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Understanding Your Client's Risk Profile

By: Michael M Pompian
Published: July 2009

Understanding Your Client's Risk Profile

Creating a consistently excellent customer experience increases client retention and ultimately produces a profitable return measured through performance criteria including total revenue growth, profit per client and share of wallet won.

This report focuses on improving the output of relationship advisers through maximising the brand experience that they offer to clients, by giving them a framework from which to understand their client's risk profile.

 

Interested in this report but require a different territory or focus? Contact Jeannie today to discuss a customised version. Email on info@vrlfinancialnews.com or call +44 (0)20 7563 5605

The Bernard Madoff fraud capped a period of severe damage to wealth management brands. The industry has suffered an estimated loss of $50 billion, involving those at the top of the industry the leading wealth managers. As plaintiffs seek out wealthy targets that might be prepared to pay up to defend their brand, the list of targets has extended to custodians and others who conceivably can be convicted of negligence. Finally, and perhaps most important, none of the sector's regulators or participants blew the whistle on what now appears to be an obvious example of potential fraud.

For an industry that is all about people this and similar events have been very damaging at a time when it is already confronted by strategic issues, in particular falling revenues as the value of assets under management fall in line with the drop in equity prices. Recent research concludes that, over the past decade, cash had outperformed all other asset classes - not a good advertisement for paying for advice.

In an increasingly competitive wealth management universe, the winners will largely be those who can attract, support and retain superior client-facing officers. It is difficult to cite another sector where the firms success is so tightly linked to the capabilities of the relationship manager.

The winners will be the organisations that create the strongest links between advisor and client in a period of near-unparalleled turmoil in global wealth markets.

Read this report to:

  • Find out why profiling your client's risk is important
  • Understand client behaviour
  • Gain an overview of the major risk influences
  • Follow trends in client risk behaviour
  • Read risk profiling case studies

 

The first challenge facing players will be to improve profit per client. The business model is critical; matching skills to client profit potential is a key criterion. One variable is systems investment to improve the quality of client service and relationship manager productivity. Many banks will be confronted by whether to invest in such systems when profits are under such pressure; experience suggests that not much will take place in wealth management.

Improving relationship manager productivity is the key variable. While expanding product range is another option, a distinguishing feature of the global wealth management sector is the relative lack of product advantage or differentiation across the business. While the competitors widely advertise the breadth of their product range and its performance, in reality successful products can be replicated or, more likely, bought in via open architecture.

As one advisor put it:

Theres no copyright in an open architecture world! All can be replicated, and there’s no ‘magical’ product. The real differentiator is quality of advice and service, not the product.’

Apart from better matching client facing officers to high potential clients, this could involve the investment in systems permitting them to spend more time with clients rather than administrative tasks. Some banks will prefer other solutions such as the franchise model, investing in training and new sources of talent, or simply replacing weak performers with stronger ones.

The adviser must have the management skills, interpersonal skills and emotional skills needed to build a relationship of trust with literally hundreds of clients with different needs and perspectives – as opposed to the much smaller number typically managed by financial advisers and brokers.

Clients have definite risk profiles that must be understood in order for their financial goals to be achieved.

The adviser must operate successfully in a matrix-type organisational structure, which requires satisfying colleagues in different parts of the organisation – retail as well as wealth management and other specialties. The critical metric of number of clients per adviser varies from one bank to another; however a number of banks allocate 200-300 clients per relationship manager.

Much therefore will depend on the skills of the relationship manager. A median of 250 clients allows for little more than two meetings and a follow up in any given year, or perhaps even less. Such complexities may not exist in a broker or advisory company without the size and structure of a large banking organisation and where personal rewards are probably much higher.

CONCLUSION

In an increasingly competitive wealth management universe, the winners will largely be those who can attract, support and retain superior client-facing officers. It is difficult to cite another sector where the firm’s success is so tightly linked to the capabilities of the relationship manager.

The winners will be the organisations that create the strongest links between advisor and client in a period of near-unparalleled turmoil in global wealth markets.

To purchase this report, or to request a report summary or list of case studies, call Jeannie on +44 (0) 207 563 5640 or email info@vrlfinancialnews.com.

 

Executive Summary

Introduction  – The Affluent   

Chapter 1: Why profile client risk appetite?

Chapter 2: Overview of major risk influences   
 
Chapter 3: Trends in Client Risk Behaviour

Chapter 4: Risk Profiling – Case Studies

Chapter 5: Understanding client behaviour

Chapter 6: The experience  of client advisors  

Chapter 7: The History of Risk Profiling

View full Summary Report

To purchase this report, or to request a report summary or list of case studies, please call Jeannie on +44 (0) 207 563 5640 or email info@vrlfinancialnews.com.

 

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