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Are You Growing Your Wealth Business Fast Enough?

New Tips for Accelerating Client Acquisition

In a September 11, 2007 Research Note, Bear Stearns reported that the wealth management industry is the fastest growing segment in financial services. In 2006, the estimated wealth of the world's high-net-worth individuals (HNWIs) increased by 11.4% to $37.2 trillion. The 2007 Capgemini Merrill Lynch World Wealth Report cites a similar growth rate of 11.7% and an 8.7% increase in the number of HNWIs.

Clearly, wealth management is a target-rich environment, both for adding new HNWI clients as well as to grow share of wallet with existing HNWI clients. So, it is not surprising that 83% of financial advisors in a Curian Capital study said that their number one goal is to attract clients with more assets.

Which raises the question: how fast is YOUR firm growing your wealth management business? Are you growing fast enough to keep up with the competition?

To compete effectively in the client acquisition game, here are some tips and best practices to consider from an interview with Bob Skea, Chief Operating Officer at NorthStar. Bob is a financial services industry veteran with over 25 years of experience working with companies such as Reuters and Multex, and he has seen hundreds of firms grapple with the client acquisition issue.

INTERVIEW

Q: How important is client acquisition?

A: "Increasingly, the distinction between various market segments and servicing models is blurring, as everyone is getting into the wealth management business. In the long term, firms that successfully win the client acquisition/land grab game will be the market leaders. So, client acquisition is of critical importance," says Bob Skea.

Q: Based on the hundreds of clients you have talked to, what do you think is the best way for advisors and their firms to attract and serve their clients? Is it all about providing good customer service? What tools are required? What role does technology play?

A: "While the basis of any client-advisor relationship is personal service, in the wealth management industry, technology enables the advisor to do much more.

"The wealth management industry is growing 8-9 percent per year, and the ultra-high-net-worth segment is even growing faster," says Skea, who was at the forefront of launching the NorthStar Client Acquisition Solution.

"There are a lot of people doing analysis, and one thing everyone agrees on is there is a wave of growth coming. Everyone needs to prepare for and take advantage of this wave.

"To gain share as the market grows, advisory firms need to invest in the tools they need to be efficient in acquiring assets."

Q: What are the biggest challenges in client acquisition today?

A: "Three of the major problems associated with client acquisition include:

• Disparate internal systems, which delay information gathering
  
  
• Extremely manual generation of client artifacts, causing a major problem in client presentations
  
  
• Compliance, as it relates to disclaimers

"Disparate internal systems create the need for more manual processes, and that always results in questions about accuracy, about what you're putting in front of the client."

Q: Compliance seems to be a bigger issue these days. Can you tell us more about how compliance is impacting the client acquisition process?

A: "The need to remain compliant with all client correspondence is critical today. In a manual proposal generation environment, as with most manual processes, disclaimers and other critical information can be overlooked, and proposals may be sent without it. This is a major issue for any compliance or risk officer. So manual adherence to compliance policy becomes a bottle neck in the creation and delivery of proposals, which slows down the sales cycle.

Q: Given the competition for new clients and assets, what is the best way for firms to differentiate themselves during the client acquisition process?

A: "A recent executive survey found that bank wealth managers rank client service first, advice second, and product a distant third as key future differentiators. Only ten percent said the products they offered would enable them to stand out from the competition, which indicates that providing relevant and useful advice and service is the key to winning and retaining clients and assets.

"Client acquisition really entails having the ability to efficiently, effectively, and compliantly deliver proposals to gain assets,"
says Skea. "It's attracting new assets into the firm. It can be from new clients or from existing clients.

"For example, at NorthStar, we believe by investing in your existing systems to produce a higher-quality asset-allocation modeling presentation, your existing clients will see you've gotten to another level, and you will likely gain more share from existing clients. It's all about gaining assets under management, and by investing in your business through a client acquisition solution we believe your existing clients will take note and you'll be able to gain a greater share of their existing net worth."

Q: Who should focus on improving their client acquisition strategies?

A: "The reality is all segments of the wealth management market need to focus on client acquisition.

"Traditionally, the high end of the industry has operated under a wealth-preservation model," says Skea. "Their clients have made it and they don't want to lose it. But generational wealth transfer is now requiring companies to change their models to attract new assets. Traditional ultra-high-net-worth companies recognize the need to attract new assets, not just preserve capital."

Q: As part of a firm's client acquisition strategy, is it better to focus on new clients or growing share of wallet from existing clients?

A: "Attracting new clients is more costly than new business from existing clients. Growth in existing clients is easier to get because relationships are in place and the money goes to the bottom line faster.

"Overall, firms should pursue a holistic approach to client acquisition spanning new and existing clients and assets to capitalize on the growth wave. It's going to take a higher level of service in both areas because the competition is going to be fierce. Those firms that don't focus on client acquisition will be left behind."

Q: What do wealth management firms need to do to ride the wave and grow at least as fast as the market?

A: "Investors are expecting and demanding a higher level of service," says Skea. "As a provider, the wealth management firm must meet the demand to grow its business, but bodies are being thrown at the situation, and that's not working. These are Band-aids. There's an inherent inefficiency of processes and too many people.

"The trend is toward a seamless work flow. One application - one process - that allows the end user to go from start to finish, uninterrupted, to create proposals intended to grow assets. It's the only way to create connectivity with other forms of information or applications that are required, and to empower the advisor to have all those tools at their disposal in one seamless workflow."

Q: What do you recommend firms put in front of the client or prospect? Does your technology provide the tools to provide a seamless interface for the advisor, allowing for continuity and a holistic approach to gaining assets under management?

A: "Whether it's pitch book, firm introduction, or a complex asset allocation proposal, it's the artifact itself that creates a tremendous impression of the company. It's crucial that wealth management firms give their advisors the tools and technology necessary to make those lasting impressions.

"Technology stitches it all together, both from a technical and human standpoint," says Skea. "Technology - in this case a client acquisition solution - not only creates a seamless work flow, but allows teams to work together in unison.

"Let's say you have nine people on a team managing $3 billion in assets. Those nine people need to work together on the same clients, share information, pass off tasks and processes to various team members.

"Technology allows relationship teams to operate more effectively in servicing clients and acquiring clients. Technology can provide task-oriented workflow tools on an entitled basis to allow various actors in the investment process to perform different tasks. This creates efficiency that is very tangible from an ROI point of view, and quite apparent to the client."

Q: Can you tell us about the NorthStar Client Acquisition Solution?

A: "The NorthStar Client Acquisition Solution is a pre-packaged solution that provides for the creation of a global client profile and an associated asset allocation, leading to the creation of unique and personalized portfolios," says Skea.

"The NorthStar Client Acquisition Solution draws on a very robust product-selection capability, and ultimately produces an industry-best client output in the form of an investment proposal. The NorthStar Client Acquisition Solution is available now and is being used by several of the top wealth management and asset management firms in the industry as a key component of their direct and channel client acquisition strategies," says Skea.

"Typically, Wealth and Asset Managers experience a 10-12 hour reduction in the time it takes to put together each proposal. Given the number of new client proposals being generated, that's a significant savings. In addition, the personalized proposals often help differentiate the firm and increase client close rates."

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