Description
The recent financial crisis has affected economies, both developed and emerging, across the world. Investors who relied on the experienced hands of financial advisors for managing and growing their wealth didn't benefit as many saw their hard earned wealth erode to a significant extent.
AAn Oracle Wh hite Paper
AApril 2010
CCustom mer Ceentric WWealth Managemennt
Oracle White Paper—Customer Centric Wealth Management
Disclaimer
The following is intended to outline our general product direction. It is intended for information purposes
only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or
functionality, and should not be relied upon in making purchasing decisions. The development, release, and
timing of any features or functionality described for Oracle’s products remains at the sole discretion of
Oracle.
Oracle White Paper — Customer Centric Wealth Management
Executive Overview............................................................................. 1
Introduction ......................................................................................... 1
Wealth Management Trends............................................................... 3
Challenges in Private Banking ............................................................ 5
Customer Centric Solutions for Private Banking ................................. 7
Conclusion ........................................................................................ 10
Oracle White Paper — Customer Centric Wealth Management
Executive Overview
The recent financial crisis has affected economies, both developed and emerging,
across the world. Investors who relied on the experienced hands of financial advisors for
managing and growing their wealth didn’t benefit as many saw their hard earned wealth
erode to a significant extent. The resulting loss of trust in financial advisors, new market
regulations and reduced margins have severely impacted the way wealth management
industry will function in the days to come. The objective of this paper is to highlight the
key trends in wealth management industry, key challenges faced by wealth management
firms and financial advisors, and how a customer centric wealth management solution
can help them address many of these challenges. The paper also briefly mentions
Oracle’s offerings for a customer centric wealth management solution.
Introduction
The unprecedented global downturn and its fallout on the world financial markets brought
to light many inherent loopholes in the functioning of financial system. Most of the
developed world was in
recession, and even the
emerging economies saw
significant reduction in their
GDP growth. Considered as
the worst global financial
crisis since the Great
Depression, it has caused
wealth erosion at various
levels and affected all asset
classes and regions albeit in
different degrees. According
to Morgan Stanley's
estimates, global wealth
which peaked at $125 trillion
(a figure quoted by United Nations) went down by 16 percent or $20 trillion since mid
Figure 1: HNI Wealth Distribution by Region in 2008
1
Oracle White Paper — Customer Centric Wealth Management
2007. For High Net Worth individuals
1
(HNWI) investors using Private Banking
2
services,
the loss is estimated at 20 percent of their financial assets or close to USD 8.9 trillion.
The total financial assets held by HNWIs in the world stood at USD 32.8 trillion (2008)
3
.
Within this North America, Europe and Asia-Pacific account for more than 75% of the
wealth as shown in Figure 1.
The recession led to a
significant fall in the
number of HNWIs from a
high of 10.1 million in
2007 to 8.6 million in
2008, as most individuals
experienced, on average,
a 20-40 percent fall in
total wealth The number
of HNWIs in the U.S. fell
18.5% in 2008 to 2.46
million but it still
accounted for 28.7% of
the global HNWI
population.
The Merrill Lynch/ Capgemini annual survey 2009 of the assets and number of high net
worth individuals shows that despite the relatively short term snags caused by the credit
crunch, over the medium term, the wealth and number of rich individuals is expected to
rise to USD 48.5 trillion by 2013, equating an annual rise of 8.1 per cent over the next
1
High Net Worth Individuals (HNWI) have at least US$1 million in investable assets, excluding
primary residence, collectibles, consumables, and consumer durables
2
“Private banking” is used as a term for the management of assets of private clients (households).
3
‘World Wealth Report 2009’ by Merrill Lynch and Capgemini
Figure 2: HNWI Population by Country in 2008
2
Oracle White Paper — Customer Centric Wealth Management
four years. Even a downward revision to such a forecast would still represent a healthy
growth rate. According to a study by Oliver Wyman, only about 50% of HNWI assets are
professionally managed, so there is still a great potential for the wealth management
industry.
The year 2009 showed some signs of improvement in global economy with select
developed economies like U.S. coming out of recession. Further, the markets in BRIC
countries (Brazil, Russia, India and China) showed great resilience and have continued to
be attractive despite the crisis. Wealth in these countries along with North America is
expected to drive growth fuelling the need for wealth management
4
services.
Wealth Management Trends
The financial industry bubble
burst and the counter measures
undertaken are expected to
significantly change the way
wealth management industry will
evolve in medium and long term.
We now look at the trends
foreseen, a result of counter
measures undertaken by the
stake holders and outcome from
the lessons learnt across four
dimensions: Industry, Client
5
,
Product and Employees.
4
“Wealth Management” is used as the generic term for the management of assets. This includes
wealth management for private as well as for institutional investors
5
The terms “Client”, “Customer” and “Investors” are used inter-changeably
Figure 3: Wealth Management Trends
3
Oracle White Paper — Customer Centric Wealth Management
Industry
• Rising costs and falling revenues will see consolidation in this still heavily fractured
industry
• Calls for tighter and more comprehensive regulation of wealth management industry
are leading to increased investments in compliance area
• Increasing government involvement in influencing business strategy and may result
in tighter licensing requirements for wealth managers, prudent and ethical business
practice and increased focus on customer education
• Better and more robust risk management systems will be the order of the day
Clients
• Investors have become more cautious than ever before and are becoming
increasingly conservative towards risk. Investors look to shift away from offshore to
onshore wealth management, from exotic investment products to more time tested
traditional investment products
• Investors seek to have greater control of their wealth and look at reducing the share
of product offerings with discretionary mandates
• Investors are expected to be more critical of advice and products
• Investor shift from performance consideration to risk consideration and asset
protection
• More and more investors will seek diversification of banking relationships as a risk
containment measure
Offerings
• Simplicity and transparency in product offering will be paramount, not complex
financial re-engineering
• Dramatic decrease in appetite for complex financial products like structured products
and a shift away from discretionary mandate, which were the sources of high income
will result in margins coming under pressure in short and medium term
• Business models will lay increasing emphasis on open architecture sales and in
generating superior risk adjusted return for clients, thereby binding customer
relationships. Move is expected from product centric to customer centric advice and
solutions
4
Oracle White Paper — Customer Centric Wealth Management
Employees
• Compensation structures of relationship managers
6
will be based on client centric
parameters like retention value, consistency in performance etc.
• Shift from fee based to fee only models that encourages advice backed sales
Challenges in Private Banking
Private Banking clients are
high-value, high net worth
individuals whose financial
services need(s) go far
beyond basic banking and
investment products. Their
requirements typically include
protection and growth of
assets, tax and retirement
planning, and generational
transition of wealth.
Sustaining business from
these clients is the biggest
challenge but at the same
time they also result in biggest
potential payoff. Hence in
order to secure high stake
finance deals from such
clients, private banks need to
pay a level of attention to
relationships that go well beyond normal. It’s a well known fact that acquiring a new
customer is far more expensive than retaining an existing customer. In such relationship-
6
The terms “Relationship Manager”, “Financial Advisor”, “Advisor” and “Private Banker” are used
inter-changeably
Figure 4: Challenges in Private Banking
5
Oracle White Paper — Customer Centric Wealth Management
dependant banking operations, it becomes all the more important for the private banks to
focus on growing their existing book of business.
However the volatility in the capital markets and a negative development in equity prices
and other asset classes, a result of the financial crisis, caused steep declines in assets
under management of private banks and also resulted in increasingly wary clients who
have lost confidence in their financial advisors and wealth management services as a
whole. This led to dramatic reduction in margins for advisors. To add to this, advisors are
now faced with clients who are demanding fast, personalized service through all access
channels at their convenience. The customers have also become more cautious now and
are diversifying their banking relationships allowing them to direct their assets to the best
deal/advice available in the market. So unless customers are assured that their service
provider is proactively managing their wealth, is deeply concerned about fulfilling their
investment objectives and can offer distinctly value-added services, they would as well
bring an end to the relationship. It is now imperative that wealth management / private
banking firms align their business strategies to manage and develop client relationships
and adapt rapidly to the changing business environment.
To sum up, private banks are faced with several challenges which they need to address
as a high priority:
• Customers are increasingly skeptical of dealing with Financial Advisors. There is a
dire need to focus on customer retention, and work on regaining customer
confidence, trust and loyalty
• Maintaining client profitability, re-building asset bases and at the same time
sustaining fee structures is becoming a humongous challenge
• Catering to ‘J ust-in-Time and J ust-for-Me’ customers with pro-active and unbiased
investment advice. Personalized services require extra-ordinary efforts and
decisiveness of action
• Improving marketing effectiveness by developing a holistic view of the customer,
understand their financial goals and suggesting products which best suit their
interests
• Developing lead generation capabilities to identify existing customers and draw out
the most profitable customer for private banking services
• Low Financial advisor productivity due to manual handling of key processes and their
inability to offer clients the right advice at the right time
6
Oracle White Paper — Customer Centric Wealth Management
• Providing a consolidated view of key information, processes and people from various
surround systems
• Adherence to stringent regulatory compliance requirements
Customer Centric Solutions for Private Banking
Customer centric wealth management / private banking solutions offering a fusion of
Customer Relationship Management (CRM), advisory, transaction management and
portfolio management, help address many of the challenges faced by the industry.
These solutions enable institutions to create competitive advantage through service
differentiation, uplift relationship manager productivity and sustain customer relationships
Such a solution for Private Banking helps relationship managers identify, acquire, retain
and expand customer relationships.
Identification
Customer centric solutions provide analytical tools that have capabilities to slice and dice
customer information and obtain critical insight into customer intelligence. These
solutions enable relationship managers to:
• Determine most profitable customers and view customer information across Lines Of
Business (LOB)
• Determine products and services which are most profitable
• Identify the best performing private bankers/ financial advisors/ relationship
managers
• Determine segmentation strategy for the client base
• Identify cross-sell and up-sell opportunities
Acquisition (Pre-Sales and Sales)
Customer centric solutions provide facility for comprehensive marketing, campaign
management and opportunity management capabilities for effective handling of pre-sales
life cycle in a private banking firm. The solution allows users to:
• Align campaign profiles to targeted customers and execute marketing campaigns.
Monitor effectiveness of campaigns in real-time
• Identify large opportunities to increase product penetration and retention rates
7
Oracle White Paper — Customer Centric Wealth Management
• Determine the elapsed time between opportunity identification and deal closing
• Manage application processing and opportunity tracking effectively
• Profile clients based on wallet share, credit history, profitability ratings, financial
account portfolios, assets, products and accounts held with competing institutions for
appropriate product sales and further give appropriate product recommendation
• Execute recommended investments
Figure 5: Customer Centric Solution for Private Banking
Retention and Expansion (Service)
Customer centric solutions enable front-line employees with the tools to own client
relationships more proactively and profitably. It provides them with ability to provide
8
Oracle White Paper — Customer Centric Wealth Management
personalized service to customers and measure the success of the services provided.
The solution provides features to:
• Monitor portfolio performance
• Manage portfolios vis-à-vis stated investment objectives and provide for periodic
rebalancing
• Test drive investments to check the efficacy of investment strategies
• Link transactional and relationship data together to give sales and service people a
consolidated 360° view of all products held and services used by client and his
households at any point of contact and provides an integrated desktop experience
• Alert advisor or client about returns, exposures, portfolios at risk, maturities etc
through collaboration tools
• Notify relationship managers of impending review of client portfolios, service requests
from client etc.
• Track, manage and report team activities and performance across organization
• Differentiate customer service based on value of account
• Enable risk management and regulatory compliance
• Enable synchronization of all channels (web, phone, email, face-to-face, branch)
allowing clients to choose their preferred communication channel for optimum
convenience
• Manage compensation and incentives for front-line employees
Reporting
• Customer portal to facilitate online access to portfolios and on demand report
generation
• Comprehensive set of operational and management reports that would drive controls
and ensure good corporate governance
• User-friendly reports with rich graphics for transparent client reporting
Technology
• On-Premise, Hosted as well as At-Premise deployment models of customer centric
solution to suit the regulatory requirements of clients across different geographies
• Standard interface mechanisms including web services, message based, file feeds
etc for information exchange with surround systems
9
Oracle White Paper — Customer Centric Wealth Management
Benefits of Customer Centric Wealth Management
Systems
• Improved revenue growth through more effective and efficient marketing and sales
strategy
• Increased customer base and customer wallet share, with increased cross-sell and
up-sell through targeted communication, a result of better insight into customer
intelligence
• Higher customer retention through improved customer services
• Better co-ordination of customer and employee information across channels and
LOBs
• Service differentiation on variety of parameters based on client profile and
segmentation
• Improved operational efficiency and shortened sales cycle through better productivity
of relationship managers
• Improved turnaround time on resolving client and employee issues with right solution
• Reduced silos of information
• Multi-channel support delivering consistent services
Conclusion
While the world continues to search their way out of the recent financial turmoil and
recession, it has no doubt churned out the inherent faults in the wealth management
industry and the larger financial system. With below par performance of wealth
management firms and wealth managers coupled with substantial customer wealth
erosion, industry players find themselves in an ethos where customers are apprehensive
of the abilities of advisors in managing their investments and their effectiveness in
providing various wealth management services as a whole.
In order to counter these apprehensions, Wealth management firms are now actively
seeking and evaluating avenues to re-build the lost trust. They are looking at engaging
their customers in managing their investments in a more collaborative and transparent
manner. At the same time, wealth managers are also seeking to empower themselves
10
Oracle White Paper — Customer Centric Wealth Management
with complete and comprehensive customer information in order to provide the best
advice and the best solution at the right time.
A customer centric solution catering to the needs of the wealth management industry is
just the right solution that would help overcome many of the challenges faced by advisors
at every stage of the wealth management business cycle covering identification,
acquisition, servicing and reporting. Key differentiators for a successful system include
support for:
Superior Client Servicing Capabilities - namely analytics driven marketing and
campaign management, family relationship view, advice based sales, continuous
monitoring and reporting of wealth performance.
Increased Operational Efficiencies – automated planning, execution of investment
strategies, online collaboration tools.
Strong Management Oversight – online monitoring of advisor performance,
institutionalizing compliance, and mitigating risk through timely reporting information
dissemination across all levels of organizational hierarchy.
A customer centric solution benefits wealth management firms through focused
marketing, timely advice, transparent portfolio management, improved and advisor
productivity resulting in enduring customer relationships and increased wallet share.
With increasing focus on client-centricity through well defined client segments, better
understanding of client needs, individualized value propositions and proactive effort in
exceeding client expectations are the key success imperatives. A customer centric
solution for wealth management would continue to be one of the major deciding factors
for wealth management firms in ensuring customer loyalty by differentiating their services
from other players and gaining competitive advantage.
11
Oracle White Paper — Customer Centric Wealth Management
Oracle’s Solutions for Wealth Management
1. Oracle FLEXCUBE Private Banking
Oracle FLEXCUBE Private Banking is a comprehensive, web-enabled wealth
management application that provides a single platform to plan, record, track, and
manage the overall wealth of a customer, across a range of asset classes and
instruments.
Key Features
• Capture client information
• Profile customers for risk appetite
• Recommend investment strategies appropriate to risk profile, needs and wants
• Originate orders and record trade executions
• Perform pre-trade compliance
• Quick search filters for order book and trade book
• Tailor multi-currency portfolios
• Unify wealth at individual level & family level
• Perform portfolio valuation; calculate returns and risk
• Simulate investment strategies & rebalance Portfolios
• Monitor and manage advisor performance
• Track revenues through commissions and fees
• Provide customer access to the application for performing self-service functions
• Collaborate with customer using tools like alerts, messaging center & interactions
• Publish rule-based advertisements
• Generate comprehensive reports for clients, operations & management
• Integrate with surround systems
Deployment Model
• On-Premise
12
Oracle White Paper — Customer Centric Wealth Management
2. Oracle CRM On Demand
Oracle's CRM On Demand delivers the industry's most complete subscription-based
solution for sales, marketing, and service, providing organizations of all types and
sizes with rapid time to business value. The solution enables financial advisors, such
as financial planners and wealth advisors to better leverage their clients’ profile and
portfolio information to identify cross-sell and up-sell opportunities, improve customer
retention and increase wallet share with their customers.
Key Features
• Automatically create, assign and qualify leads
• Enable lead and opportunity revenue tracking
• Consolidate portfolio, leads, opportunities, notes and tasks for a household
• Single view of book of business for individuals as well as household
• Household, financial and investment risk profile tracking
• Integrate with Microsoft Outlook and Lotus Notes
• Automatically link incoming and outgoing e-mails with associated contacts,
accounts, leads and opportunities
Deployment Model
• Hosted – Single Tenant, Multi-Tenant and @Customer
3. Oracle Siebel CRM Financial Services - Wealth Management
Oracle Siebel CRM provides a platform for advisors at wealth management divisions of
banks, brokerage firms, and insurance organizations to grow assets under management
with new and existing clients through targeted marketing and sales, provide consultative
advice to clients and reestablish client trust and confidence
Key Features
• Profile customer/household for one view of the client
• Segment clients on profitability and deliver tiered service
• Generate client call lists to offer targeted products and services
• Manage marketing campaigns & events
• Manage referrals
• Manage households
13
Oracle White Paper — Customer Centric Wealth Management
• Manage financial investment goals and milestones
• Manage financial accounts
• Service book of business
• Support for Know Your Client and USA Patriot Act compliance
• Integrate with email and calendar
• Integrated analytics
Deployment Model
• On-Premise
14
Oracle White Paper — Customer Centric Wealth Management
References
1. ‘Global Private Banking/Wealth Management Survey 2007: Executive Summary’ by
Bruce Weatherill, PricewaterhouseCoopers
2. ‘Wealth Management in Switzerland’ by Swiss Bankers Association Basel, J anuary
2009
3. ‘World Wealth Report 2009’ by Merrill Lynch and Capgemini
4. ‘Article: How Will Wealth Management Adapt To The Challenges of 2009?’ by Tom
Burroughes, Wealth Briefing, J anuary 6,2009
5. ‘Regaining momentum in wealth management’ by Daniel Gresch and Olaf Toepfer,
Roland Berger Strategy Consultants
6. ‘Article: Destruction of global wealth tops $20trn’ by Karen Remo-Listana, February
11 2009
7. ‘The Wealth Report 2009’, Knight Frank & CitiPrivate Bank
8. ‘Oracle Siebel Bookshelf – Siebel 8.0 Release’, Oracle
9. ‘Siebel Trusted Advisor Solution for Wealth Management’, www.oracle.com
10. ‘Siebel CRM On Demand Financial Services Edition – Wealth Management Solution
Datasheet’, www.oracle.com
15
Oracle White Paper — Customer Centric Wealth Management
About Oracle Financial Services Software Limited
Oracle Financial Services Software Limited (referred to as "Oracle Financial Services
Software") (Reuters: ORCL.BO & ORCL.NS) is a majority owned subsidiary of Oracle.
Oracle Corporation (NASDAQ: ORCL) is the world's largest business software
company. For more information, visit www.oracle.com/financialservices
Trademarks
Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other
names may be trademarks of their respective owners.
About the Author(s)
Parag Shah is Presales Manager for the Oracle FLEXCUBE Private Banking at
Oracle Financial Services Software Ltd. He has close to 8 years of IT experience
spanning across business development, presales consulting for wealth management
products, CRM products, and software development for financial services firms.
Parag is a graduate of Indian Institute of Management and a certified Professional
Risk Manager.
Balaji Kalyanasundaram is Head of Presales and Business Development for Oracle
FLEXCUBE Private Banking at Oracle Financial Services Software Ltd. He has close
to 19 years of experience in the fields of Investment Banking, Private Banking,
Banking Software, Sales Consulting and Business Development. Balaji holds a
Bachelors degree in Physics and a Masters degree in Business Administration.
16
White Paper –
Customer Centric Wealth Management
April 2010
Authors: Parag Shah & Balaji Kalyanasundaram
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
oracle.com
Copyright ©2010, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and
the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other
warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or
fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are
formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any
means, electronic or mechanical, for any purpose, without our prior written permission.
Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective
owners.
0109
doc_782015641.pdf
The recent financial crisis has affected economies, both developed and emerging, across the world. Investors who relied on the experienced hands of financial advisors for managing and growing their wealth didn't benefit as many saw their hard earned wealth erode to a significant extent.
AAn Oracle Wh hite Paper
AApril 2010
CCustom mer Ceentric WWealth Managemennt
Oracle White Paper—Customer Centric Wealth Management
Disclaimer
The following is intended to outline our general product direction. It is intended for information purposes
only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or
functionality, and should not be relied upon in making purchasing decisions. The development, release, and
timing of any features or functionality described for Oracle’s products remains at the sole discretion of
Oracle.
Oracle White Paper — Customer Centric Wealth Management
Executive Overview............................................................................. 1
Introduction ......................................................................................... 1
Wealth Management Trends............................................................... 3
Challenges in Private Banking ............................................................ 5
Customer Centric Solutions for Private Banking ................................. 7
Conclusion ........................................................................................ 10
Oracle White Paper — Customer Centric Wealth Management
Executive Overview
The recent financial crisis has affected economies, both developed and emerging,
across the world. Investors who relied on the experienced hands of financial advisors for
managing and growing their wealth didn’t benefit as many saw their hard earned wealth
erode to a significant extent. The resulting loss of trust in financial advisors, new market
regulations and reduced margins have severely impacted the way wealth management
industry will function in the days to come. The objective of this paper is to highlight the
key trends in wealth management industry, key challenges faced by wealth management
firms and financial advisors, and how a customer centric wealth management solution
can help them address many of these challenges. The paper also briefly mentions
Oracle’s offerings for a customer centric wealth management solution.
Introduction
The unprecedented global downturn and its fallout on the world financial markets brought
to light many inherent loopholes in the functioning of financial system. Most of the
developed world was in
recession, and even the
emerging economies saw
significant reduction in their
GDP growth. Considered as
the worst global financial
crisis since the Great
Depression, it has caused
wealth erosion at various
levels and affected all asset
classes and regions albeit in
different degrees. According
to Morgan Stanley's
estimates, global wealth
which peaked at $125 trillion
(a figure quoted by United Nations) went down by 16 percent or $20 trillion since mid
Figure 1: HNI Wealth Distribution by Region in 2008
1
Oracle White Paper — Customer Centric Wealth Management
2007. For High Net Worth individuals
1
(HNWI) investors using Private Banking
2
services,
the loss is estimated at 20 percent of their financial assets or close to USD 8.9 trillion.
The total financial assets held by HNWIs in the world stood at USD 32.8 trillion (2008)
3
.
Within this North America, Europe and Asia-Pacific account for more than 75% of the
wealth as shown in Figure 1.
The recession led to a
significant fall in the
number of HNWIs from a
high of 10.1 million in
2007 to 8.6 million in
2008, as most individuals
experienced, on average,
a 20-40 percent fall in
total wealth The number
of HNWIs in the U.S. fell
18.5% in 2008 to 2.46
million but it still
accounted for 28.7% of
the global HNWI
population.
The Merrill Lynch/ Capgemini annual survey 2009 of the assets and number of high net
worth individuals shows that despite the relatively short term snags caused by the credit
crunch, over the medium term, the wealth and number of rich individuals is expected to
rise to USD 48.5 trillion by 2013, equating an annual rise of 8.1 per cent over the next
1
High Net Worth Individuals (HNWI) have at least US$1 million in investable assets, excluding
primary residence, collectibles, consumables, and consumer durables
2
“Private banking” is used as a term for the management of assets of private clients (households).
3
‘World Wealth Report 2009’ by Merrill Lynch and Capgemini
Figure 2: HNWI Population by Country in 2008
2
Oracle White Paper — Customer Centric Wealth Management
four years. Even a downward revision to such a forecast would still represent a healthy
growth rate. According to a study by Oliver Wyman, only about 50% of HNWI assets are
professionally managed, so there is still a great potential for the wealth management
industry.
The year 2009 showed some signs of improvement in global economy with select
developed economies like U.S. coming out of recession. Further, the markets in BRIC
countries (Brazil, Russia, India and China) showed great resilience and have continued to
be attractive despite the crisis. Wealth in these countries along with North America is
expected to drive growth fuelling the need for wealth management
4
services.
Wealth Management Trends
The financial industry bubble
burst and the counter measures
undertaken are expected to
significantly change the way
wealth management industry will
evolve in medium and long term.
We now look at the trends
foreseen, a result of counter
measures undertaken by the
stake holders and outcome from
the lessons learnt across four
dimensions: Industry, Client
5
,
Product and Employees.
4
“Wealth Management” is used as the generic term for the management of assets. This includes
wealth management for private as well as for institutional investors
5
The terms “Client”, “Customer” and “Investors” are used inter-changeably
Figure 3: Wealth Management Trends
3
Oracle White Paper — Customer Centric Wealth Management
Industry
• Rising costs and falling revenues will see consolidation in this still heavily fractured
industry
• Calls for tighter and more comprehensive regulation of wealth management industry
are leading to increased investments in compliance area
• Increasing government involvement in influencing business strategy and may result
in tighter licensing requirements for wealth managers, prudent and ethical business
practice and increased focus on customer education
• Better and more robust risk management systems will be the order of the day
Clients
• Investors have become more cautious than ever before and are becoming
increasingly conservative towards risk. Investors look to shift away from offshore to
onshore wealth management, from exotic investment products to more time tested
traditional investment products
• Investors seek to have greater control of their wealth and look at reducing the share
of product offerings with discretionary mandates
• Investors are expected to be more critical of advice and products
• Investor shift from performance consideration to risk consideration and asset
protection
• More and more investors will seek diversification of banking relationships as a risk
containment measure
Offerings
• Simplicity and transparency in product offering will be paramount, not complex
financial re-engineering
• Dramatic decrease in appetite for complex financial products like structured products
and a shift away from discretionary mandate, which were the sources of high income
will result in margins coming under pressure in short and medium term
• Business models will lay increasing emphasis on open architecture sales and in
generating superior risk adjusted return for clients, thereby binding customer
relationships. Move is expected from product centric to customer centric advice and
solutions
4
Oracle White Paper — Customer Centric Wealth Management
Employees
• Compensation structures of relationship managers
6
will be based on client centric
parameters like retention value, consistency in performance etc.
• Shift from fee based to fee only models that encourages advice backed sales
Challenges in Private Banking
Private Banking clients are
high-value, high net worth
individuals whose financial
services need(s) go far
beyond basic banking and
investment products. Their
requirements typically include
protection and growth of
assets, tax and retirement
planning, and generational
transition of wealth.
Sustaining business from
these clients is the biggest
challenge but at the same
time they also result in biggest
potential payoff. Hence in
order to secure high stake
finance deals from such
clients, private banks need to
pay a level of attention to
relationships that go well beyond normal. It’s a well known fact that acquiring a new
customer is far more expensive than retaining an existing customer. In such relationship-
6
The terms “Relationship Manager”, “Financial Advisor”, “Advisor” and “Private Banker” are used
inter-changeably
Figure 4: Challenges in Private Banking
5
Oracle White Paper — Customer Centric Wealth Management
dependant banking operations, it becomes all the more important for the private banks to
focus on growing their existing book of business.
However the volatility in the capital markets and a negative development in equity prices
and other asset classes, a result of the financial crisis, caused steep declines in assets
under management of private banks and also resulted in increasingly wary clients who
have lost confidence in their financial advisors and wealth management services as a
whole. This led to dramatic reduction in margins for advisors. To add to this, advisors are
now faced with clients who are demanding fast, personalized service through all access
channels at their convenience. The customers have also become more cautious now and
are diversifying their banking relationships allowing them to direct their assets to the best
deal/advice available in the market. So unless customers are assured that their service
provider is proactively managing their wealth, is deeply concerned about fulfilling their
investment objectives and can offer distinctly value-added services, they would as well
bring an end to the relationship. It is now imperative that wealth management / private
banking firms align their business strategies to manage and develop client relationships
and adapt rapidly to the changing business environment.
To sum up, private banks are faced with several challenges which they need to address
as a high priority:
• Customers are increasingly skeptical of dealing with Financial Advisors. There is a
dire need to focus on customer retention, and work on regaining customer
confidence, trust and loyalty
• Maintaining client profitability, re-building asset bases and at the same time
sustaining fee structures is becoming a humongous challenge
• Catering to ‘J ust-in-Time and J ust-for-Me’ customers with pro-active and unbiased
investment advice. Personalized services require extra-ordinary efforts and
decisiveness of action
• Improving marketing effectiveness by developing a holistic view of the customer,
understand their financial goals and suggesting products which best suit their
interests
• Developing lead generation capabilities to identify existing customers and draw out
the most profitable customer for private banking services
• Low Financial advisor productivity due to manual handling of key processes and their
inability to offer clients the right advice at the right time
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Oracle White Paper — Customer Centric Wealth Management
• Providing a consolidated view of key information, processes and people from various
surround systems
• Adherence to stringent regulatory compliance requirements
Customer Centric Solutions for Private Banking
Customer centric wealth management / private banking solutions offering a fusion of
Customer Relationship Management (CRM), advisory, transaction management and
portfolio management, help address many of the challenges faced by the industry.
These solutions enable institutions to create competitive advantage through service
differentiation, uplift relationship manager productivity and sustain customer relationships
Such a solution for Private Banking helps relationship managers identify, acquire, retain
and expand customer relationships.
Identification
Customer centric solutions provide analytical tools that have capabilities to slice and dice
customer information and obtain critical insight into customer intelligence. These
solutions enable relationship managers to:
• Determine most profitable customers and view customer information across Lines Of
Business (LOB)
• Determine products and services which are most profitable
• Identify the best performing private bankers/ financial advisors/ relationship
managers
• Determine segmentation strategy for the client base
• Identify cross-sell and up-sell opportunities
Acquisition (Pre-Sales and Sales)
Customer centric solutions provide facility for comprehensive marketing, campaign
management and opportunity management capabilities for effective handling of pre-sales
life cycle in a private banking firm. The solution allows users to:
• Align campaign profiles to targeted customers and execute marketing campaigns.
Monitor effectiveness of campaigns in real-time
• Identify large opportunities to increase product penetration and retention rates
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Oracle White Paper — Customer Centric Wealth Management
• Determine the elapsed time between opportunity identification and deal closing
• Manage application processing and opportunity tracking effectively
• Profile clients based on wallet share, credit history, profitability ratings, financial
account portfolios, assets, products and accounts held with competing institutions for
appropriate product sales and further give appropriate product recommendation
• Execute recommended investments
Figure 5: Customer Centric Solution for Private Banking
Retention and Expansion (Service)
Customer centric solutions enable front-line employees with the tools to own client
relationships more proactively and profitably. It provides them with ability to provide
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Oracle White Paper — Customer Centric Wealth Management
personalized service to customers and measure the success of the services provided.
The solution provides features to:
• Monitor portfolio performance
• Manage portfolios vis-à-vis stated investment objectives and provide for periodic
rebalancing
• Test drive investments to check the efficacy of investment strategies
• Link transactional and relationship data together to give sales and service people a
consolidated 360° view of all products held and services used by client and his
households at any point of contact and provides an integrated desktop experience
• Alert advisor or client about returns, exposures, portfolios at risk, maturities etc
through collaboration tools
• Notify relationship managers of impending review of client portfolios, service requests
from client etc.
• Track, manage and report team activities and performance across organization
• Differentiate customer service based on value of account
• Enable risk management and regulatory compliance
• Enable synchronization of all channels (web, phone, email, face-to-face, branch)
allowing clients to choose their preferred communication channel for optimum
convenience
• Manage compensation and incentives for front-line employees
Reporting
• Customer portal to facilitate online access to portfolios and on demand report
generation
• Comprehensive set of operational and management reports that would drive controls
and ensure good corporate governance
• User-friendly reports with rich graphics for transparent client reporting
Technology
• On-Premise, Hosted as well as At-Premise deployment models of customer centric
solution to suit the regulatory requirements of clients across different geographies
• Standard interface mechanisms including web services, message based, file feeds
etc for information exchange with surround systems
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Oracle White Paper — Customer Centric Wealth Management
Benefits of Customer Centric Wealth Management
Systems
• Improved revenue growth through more effective and efficient marketing and sales
strategy
• Increased customer base and customer wallet share, with increased cross-sell and
up-sell through targeted communication, a result of better insight into customer
intelligence
• Higher customer retention through improved customer services
• Better co-ordination of customer and employee information across channels and
LOBs
• Service differentiation on variety of parameters based on client profile and
segmentation
• Improved operational efficiency and shortened sales cycle through better productivity
of relationship managers
• Improved turnaround time on resolving client and employee issues with right solution
• Reduced silos of information
• Multi-channel support delivering consistent services
Conclusion
While the world continues to search their way out of the recent financial turmoil and
recession, it has no doubt churned out the inherent faults in the wealth management
industry and the larger financial system. With below par performance of wealth
management firms and wealth managers coupled with substantial customer wealth
erosion, industry players find themselves in an ethos where customers are apprehensive
of the abilities of advisors in managing their investments and their effectiveness in
providing various wealth management services as a whole.
In order to counter these apprehensions, Wealth management firms are now actively
seeking and evaluating avenues to re-build the lost trust. They are looking at engaging
their customers in managing their investments in a more collaborative and transparent
manner. At the same time, wealth managers are also seeking to empower themselves
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Oracle White Paper — Customer Centric Wealth Management
with complete and comprehensive customer information in order to provide the best
advice and the best solution at the right time.
A customer centric solution catering to the needs of the wealth management industry is
just the right solution that would help overcome many of the challenges faced by advisors
at every stage of the wealth management business cycle covering identification,
acquisition, servicing and reporting. Key differentiators for a successful system include
support for:
Superior Client Servicing Capabilities - namely analytics driven marketing and
campaign management, family relationship view, advice based sales, continuous
monitoring and reporting of wealth performance.
Increased Operational Efficiencies – automated planning, execution of investment
strategies, online collaboration tools.
Strong Management Oversight – online monitoring of advisor performance,
institutionalizing compliance, and mitigating risk through timely reporting information
dissemination across all levels of organizational hierarchy.
A customer centric solution benefits wealth management firms through focused
marketing, timely advice, transparent portfolio management, improved and advisor
productivity resulting in enduring customer relationships and increased wallet share.
With increasing focus on client-centricity through well defined client segments, better
understanding of client needs, individualized value propositions and proactive effort in
exceeding client expectations are the key success imperatives. A customer centric
solution for wealth management would continue to be one of the major deciding factors
for wealth management firms in ensuring customer loyalty by differentiating their services
from other players and gaining competitive advantage.
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Oracle White Paper — Customer Centric Wealth Management
Oracle’s Solutions for Wealth Management
1. Oracle FLEXCUBE Private Banking
Oracle FLEXCUBE Private Banking is a comprehensive, web-enabled wealth
management application that provides a single platform to plan, record, track, and
manage the overall wealth of a customer, across a range of asset classes and
instruments.
Key Features
• Capture client information
• Profile customers for risk appetite
• Recommend investment strategies appropriate to risk profile, needs and wants
• Originate orders and record trade executions
• Perform pre-trade compliance
• Quick search filters for order book and trade book
• Tailor multi-currency portfolios
• Unify wealth at individual level & family level
• Perform portfolio valuation; calculate returns and risk
• Simulate investment strategies & rebalance Portfolios
• Monitor and manage advisor performance
• Track revenues through commissions and fees
• Provide customer access to the application for performing self-service functions
• Collaborate with customer using tools like alerts, messaging center & interactions
• Publish rule-based advertisements
• Generate comprehensive reports for clients, operations & management
• Integrate with surround systems
Deployment Model
• On-Premise
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Oracle White Paper — Customer Centric Wealth Management
2. Oracle CRM On Demand
Oracle's CRM On Demand delivers the industry's most complete subscription-based
solution for sales, marketing, and service, providing organizations of all types and
sizes with rapid time to business value. The solution enables financial advisors, such
as financial planners and wealth advisors to better leverage their clients’ profile and
portfolio information to identify cross-sell and up-sell opportunities, improve customer
retention and increase wallet share with their customers.
Key Features
• Automatically create, assign and qualify leads
• Enable lead and opportunity revenue tracking
• Consolidate portfolio, leads, opportunities, notes and tasks for a household
• Single view of book of business for individuals as well as household
• Household, financial and investment risk profile tracking
• Integrate with Microsoft Outlook and Lotus Notes
• Automatically link incoming and outgoing e-mails with associated contacts,
accounts, leads and opportunities
Deployment Model
• Hosted – Single Tenant, Multi-Tenant and @Customer
3. Oracle Siebel CRM Financial Services - Wealth Management
Oracle Siebel CRM provides a platform for advisors at wealth management divisions of
banks, brokerage firms, and insurance organizations to grow assets under management
with new and existing clients through targeted marketing and sales, provide consultative
advice to clients and reestablish client trust and confidence
Key Features
• Profile customer/household for one view of the client
• Segment clients on profitability and deliver tiered service
• Generate client call lists to offer targeted products and services
• Manage marketing campaigns & events
• Manage referrals
• Manage households
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Oracle White Paper — Customer Centric Wealth Management
• Manage financial investment goals and milestones
• Manage financial accounts
• Service book of business
• Support for Know Your Client and USA Patriot Act compliance
• Integrate with email and calendar
• Integrated analytics
Deployment Model
• On-Premise
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Oracle White Paper — Customer Centric Wealth Management
References
1. ‘Global Private Banking/Wealth Management Survey 2007: Executive Summary’ by
Bruce Weatherill, PricewaterhouseCoopers
2. ‘Wealth Management in Switzerland’ by Swiss Bankers Association Basel, J anuary
2009
3. ‘World Wealth Report 2009’ by Merrill Lynch and Capgemini
4. ‘Article: How Will Wealth Management Adapt To The Challenges of 2009?’ by Tom
Burroughes, Wealth Briefing, J anuary 6,2009
5. ‘Regaining momentum in wealth management’ by Daniel Gresch and Olaf Toepfer,
Roland Berger Strategy Consultants
6. ‘Article: Destruction of global wealth tops $20trn’ by Karen Remo-Listana, February
11 2009
7. ‘The Wealth Report 2009’, Knight Frank & CitiPrivate Bank
8. ‘Oracle Siebel Bookshelf – Siebel 8.0 Release’, Oracle
9. ‘Siebel Trusted Advisor Solution for Wealth Management’, www.oracle.com
10. ‘Siebel CRM On Demand Financial Services Edition – Wealth Management Solution
Datasheet’, www.oracle.com
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Oracle White Paper — Customer Centric Wealth Management
About Oracle Financial Services Software Limited
Oracle Financial Services Software Limited (referred to as "Oracle Financial Services
Software") (Reuters: ORCL.BO & ORCL.NS) is a majority owned subsidiary of Oracle.
Oracle Corporation (NASDAQ: ORCL) is the world's largest business software
company. For more information, visit www.oracle.com/financialservices
Trademarks
Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other
names may be trademarks of their respective owners.
About the Author(s)
Parag Shah is Presales Manager for the Oracle FLEXCUBE Private Banking at
Oracle Financial Services Software Ltd. He has close to 8 years of IT experience
spanning across business development, presales consulting for wealth management
products, CRM products, and software development for financial services firms.
Parag is a graduate of Indian Institute of Management and a certified Professional
Risk Manager.
Balaji Kalyanasundaram is Head of Presales and Business Development for Oracle
FLEXCUBE Private Banking at Oracle Financial Services Software Ltd. He has close
to 19 years of experience in the fields of Investment Banking, Private Banking,
Banking Software, Sales Consulting and Business Development. Balaji holds a
Bachelors degree in Physics and a Masters degree in Business Administration.
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White Paper –
Customer Centric Wealth Management
April 2010
Authors: Parag Shah & Balaji Kalyanasundaram
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