Putting clients at the heart of the system
Didier Pitton, Odyssey Financial Technologies
Client relationship management systems were once seen as too expensive for private banks. But the idea that advisors can also become salespeople has led to growing interest in the way CRM technology can manage and attract clients for financial institutions, writes Rekha Menon
The customer is king. This mantra is regularly bandied about the banking industry. However, nowhere is this philosophy more appropriate than in the wealth management space where client relationships lie at the heart of a financial institution’s service proposition. Small wonder then, that, there is a growing prevalence of customer relationship management (CRM) systems in this sector. In response to a question on their organisation’s current IT priorities, more than 60 percent of chief operating officers (COOs) interviewed for the 2007 PricewaterhouseCoopers’ (PwC) Global Private Banking/ Wealth Management Survey covering more than 265 organisations across 43 countries stated they were in the process of reviewing or improving CRM systems.
“Private banks and wealth managers are the perfect customer for CRM solutions because of their high-touch relationship approach to client management”, comments Ehab Samy, senior product manager at CDC Software, which offers its flagship Pivotal CRM product as a stand-along CRM solution to the wealth management industry.
Beveloping insight
“CRM enables wealth managers to develop deep insight into their clients' needs, households, preferences, and influencers, accompanied by tools that help them automate multi-step processes, track performance, and collaborate better to increase client satisfaction,” says Vincent Fournié, CRM Manager, at French consulting and systems integration company, Business & Decision, which recently concluded the implementation of Pivotal CRM at Rothschild Private Banking & Trust in Paris.
“CRM systems can provide private banks with tools to better manage and retain clients”, remarks Isabella Fonseca, senior analyst at research firm Celent and author of several reports on technology in the wealth management industry. Aiding financial advisors in retaining and acquiring customers with dedicated tools also helps firms to retain relationship managers, who are key to client relationships and prevents clients from leaving if the advisor leaves the firm, she adds. The concept of CRM is not new in financial services, says Ms Fonseca, however, these tools were never taken seriously enough in the wealth management area. “For banks, CRM was expensive and was mostly considered a sales tool. However, the idea that advisers are also salespeople has triggered financial institutions to adopt CRM technology to help them acquire and retain customers,” she explains.
Key requirements
Outlining the key requirements of a CRM system optimised for wealth management, Ms Fonseca says the solution should include features such as contact management, campaign management, fee management, contract management, document storage, triggers, and alerts. “A CRM solution needs to provide advisors with a 360 degree view of their clients,” notes Mr Samy at CDC Software.
Advisers should have a consolidated investment and risk profile of clients at the household level, including details of all communication that the firm has had with household members and information about their interests and hobbies, he says. This helps advisers in not only comprehensively servicing clients but effectively cross-selling and up-selling additional financial products and services to them as well.
“A consolidated view of the client is essential for wealth managers to be able to give them holistic advice,” agrees Didier Pitton, product marketing director for private wealth management, at Swiss vendor Odyssey Financial Technologies. Referral management too is important, he notes. “The value of a client is not only their assets but the number of referrals they provide as well. Most new clients for wealth managers come through referrals and the CRM system should be able to track referrals and leads.” Odyssey provides its CRM solution as part of an integrated wealth management platform. Institutions where this platform has been deployed are Davy Stockbrokers and Stanford Group, which has been making a big push into wealth management through its Zurich-based European headquarters. Mr Pitton says that while the CRM solution can be deployed on a stand-alone basis, most customers opt for the integrated platform. The benefit of this approach, he points out, is that it helps reduce the number of applications a wealth manager needs to implement.
Integrated platform
Another benefit is the tight linkage between client data and portfolio management data. “Since most wealth management firms advise clients about their asset management strategies, an integrated platform helps them to easily manage between client data and their portfolio information. Many large wealth managers that have deployed stand-alone CRM solutions complain about lack of integration between client and portfolio data. This is usually the main reason why their usage of CRM is very low,” states Mr Pitton. SunGard is another vendor that offers a wealth management platform with a strong CRM functionality. The latest version of its solution includes a dashboard for viewing client and account activities; intuitive workflows across each step of the wealth management continuum to help improve productivity; data sharing across applications to help streamline processes; and the integration of trading, rebalancing and house holding capabilities. In a prepared statement, Blaine Maxfield, chief operating officer of SunGard's wealth management business said: “WealthStation's new capabilities help advisors spend more time with clients and become more effective by bringing multiple processes together into one seamless environment." No doubt, integrated wealth management platform providers are a key source of competition to standalone CRM solution vendors.
However, CDC’s Mr Samy contends that wealth management platforms lack depth of CRM functionality. “These solutions are better at wealth management and portfolio management. Often their CRM functionality is limited to contact management. We have customers that have implemented large wealth management solutions, but because the CRM features aren’t deep enough, they have gone with us. Additionally, Pivotal CRM is much easier to customise,” states Mr Samy. European wealth management firms that have deployed Pivotal CRM solution include Swiss Life Banque, Natixis Asset Management and KBL Group. The stand-alone CRM solution space is highly fragmented. While there are a few leading solution providers such as Oracle and CDCSoftware, there are a number of smaller vendors that re-sell Micosoft’s CRM solution. Another dynamic player is Salesforce.com. In February last year, the vendor made a dramatic entry into the wealth management CRM space by announcing that 25,000 of Merrill’s geographically dispersed investment advisers would use Salesforce.com’s Web-based CRM solution. Merrill Lynch has selected the solution after running a one-year pilot with 5,000 subscribers.
“With the force.com Platform-as-a-Service, financial institutions can customize their CRM and create new applications tailored specifically to the requirements of their organisation at a fraction of the time and cost required with traditional software. They can also react with greater agility to changes in their requirements linked to market conditions. And, without the need to roll-out complex infrastructure, this can be done in a matter of days or weeks, rather than the months or years taken in the past,” states Woodson Martin, vice president, EMEA marketing at salesforce.com. He adds: “In the current climate private banks are under pressure to make every penny count, and no more so than when considering investments. Cloud computing offers many benefits in an economic downturn. It offers banks low initial financial outlay and the flexibility to scale up and down as the business requires. This becomes a low risk investment, without the huge funds required by traditional on-premise systems.”
Staying in-house
Despite Salesforce.com’s initial success, some industry experts state that its business model could be its Achilles heel in the wealth management space. Private banks that lay a high premium on security and secrecy of customer data, they suggest, would prefer a business model where the customer information resides in-house rather than where it is accessed over the Internet. Interestingly, even today a majority of wealth management firms have deployed in-house or proprietary solutions. Ms Fonseca of Celent believes this is set to change in the coming months. “In Europe there has always been a prevalance of in-house build, however, there is a trend to outsource much more now. Celent estimates that by the end of 2008, 45 percent of applications will be licensed from a software vendor.”
It remains to be seen which CRM solutions will thrive in the coming months. Gary Linieres, Director, Third Financial Software which provides a Microsoft CRM based solution says the choice of CRM solution is dictated by the size of a financial institution. “While bigger banks usually opt for point solutions, there is a greater demand for integrated platforms from mid-tier and smaller firms”, he says.
