Private Banks and Wealth Management Firms - Essay Example

Segmentation, like a mirror, will show that the actual cost of servicing the highly valuable customers is far less in comparison to the rewards generated, and it will also show the behavioral patterns of those customers, which, in turn, will help to plan and implement balancing strategies that can optimize the results.

 The recent Global Financial Crisis has brought in its wake a few upheavals in the Banking and Financial Service Industries. The most significant of these is a total re-thinking on Customer service, particularly in the sector of Asset/Wealth Management Advice, where European Banks were, till recently, enjoying an advantage, (Reinartz, Krafft, and Hoyer, 2004). The entry of several new Financial Services Companies into this sector has caused the re-thinking of strategies even though the actual number of Asset Management Clients has expanded recently. In the competition for customers, the existing Client Segmentation has been sidestepped and the admission threshold for Asser Management Service has been lowered. The emergence of new High Net Worth Individuals all across Asia and Latin America has added to the stress.

The burgeoning new clientele has spurred the creation of many new innovative investment products and services targeting them. European Banks, reluctant to lose the strategic advantage they had enjoyed in the sector, are gearing up to face competition from new entrants, including Retail Bankers and International Providers, (Landberg, 2001). Consolidation of some European Banks is a distinct possibility in the prevailing conditions. Small Boutique Banks with a limited number of High Net Worth (HNW) clients are gaining a tremendous advantage in this scenario. Wealth management in the current state of the economy where the Banks are struggling to salvage and resurrect the confidence of Clients hard-pressed to concentrate on Wealth management tasks. A recent study in Germany has shown a 64% erosion in customer confidence in Banks among HNW individuals with Annual salaries in the range of EURO 100,000 TO 240,000. Regaining that lost ground is bound to be a challenge for the Banks, (Zeithaml, V. 2008).

Measures to boost Customer satisfaction and loyalty are being tried by the financial institutions, (Heil, Parker, and Stephens, 1999). The customers in the high end are always acquired through recommendations it is routine for many of these to be dealing with several Banks. They compare notes and any slipping in customer confidence will have an avalanche effect very quickly. The progressive maturing of the investor client, resulting in demand for specific services rather than generalized advice is a new reality. Among these are the demands for sophisticated management systems for both investm4nts as well as risks. Earlier such services were extended only to select clients with huge investments. Banks’ consultants, previously accustomed to personal dealings with a limited number of HNW cases, are now compelled to deal with more clients, including International ones too competitive give. Preventing the highly successful Consultants from migrating to other service providers, along with their clients, is another task now facing the banks, (Reinartz, and Kumar, 2003).

 2.0 RECENT WEALTH MANAGEMENT TRENDS

Recent broad trends in the field of Wealth Management, as assessed through Industry studies, report,s and interviews with main stakeholders indicated that:

• Top-end service providers continued to gain Very High and Ultra High Net Worth clients
• Consolidation trends and Talent Poaching continues unabated in the Banking Industry.
• Service Mix changes in response to observed changes in the Demographics of the clientele.
• Movement The movementtment Capital is taking place across National Frontiers, as ore and more countries are implementing Economic Reforms and offer protection to Foreign Investors, thus interconnecting the World’s markets.
• The complexities of Client Needs are on the increase, and mobility of Clients and their assets across regions is also increasing, setting in motion demands for more and better Service including better visibility in matters of management of Portfolios, from the Banks, (Zeithaml, 2000).
• Currently the two key service differentiators in the industry are Client Relationship Management and availability of new Innovative Investment Products.
• Investment Advisors are increasingly insisting on getting a more comprehensive view of the Client Profile.
• Costs of running the Back Office have gone high.

The inescapable conclusion is that the Firms have no choice but to enhance quality of Client Service and Customer Relationship and reduce the costs, (Landberg, 2001). The Analysis in this section looks at these areas of concern, with emphasis on the Mass Affluent and HNWI segments of clients, to the exclusion of the richer counterparts.