-efficient
146
workforces still have the scalability to Becoming more customer-orientated
193
support volumes that will grow in the 91
Ensuring legal and regulatory compliance
medium term. 72
45
Increasing organisational change agility
Recognising strategic competencies and 61
developing these as competitive in-house 25
Setting up new operations/branches
capabilities is part of the COO’s 44
responsibility. Over the next two years 0 50 100 150 200 250 300 350 400
COOs expect a 5% reduction in the Now In two years Sum of weighted ranked responses
outsourcing of portfolio management.
Additionally, they expect a 7% reduction in Source: PricewaterhouseCoopers
the outsourcing of tax advice, which
35
currently is the business function most this level of functionality, faxing statements Information security, client data protection
likely to be outsourced in wealth upon request was regarded by clients as and privacy have become top priorities.
management. simply failing to meet their needs. The media highlights discoveries of
departing staff finding ways to extract or
If wealth managers are to do this they These issues are compounded when generate client contact lists, potentially
will not only need to build effective clients want to know their net positions including information on account sizes and
infrastructure, but also significantly up-skill across multiple accounts. Aggregated account numbers. Wealth managers and
their Client Relationship Managers (CRMs). client reporting is a function that 42% of regulators are reviewing client data security
COOs’ organisations are not yet able to as a critical legal and reputational priority.
Similarly, functions that were historically provide. For those who do not yet offer Technical difficulty in encrypting client data
regarded as core competencies but are aggregated reporting, 66% plan to offer held in mobile and laptop devices poses
now recognised not to be strategic such statement capability within the next one problem, as does the practicality of
differentiators are being outsourced. two years. Aggregated reporting is a restricting and tracking access to client
For example, an 8% increase in the technical challenge – of these, 87% names and contact information.
outsourcing of trading/executing and will need to first undergo system and
payments is anticipated. process upgrades. CEOs regard use of technology as the
weakest element of their organisational
Client communications strategy is also a While not an immediate priority, survey capabilities and 63% of COOs expect to
key focus for COOs. To date, particularly respondents predict that online client increase their IT spend in the next two
outside the US, the overriding majority of service platforms will become a top five years. Long-term investment is required;
client communication has been handled operational priority over the next two years. indeed, 82% of COOs will undertake some
through monthly reporting and regular Those able to provide such client form of major core system upgrade,
discussions with CRMs. During the interfaces, through the internet and including 36% who will introduce
financial crisis, however, it became handheld devices for example, may be enterprise-wide solutions for their
apparent that most clients required more able to increase client loyalty and free their organisations.
regular and even real-time reporting around CRMs to focus on higher value client
their overall positions. For those without interactions.
36
Investment in systems can deliver much- Reengineering and reorganising for costs to be reduced, with 36% of our Process reengineering is an obvious place
needed functionality to front-office staff respondents estimating that 10% to 20% to start, with 84% of Finance Directors
for efficiency
such as enhanced portfolio management or can be eliminated, and 18% estimating that expecting process efficiency projects to be
performance analysis tools, as well as While growth is the top priority for COOs, reductions greater than 20% can be a cost-control strategy, and process
supporting major efficiency gains through unsurprising yet somewhat of a achieved with more aggressive automation appearing second in our COOs’
the automation of legacy manual process contradiction, is that short-term cost non-traditional programmes (see Figure 6 list of top operational strategies (see
workarounds. cutting is their next-highest priority. CEOs on page 14). Figure 22). This trend is present globally in
certainly believe that there is ample room every region. It is present even in Asia
Pacific, where arguably systems are
Figure 22: What are the top key operational strategies that you, as COO, currently Figure 23: In an average month, what proportion of time do you, as CRM, spend on
employ to support your business objectives? the following activities?
Contact with existing clients

Reviewing and improving CRM front-office systems 157
4% Marketing and prospecting
Process automation 145 8%
Administration and error resolution
Improving client reporting systems 125
5%
Improving investment planning and management Portfolio management
114
Improving performance-tracking metrics 82 40% Compliance
10%
Client segmentation 72 Investment research and analysis
Ensuring legal and regulatory compliance 70 Training

Integration of new systems 70
Rationalising systems 53 16%
Adopting e-platforms to allow clients to service themselves 48

17%
0 20 40 60 80 100 120 140 160
Sum of weighted ranked responses

37
CRMs spend 16% of their time on administrative tasks and

error resolution.
relatively newer. The result is that in every 17% spent on the much more valuable Outsourcing through the use of open The financial case for many such moves is
region market growth and changes have marketing and prospecting. Even more architecture is one technique that wealth based upon economies of scale through
occurred at a faster pace than systems concerning is that this is double the time managers continue to use. Wealth servicing much larger volumes, or in the
have been able to keep up with, resulting in spent on investment research and managers recognise that by outsourcing greater capability afforded by combining
manual process workarounds. analysis. Clearly, better use of tools to product manufacture or even whole small teams of highly specialised
free up time will be the hallmarks of business functions, such as trust resources into centres of excellence.
CRMs today spend 16% of their time on the successful wealth manager in the administration or settlement, they can Shared service decisions should not be
administration and error resolution (see near- and longer-term.
either reduce operating costs or achieve taken lightly. This is particularly true for
Figure 23). This is comparable with the
greater flexibility in matching costs to business process outsourcing decisions
market demand. focused on operational efficiency.
There can be a difficult transitional period
Shared services is a structural strategy with challenges around service delivery
Figure 24: How is your current IT capability predominantly sourced and how do you, that has the potential to unlock more risks, service-level maintenance and
as COO, expect this to change in two years’ time? significant cost savings. The obvious monitoring issues, along with potential
choices include supporting processes loss of control and negative impact on
100 such as Human Resources and client service.
13 13 Information Technology (IT). Taking IT
90 1
5 as an example, COOs expect to increase
80 9
19
the use of regional and global hubs
70
% of participants
18 (see Figure 24).

60
50
21 Shared service concepts can be applied
27 more widely in back-office functions. For
40
22 example, operations functions such as
30
payments can be shared with that of retail
20
32 operations within a parent banking group.
10 20
0
Now 2 years
Departmentally Nationally Regionally Global hub

Third party off-shore Third party on-shore
38
Entering a period of For COOs, mergers and acquisitions pose

an increased challenge. This is a reflection
inorganic growth
on the way operating models have been
While wealth managers plan to reduce engineered. Expectations upon or after an
operating costs, a level of industry acquisition might start with wanting to
consolidation in the sector appears cross-sell products and services, and later
inevitable. Some 88% of CEOs expect at on combining front-, middle- and back-
least some consolidation in the sector in office teams in order to combine strengths
the coming two years, with 34% expecting and gain economies of scale. The reality,
substantial consolidation. Indeed, 63% of however, is that current operating
CEOs regard acquisitions as part of their models are highly individualised.
growth strategy over the next two years; Integrating live business functions
more than double the projected rate of is a risky, time-consuming and
acquisitions in our previous Survey. complex exercise.
Inorganic growth through mergers and The work of COOs is perhaps harder now
acquisitions can be a reasonable approach than it has ever been before. Needing to
to growth. It can provide the acquirer with support growth, while also making
a complete package consisting of new significant cost reductions will be a strain
clients, their accounts, CRMs and the on project resources. COOs must obtain
operational environment necessary to and direct resources wisely and avoid fire
service them. fighting in order to best position operations
for the medium- and longer-term.
39
PricewaterhouseCoopers Viewpoint: Operational improvement is at the heart of future success
There are a variety of options and approaches to the infrastructure supporting private or outsourced. Clearly investment in front-office automation provides superior tools, and
banking and wealth management. Managing costs around every aspect of infrastructure a powerful form of leverage for a smaller, better trained and efficient team of CRMs.
including people, processes, technology and data is vital to future success, now more
than ever. Increasing open architecture and sourcing: The variety of sourcing options has
expanded significantly in recent years. In particular, wealth managers are embracing
Transformational change starts at the 20% savings level. To secure real savings, wealth outsourcing for more and more components of the value chain. We see white labelling
managers will need to go well beyond making minor headcount reductions in middle- and open architecture increasing as wealth managers define and focus on their core
and back-office support functions such as IT, operations, and finance and deliver competences and outsource other more commoditised processes, and products.
transformational change. We believe success might include use of techniques pioneered Services and platforms for accounting, operations, performance and risk measurement,
in other industries – without in any way compromising the quality of client advice. investor reporting, tax and portfolio management are now all available under several
different delivery models, ranging from outsourced, to internally hosted platforms.
Typically wealth managers have restricted cost savings to performance-based How organisations structure and resource different sourcing models will be key drivers
headcount reductions. While straightforward, these typically only yield modest savings, of future savings.
which are simply not of sufficient scale to sustain competitive advantage in today’s
market. Minor cost-saving initiatives will only drive a continuation of lower levels of Managing the cost of transparency: Following recent investment scandals, wealth
performance. They are no substitute for more substantive operating model reviews. managers have increased responsibilities, and costs associated with delivering customer
information. The escalating pace of new regulation is a significant and unplanned cost
With many wealth managers having now completed their first round of operational cost for operations. The ultimate consequences of this are far from clear but there appears no
cuts, success in future phases will depend on re-evaluating all aspects of their end in sight to increased regulatory overhead and cost. This includes performance
businesses. Wealth managers could draw on non-traditional tools and techniques, transparency and client suitability of product offerings, as well as due diligence of
including those from outside financial services. third-party investment managers. In an attempt to ‘hold the line’, management has to
become more creative. Using automated portfolio management systems to reduce cost
Some approaches we observe include: is just the start. Some wealth managers will narrow the scope of their investment
offerings, giving rise to staff reductions in the product management and support
Centralising organisational structures: Diversified wealth managers are reviewing how organisations. Greater automation of the due diligence process, through electronic
they can run different divisions and distribution channels such as brokerage, private attestation and improved reporting will facilitate more transparent information and free
banking, trust and family office using shared support services. The governance and up resources.
purchasing power advantages of centralisation can yield savings for certain functions,
such as in procurement and legal, however, other functions are more difficult to Learning from outside financial services: The techniques needed for achieving
centralise across divisions. The key is balancing consolidation objectives with transformational change can often be learned from outside financial services. Wealth
uniqueness around specific value propositions. management can leverage many of the supply chain and customer experience lessons
that other industries use to achieve greater operational efficiency. We see lean
Pruning and tailoring the investment process: Although historically not the first target manufacturing techniques and enhanced customer experience programmes relevant
for savings, there is significant cost-cutting potential hidden in the operational aspects throughout the wealth pyramid and such appraisals can teach many lessons about
of many investment activities. For example, research can be divided between data achieving breakaway performance, increased efficiency and cost reduction.
gathering and manipulation, analysis and publication. Only analysis needs to be retained
by true investment personnel. Other functions can be centralised or even outsourced. In our view, 20% cost savings is the threshold that tomorrow’s leaders must cross
Fund accounting, portfolio management and other processes can also be restructured in terms of their wealth management operations. Wealth managers should explore
non-traditional solutions with an open mind.
40
Risk management – protecting the client promise
Risk management –
protecting the client promise
06
Robust risk management is the guardian of every wealth manager’s reputation. Poor risk management when
selecting products for clients has been an evident weakness – undermining many established wealth
management brands. In this new era, risk management must come of age. Its application must be holistic
and driven by clients’ expectations.
Following the financial crisis and recent Wealth managers have gained a far
investment frauds, wealth managers are better understanding of the overall
concentrating more than ever on managing importance of risk management. They are
risk. For Chief Executive Officers (CEOs), naturally becoming more cautious and
risk and its consequences has become tending towards extra layers of control.
the third most important strategic area When doing so they must improve on
on which they are currently spending yesterday’s risk management shortfalls
their time. but also anticipate the risks that will
accompany tomorrow’s opportunities.
At the same time, the focus of risk Strong risk management is a process of
management is changing. Today, Survey making informed decisions across the
respondents view counterparty risk as entire spectrum of risk to which a client
their number one concern, with client and and the institution are exposed.
product suitability as their number three
concern. In two years’ time, client and
product suitability is expected to rank first, Risk-based frameworks need
with counterparty risk sliding to number to evolve continually
four (see Figure 25). Once the immediate
crisis has passed, wealth managers For those working in financial services, the
anticipate concentrating more than ever past 18 months has been a rollercoaster
on whether they are selling clients ride. As management now turns to focus
appropriate products – which is highly on how to improve risk management –
relevant considering the overwhelming and doing so while minimising constraints
importance of appropriate advice today. on the business – there is a need to be
41
Figure 25: What do you, as risk officer, believe will be the key areas of risk Figure 26: Which of the following best describes your organisation’s approach
needing to be addressed by your organisation in two years’ time? to risk management, now and in two years’ time?
Client and product suitability 106

55
Loss prevention and governance reporting
Operational processing errors 91 20
Mis-selling/Inappropriate advice 85
Risk quantification (value at risk) 19
Counterparty risk/Credit risk evaluation 78 and alignment to objectives 26
Focus on stakeholder value and integrated risk
IT risk 73 14
and value management focusing on linking
performance and capital efficiency 36
Market risk 72
Data security 61 CEO sponsors and promotes enterprise 12

risk management programme 18
Fraud risks 59
0 20 40 60 80 100 120 0 10 20 30 40 50 60
Sum of weighted ranked responses Now In two years % of participants
proactive. The past has proven that aiming strategy. While the majority of wealth management on a holistic basis in order to frameworks are less than five years old,
simply to ensure regulatory compliance is managers have invested in strengthening capture and manage all business risks. it is clear that risk management needs
not enough. Risks around liquidity, their risk management processes over the to be continually evolved.
operations and third-party product past few years, only 27% of CEOs are Those that continue to operate risk,
selection have not been mitigated very confident that they have appropriate business planning and performance The most common method of risk
sufficiently across all industry players. risk frameworks in place to identify, management in silos are particularly management reporting remains loss
monitor and measure risk across their vulnerable to unforeseen or misjudged prevention and governance reporting
Risk management needs to be embedded organisations. Wealth managers risks. With 62% of Survey respondents (see Figure 26), as was the case in our
in the wealth manager’s overall business need to gain better control of risk reporting that their risk management past two Surveys. Yet, significantly, 36%
42
of risk officers expect that in two years’ There is a need for risk management Risk and performance
time their approach to risk management frameworks to become increasingly
management must be
will focus on stakeholder value and holistic. Risk management needs to be
integrated risk and value management. viewed as an integral part of good integrated
decision making, and not simply as an
What has now become clear through this Governments and regulators are rapidly
after-the-event back-office function.
economic crisis is that the risk and control becoming a driver for change in reward
While 70% of wealth managers possess
infrastructures across the financial structures across financial services and
board-approved risk appetite statements,
services industry are operating with a set are demanding improved risk aligned
only 44% say these are fully cascaded
of decision metrics that were conceived compensation structures.
throughout their organisations.
and implemented in an environment that is
When setting performance-related
no longer present. The resulting exposure Evidently, wealth managers have
compensation, wealth managers must
to unplanned losses and systemic risk will some way to go before risk management
go beyond simply ensuring regulatory
continue and these will further shake the is properly embedded throughout
compliance – which 47% of wealth
confidence of wealth managers’ clients their organisations.
managers say is a very important factor.
and stakeholders alike.
Narrow approaches to risk management This is not simply about completing
In our view wealth managers also need to hamper an organisation’s ability to ‘Know Your Customer’ checks and
focus on responding to increasing monitor critical risk interdependencies. suitability checklists – behaviours and
customer expectations and sophistication. An organisation is then less able to performance need to encompass a broad
As such, they need to develop risk discern the consequences of other consideration of risk.
management frameworks that reflect and decisions it makes in an increasingly
deliver on customer expectations in the volatile business environment.
context of the institution’s legal,
constructive and reputational obligations.
43
Product suitability and mis-selling are set to become priority areas of

risk for wealth managers.
Linking business risk indicators with key generations to come – has been
performance indicators can be achieved. compromised.
Encouragingly, 40% of wealth managers
have policies in place that assess whether Developing successful strategies for
compensation policies and practices are investing in such complex investments
consistent with the organisation’s requires an understanding of their risks.
corporate culture, long-term objectives CEOs have clearly identified this as an
and strategy. Unsurprisingly, considering area of weakness among Client
the regulators’ increased interest, this is an Relationship Managers (CRMs). Yet if risks
area wealth managers are looking to associated with products are not
enhance over the next two years. adequately understood, then on what
basis can wealth managers responsibly
invest their clients’ wealth in such
Understanding product and products? CRMs need to have sufficient
potential mis-selling risks knowledge to make informed decisions
becomes a priority about the structuring of clients’ portfolios
in the context of their stated objectives,
Failures and client disappointment with circumstances and risk appetite.
the array of complex financial products
introduced over the past few years have It is not surprising then that the primary
damaged the wealth management area of risk that wealth managers
industry. Collapsing markets have anticipate addressing in two years’
significantly shrunk clients’ wealth, while time is client and product suitability.
investment scandals have eroded trust. Furthermore, this is closely followed by
Many clients perceive that the wealth the risks around mis-selling and
manager’s promise – to protect clients’ inappropriate advice.
wealth today, tomorrow and for
44
At a time when open architecture is The regulatory burden and its cost will
Figure 27: What do you believe will be the top drivers for change to your approach increasing, product liability issues around only increase in the near term. For global
to risk management over the next two years? suitability and regulatory compliance are wealth managers, keeping abreast of
certainly concerns. Clients look to their changing regulations across different
wealth managers for wealth protection. jurisdictions is a huge task. The
Changes in regulatory requirements / developments 102
This means selecting appropriate fundamental shift in western governments’
Increasing / changing client expectations and demands 68 products, regardless of manufacture, attitudes towards offshore tax planning
Pre-requisite for delivery of business strategy 55 which requires robust due diligence means that wealth managers operating
Perceived increase in risk
processes covering the increasingly within certain jurisdictions will come under
55
broad and complex potential range greater scrutiny. No doubt the regulatory
Head office / parent requirement 46 of investments. burden is one reason why 68% of CEOs
Reaction to an industry trend 40 say they will not open up operations in
Reaction to external loss events 34 Costs of compliance on new countries over the next two years.
Need for increased capital requirements 31 the increase The importance of robust risk
Perceived source of competitive advantage 30 management to the brand has never been
Over the past few years the costs of more important. The majority of Survey
Increased incidence of losses internally 26
compliance have increased for most respondents state that enhanced
0 20 40 60 80 100 120 wealth managers. Respondents anticipate reputation is the primary benefit of risk
Sum of weighted ranked responses that these will continue to rise. The key management. In the past 18 months,
drivers are mounting regulatory some reputations have been severely
Source: PricewaterhouseCoopers requirements, as well as evolving damaged by failures of risk management.
client expectations and demands One of the primary lessons of the financial
(see Figure 27). crisis for wealth managers is that
appropriate and robust risk frameworks
History shows that following financial
are absolutely essential.
crises, regulators tend towards extra
layers of control. New regulations on
increased capital requirements, amended
commission and fee models, risk-aligned
reward and compensation structures are
all in various stages of enactment.
45
PricewaterhouseCoopers Viewpoint: International private banking centres –

finding the value proposition in a new world
Currently US$ 7.3 trillion2 of private banking assets are held in international private Through international pressure for increased transparency, the competitive
banking centres (IPBCs) outside clients’ jurisdictions. The largest of these is advantage of IPBCs could be challenged as the era of absolute banking secrecy
Switzerland, managing 27% of global ‘offshore’ assets, followed by the UK, evolves into a new world of ‘compliant confidentiality’. To retain and gain assets
Luxembourg and other centres. In recent months, pressure has been ratcheted up compliant with international tax legislation, and to remain competitive, IPBCs
on IPBCs. This pressure has taken two forms: on the one hand, direct pressure on will need to re think the true value of their services. Aside from professional
the centres themselves to agree to exchange of client information and, on the other services offered, including niche expertise, this might arise from strengths such as
hand, ‘carrot and stick’ policies directed at High Net Worth individuals. The ‘carrot’ infrastructure, as well as legal and regulatory frameworks. Furthermore, the relatively
is in the form of tax amnesties; the ‘stick’ is enforcement action. So what is the small size of some centres allows them to adapt quickly to a changing international
value proposition of IPBCs in today’s environment? environment, although as political pressure increases smaller centres could arguably
lose out.
IPBCs are important to the private banking and wealth management market,
competing in the context of international taxation. While optimising taxes is an The private banking and wealth management world will become more transparent
important reason for some clients to open accounts in IPBCs, there are other good and more regulated in the years ahead. While onshore centres will manage more
reasons for doing so – not least clients’ desire for stability and for safety in these private wealth than they do now, IPBCs that focus their offerings and complement
uncertain times. Globalisation and the increasing mobility of wealthy families are onshore services will continue to play an important role and new centres might also
creating new challenges for financial institutions. IPBCs are often well prepared to emerge. A fast-changing international regulatory framework will lead to a new
deal with international families and individuals, employing experienced and generation of treaties between IPBCs and large economies, as well as the probable
multilingual wealth management professionals and providing specific products and emergence of expanded regulatory regimes within the EU and elsewhere.
services. Many IPBCs have long histories and strong brands in global wealth
management, conveying values appreciated by wealthy individuals and families Wealth managers will not want to impact their reputations by operating in
from around the globe, including tradition, honesty and confidentiality. ‘non-transparent’ or ‘non-cooperative’ jurisdictions. To emerge as leaders, private
banks and wealth managers will need to ensure that they plan for the new world
Major reasons for wealthy clients to have assets managed in IPBCs include wealth and focus on the value proposition of IPBCs and how their chosen centres deliver
creation and preservation. Wealthier clients from the Middle East, Asia, Latin their clients’ needs.
America and Africa often seek relatively more stable political and legal frameworks
and financial systems, and value confidentiality deeply. Independent of any changes
in their home country, the stability they find in IPBCs allows them to preserve and
accumulate family wealth over several generations. Many commentators expect to
see relatively more private wealth being generated in the future in emerging market
economies, yet regulatory and legal frameworks remain volatile, so ‘stability’ will
remain particularly important. Moreover, the very wealthy have a risk-averse mind-
set in the current environment and do not want to have all their wealth managed in
a single jurisdiction.
2 Source: Swiss Bankers Association.

46
Background to the 2009 Survey
The PricewaterhouseCoopers Global Private Banking and Wealth Management Survey 2009 reflects the
contributions of some 238 wealth managers across 40 countries (see Figure 28). The level of participation
and the time invested by organisations is an endorsement of the value the industry places in our Survey and
the analysis and insights that it brings to senior management.
Our Survey questionnaires canvassed the

Figure 28: Survey responses were received from 40 countries
full range of senior management views.
Chief Executives, Heads of Business
Argentina India Portugal Units, Chief Operating Officers, Finance
Australia Ireland Russia Directors, Risk Officers and Human
Bahrain Isle of Man Singapore Resource Managers all completed
Barbados Israel South Africa specific sections. Acknowledging their
Belgium Japan Spain
crucial role in the client experience, there
Bermuda Liechtenstein Sweden
Brazil Luxembourg Switzerland
is also a section dedicated to Client
Cayman Islands Malaysia Taiwan Relationship Managers.
Channel Islands Malta United Arab Emirates
China Monaco United Kingdom By focusing on different areas of a wealth
Cyprus Netherlands United States of America manager’s business, these responses
France Nigeria Uruguay reveal the key issues facing wealth
Germany Norway management on a holistic basis.
Hong Kong Poland Reflecting this, our Survey is split into
six underlying sections covering:
Performance, Client Service, Products
and Services, Talent, Operations and
Source: PricewaterhouseCoopers Technology and Risk Management.
We also present Viewpoints that discuss
the key topics we believe will shape the
future of industry.
47
Questionnaires were completed either Our Survey refers to wealth managers in

Figure 29: Split of participants by AuM (US$)
online or in face-to-face interviews their broadest sense. Respondents
between December 2008 and March cover the entire spectrum of wealth
$0-1bn
2009. PricewaterhouseCoopers’ management, including private banks,
$1-5bn International Survey Unit located in boutiques, local onshore wealth
12%
Belfast, Northern Ireland, which manages managers, universal global banks and
$5-10bn
26% numerous international surveys including family offices. As such they manage
$10-50bn many on behalf of clients and assets under management of varying
$50bn+ governmental bodies, built and managed sizes (see Figure 29). This diversity of
21% the online questionnaires and led perspectives provides unique insight
the detailed data analysis of the into the activities of all types of wealth
Survey results. managers, whatever their size, wherever
they operate and whichever client
segments they serve.
27%
14%
48
Figure 30: Regional split of global participants

With wealth management expanding in Where relevant, findings have been
developing economies, there are analysed by geography to ensure that
respondents from countries such as Brazil, broad averages do not obscure underlying
Americas
India, China and Russia. Additionally, this regional themes. Furthermore, many of our
Asia Pacific year’s Survey has its strongest ever questions have forward-looking elements
13% participation from the Americas, with 13% to them, providing invaluable insight into
EMEA
of total respondents. Asia Pacific, future expectations. Our Survey continues
predominantly Singapore and Australia, to use the wealth management pyramid
16%
represents a further 16%. The balance, (see Figure 31), which segments clients
and the majority, of participants are from by wealth band.
the established wealth management
nations of Europe, including Switzerland, PricewaterhouseCoopers also performed
the United Kingdom and Luxembourg a supplementary survey of High Net Worth
(see Figure 30). clients globally in order to establish where
71% private clients’ perceptions differ from
Many of the questions are similar to those those of their wealth managers. Elements
in previous years’ Surveys, to help identify of this data have been included to enrich
clear trends and track changes. the Survey results.
In order to identify regional differences,
Source: PricewaterhouseCoopers a Global Editorial Board, made up of
PricewaterhouseCoopers wealth
professionals from different regions, has
worked together to analyse the Survey’s
key themes.
49
Our survey includes representation from the principal wealth

management jurisdictions across the globe.
This report is the first release from our

Figure 31: The Wealth Pyramid (US$)
2009 Survey. We plan to publish
subsequent supplements that will focus
on specific topics in greater depth,
Ultra
together with more detailed data analysis.
High Net
Worth All participants in the Survey will receive
>$50 million detailed analysis in return for providing
their valuable time to complete the
questionnaires and impart information
Very High Net Worth about their businesses and how their
$20 million < $50 million organisations operate.
PricewaterhouseCoopers can also

make further detailed analysis available,
including non-attributable industry
High Net Worth comparisons covering: type of
$1 million < $20 million organisation, size, geographic reach
and service offerings tailored to
specific client requests.
All Survey information and further

Wealthy releases will be available at
$500,000 < $1 million www.pwc.com/wealth
Affluent
$100, 000 - $500, 000
Source: PricewaterhouseCoopers. Note: Charts representing the ranking of criteria have been prepared using a weighted average ranking across all participants.
50
Contacts
Contacts
The Survey was principally written by the Global Private Banking and Wealth Management leadership team,
together with the Global Editorial Board.
We received additional support from a Global Editorial Board

significant number of individuals, in
particular other members of the Luxembourg
PricewaterhouseCoopers Private Banking Etienne Hirsch
and Wealth Management network and +352 49 48 48 5459
Rupert Bruce. etienne.hirsch@lu.pwc.com
We would like to take this opportunity to Singapore

thank everyone involved for their Kai-Wing Shiu
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Redefining Ways To Deliver Advice

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Financial Services

A new era: redefining ways to deliver trusted advice

Key survey headlines 6

01 Performance in crisis – what to do now? 8

02 Client service – disciplined segmentation lifts quality 16

03 Products and services – delivering ‘Nouveau Classic’ banking 22

04 The people agenda – a new strategy required 26

05 Operations and technology – delivering client value and cost efficiency 34

06 Risk management – protecting the client promise 40

Background to the 2009 Survey 46

We would like to take this opportunity to thank all the organisations

To make things tougher, the relatively fixed

Our Survey suggests, however, that the 10%

Average clients per CRM

Putting the client first Furthermore, CRMs need to develop

wealth managers provide services across managers seeking to operate in these

Most wealth managers offer a wide variety

The crisis shows us that high-margin

Attacking your cost structure It is an opportunity to manage out

After a slump in asset prices and a Disciplined segmentation of the client

Acquisition and retention of clients 268 58

Managing through economic downturn 246

Managing risk 152

Improving profitability 134

0 50 100 150 200 250 300 0 10 20 30 40 50 60

Source: PricewaterhouseCoopers Source: PricewaterhouseCoopers

Client attrition has been reported by 25% of respondents while 43%

Clients are rewarding unannounced transfers of assets by

Client attrition has been reported by 25%

PricewaterhouseCoopers Viewpoint: Transparency – the new gold standard

This shift also manifests itself in changes to investment vehicle preference.

Products and services –

Respondents recognise that becoming

With open architecture increasing

models. By bundling proprietary and

Globally, clients currently favour more Putting advice first

inexpensive support staff to optimise Meeting client demands

In the wake of recent scandals, wealth managers are seeking to

The people agenda –

People management practices need to be Demand for CRMs becomes

economic slowdown has created a far

Clearly the balance of power has

The CRM perspective:

Lack of client relationship skills 93 Taxation updates 170

Lack of understanding of tax issues 57 Compliance and regulatory updates 62

Lack of ability to collaborate 45 Philanthropy 40

0 20 40 60 80 100 120 0 50 100 150 200

Source: PricewaterhouseCoopers Source: PricewaterhouseCoopers

The three most common areas of weakness for CRMs, cited by

Only 25% of CRMs have personal medium-term career development

When it comes to leadership, there compensation structures can reward

Some wealth managers realise they By changing reward structures,

PricewaterhouseCoopers Viewpoint: Moving to a new reward model

Regulation Reward in the new environment

Operations and technology –

Investing for client value and

revenue growth. They also need to deliver 161

Contact with existing clients

Ensuring legal and regulatory compliance 70 Training

Adopting e-platforms to allow clients to service themselves 48

Source: PricewaterhouseCoopers Source: PricewaterhouseCoopers

CRMs spend 16% of their time on administrative tasks and