Futuristic models to get message across

A major issue concerning delivery of advice and sale of products within an open architecture environment – which broadens both the number and type of funds available – is how and where discussions with a client should take place.

The ability to communicate with clients is one of the key skills major continental players, such as Spain’s Banco Santander Central Hispano and France’s BNP Paribas have bought to the party.

Banks moving into an advisory relationship, using a broad range of fund managers, need to ask themselves what they should do if they need to vary an asset allocation. How do they contact the investors – by telephone, post or e-mail? According to Abbey, the UK bank recently purchased by Spain’s Santander, large numbers of individuals don’t even open envelopes containing dividend cheques or bank statements, so why should they respond to a letter suggesting a change of investment strategy? “Very few distributors are good at mass communication concerning changes of assets for their investors,” Abbey’s chief investment officer James Bevan told the recent PWM Open Architecure Forum in London.

The greatest success in terms of product sales always comes from face to face contact with a customer in a high street branch, said Mr Bevan. But an adviser needs to shift £10,000 or ?15,000 worth of an asset to the client in order to make the outcome commercially viable for the bank. This means any regular savings plan needs to be very straightforward to sell and buy. It must be so simple to understand that branch network staff can be quickly trained in marketing the product. In order to efficiently follow up client meetings, institutions need to operate an effective customer relationship management system.

The “hideous economics” of a system where up to 80 per cent of a bank’s costs are tied up in financing branch infrastructure, while large numbers of customers don’t want to enter branches, must also be tackled. Yet it is even more expensive to send advisers out into the field.

One answer is the Mediolanum model, pioneered in Italy by the bank’s founder Ennio Doris. His idea was one of a virtual bank. Customers’ assets are managed by external sub-advisers, and commission-led agents make their sales in a customer’s home, with sales support delivered through a dedicated TV channel. This is one economically viable model of open architecture product delivery.

It is these futuristic models, as well as the sophisticated CRM systems of banks such as Santander which newer entrants to open architecture such as Abbey and Barclays will be looking at in their quest to both maximise profits and satisfy their customers.