Retail banks are now able to deliver wealth management
products that were previously reserved for high net worth
individuals because of the development of sophisticated, end-to-end
technology solutions. PBI talks to Lynne Landau from
Temenos about how wealth management services can become more
scaleable.
Go deeper with GlobalData
Lynne Landau, product manager for private wealth management
at Tenemos, talks to PBI about HNWI strategy.
Private Banker International
(PBI): We have seen a lot of activity among retail banks
refining and expanding their wealth offerings, particularly in the
segment between retail and private banking – the so-called
‘in-betweener’ segment. What is driving this interest?
Lynne Landau (LL), Temenos: The
emerging affluent market is becoming a very significant customer
segment for many of the banks we talk to.
In developed markets we’re seeing the
interest from banks driven by factors like the need for retirement
investments, pension plans and the transfer of wealth between older
and younger generations. In emerging markets, the growth of a
wealthy middle class is well documented and this too creates
opportunities in the affluent segment.
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By GlobalDataAn important element of this shift is
that banks are now able to use technology to better identify
customers which have significant wealth that is either sitting idle
or being managed by a rival. It provides a way for banks to grow
their share-of-wallet with customers already on their books.
Banks with the ability to service
clients through the changing phases of their wealth requirements
are able to create a better customer experience, improving loyalty
and retention. It also helps them produce a strong pipeline of
clients for affluent wealth management and their more traditional
private banking services, generating better margins along the
way.
PBI: What are the main challenges
facing these banks when they are designing a wealth offering for
affluent clients?
LL: One of the key challenges is
really being able to understand your customer and creating a
consolidated view of their holdings across the bank. If you look at
some of the large retail banks which have started focusing on this
segment, they typically have a number of large, siloed banking
systems across different products.
Most of them will have separate
deposits and lending platforms, for example. These are huge
infrastructures – they’re not something you can change
overnight.
To understand and to be able to better
segment and service customers, banks need to be able to consolidate
all of that information so they have a 360 degree view of their
customer’s product holdings. If you’re looking at a small number of
clients you can try and do it on spreadsheets and do it manually –
this is still the case among some of the smaller family offices. If
you’re trying to provide a wealth management proposition on a more
industrial basis you need these more advanced tools to help you
achieve that customer view and service level.
PBI: Scaleability is also an issue
here. How does a bank offer wealth management to such a broad range
of affluent customers, as compared to a private bank which may have
a smaller number of wealthier clients?
LL: The first thing is it’s about
being able to provide products in a more simplified version which
are appropriate to the investment requirements and risk appetite of
affluent, rather than high net worth, customers.
The good news is that the ongoing
democratisation of wealth management products and services has made
investments that were previously only available to high net worth
individuals (HNWIs) and even ultra-HNWIs more widely
accessible.
As the products are available, a lot
of the challenge becomes enabling relationship managers at the bank
to handle the greater volume that comes with a wider client base.
When we’re looking at the affluent segment, there needs to be a lot
more automation. The primary relationship is not always going to be
with a relationship manager, it’s often going to be a third party
channel – like a call centre or online banking.
PBI: How active has Temenos been
in this space since the acquisition of Odyssey Financial
Technologies and what opportunities do you see in affluent wealth
management services?
LL: What we’ve been able to do since
the acquisition is address the full spectrum of not only private
banking but also affluent wealth management.
In addition to the existing back
office capabilities we had, the Odyssey acquisition has given us
the specialised front-office tools to complement that – one of
those being Wealth Manager and the other Triple A Plus. When
looking specifically at the trend towards the mass affluent, Wealth
Manager offers banks a fully integrated wealth management
front-office platform to deliver solutions for client management,
advice, sales, portfolio management, compliance and reporting.
Our new software combination for
private banking provides our clients with an end-to-end technology
solution which enables them to deliver a compelling customer
proposition.
That’s highlighted by the market
penetration we have had in the last year. Since January, we’ve had
11 new name signings in the wealth space – not including our
existing clients which have added the front-end tools. That’s very
encouraging progress.
Temenos was the winner of PBI’s
Outstanding Private Banking Platform Award in October 2011. It
acquired Odyssey Financial Technologies in 2010, and now offers an
end-to-end service for banks and wealth managers. Its back office
core banking platform and portfolio management software is used by
around 120 wealth management clients globally.
