In Part 1 we took a look at five mission critical activities that top performing firms are utilizing. Now we’ll take a deeper dive into those mission critical activities.
Some advisors think there are too many benchmarking surveys with too little actionable intelligence. The Boston Consulting Group’s Global Wealth 2015 report takes benchmarking to the next level. Last week we looked at five mission critical activities that high-performing firms are utilizing to stay ahead of the competition. BCG’s report found that the top firms all share these characteristics. This week we’ll take a closer look at these activities and how the top firms are employing them.
- Segment-Specific Value Propositions and Coverage Models. A one-size-fits-all, cookie-cutter approach is no longer viable in today’s wealth management industry. This applies not only to operations and costs, but to clients as well. BCG concludes that customers will not continue to pay too much for services they don’t need or understand, or for insufficient guidance and advice.
Most firms are already doing this to some extent. BCG’s research found that out of all survey participants, only 5% said they do not segment clients at all in their service models. Generally, firms segment clients into affluent, high-net-worth (HNW) and ultra-high-net worth (UHNW) categories. Some top performers have taken this to the next level by tailoring their segmented offerings. This has much less to do with the number of products or services being offered; rather, it’s about customizing the offering to the target segment’s specific needs. Top firms are also using a dedicated coverage model for each segment to clearly define who interacts with a specific client when and for what needs.
- Rigorous Price Realization in Target Client Segments. The most successful managers clearly define which client segments they are targeting. To successfully enforce price realization, top firms clearly define their target client segments and effectively convey their value proposition to each client segment. This can lead to increased revenue; for example, clients will be less inclined to request a discount when the value a firm brings to the table is evident.
- A Differentiated Advisory Offering. Clients want to see differentiation and clear value-add. They demand a clear value proposition in our age of the “robo-advisor” and low-cost online brokerage services. And it’s not just about differentiating the advisory process- it also applies to the client experience.
Many of the high-performing firms are investing in building a client experience that incorporates relationship building and customized features. It’s all about the experience. The BCG report states: “A well-structured advisory offering will increase and systematize the frequency of interactions with the client, generating an experience of proactive and timely service.” This kind of client-centric approach ultimately leads to client portfolios with asset allocations aligned to specific investment objectives and risk appetites.
- A Focus on Front-Office Excellence. Top performers have found that optimizing the front-office is a key priority. These high performing firms can achieve more than double the revenues of average performers. Likewise for the acquisition of new assets. However, though the benefits are clear, many managers still struggle to optimize their front-office. BCG’s research reveals 4 steps that top wealth-management firms have used to significantly improve their front-office performance:
- Making leaders accountable for team (not just individual) performance
- Fostering cross-functional approaches to clients across retail, corporate and private-banking divisions
- Developing a client-centric (as opposed to product-centric) sales culture
- Complementing the sales-management system with activity-based measures
However, as BCG points out, front-office excellence is less about processes and much more about changing how the front-office functions day-to-day.
- The Ability to Measure and Manage Profitability. BCG found that for their 2015 benchmarking participants, few steered their businesses based on profitability. Rather, revenue-based measures were the approach favored by the top performers. “Top performers aim for full transparency on cost to serve, enabling them to clearly prioritize activities and investments on the basis of profitability.”
Top firms are also very much aware that accurately gauging the financial health of their business, profitability must be measured across multiple dimensions (i.e. market, client, product, etc). These more comprehensive approaches to measuring profitability allow top performing firms to achieve lower costs relative to assets and liabilities.
Adhesion complements and augments top firms because we’re a “personalized UMA” — we represent a next generation investment advice platform that powers segmentation through personalization and moves resources and executive mental shelf space from the back office to the front office.