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The Futurewealth Report 2015 Hanging in the balance: Conversations with the Futurewealthy

Part 2

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FOREWORD – SCORPIO PARTNERSHIP

In recent years, the value of the relationship manager in the client contact strategy has become precarious in the face of multiple challenges. Regulations now dictate more than ever how interaction between relationship manager and client should be structured and a wave of digital solutions have raised the question of whether this human touch point is still relevant.

Too often, these discussions ignore how clients feel about the experience. And so, in this second instalment in the 2015 Futurewealth series, we take the client contact strategy ‘back to basics’. We ask the Futurewealthy about the communications they have with their wealth management firm; who do they want to hear from, when and about what.

Their answers reveal where the relationship manager and other specialists are crucial to their exchange with a firm. The relationship management model is alive and well but it is up to firms to really understand the distinct value they bring to client engagement. We hope this insight will stimulate more clarity over the dynamics of this communication.

Thank you, once again, to all those who took part in this research.

Sebastian Dovey Managing Partner Scorpio Partnership

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FOREWORD – NPG WEALTH MANAGEMENT

At NPG Wealth Management, we understand that quality communications are vital to develop trusted relationships with the world’s wealthy. It is therefore with great passion and interest that we explore the contact strategy of wealth management firms in this second Futurewealth paper of 2015. Within this instalment, we see that product and service specialists have a significant role to play when interacting with the Futurewealthy. Experts are fundamental to the contact strategy because they deliver access to new opportunities, as well as technical knowledge and informative content. As a specialist provider of wealth management solutions through unit-linked and private placement life insurance, this insight is particularly pertinent to us. It helps us to better understand how we engage directly with our clients but also how we can enhance our partnerships with institutions by supporting relationship managers with more knowledge, education and information. We hope this research shows others how to strive for excellence in their client communications. Marc Stevens Chief Executive Officer NPG Wealth Management

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FOREWORD – SEI

At SEI, we provide tools and solutions to wealth management firms and private banks globally. What makes us a world leader in this field is our understanding of how systems implemented behind the scenes can support frontline staff in the delivery of a high quality client experience.

This is why we continue to sponsor the Futurewealth program. This research gives us insight into what drives a client’s engagement with their wealth management firm.

In this second paper of the 2015 series, we compare the communication preferences of individuals who have a large proportion of their wealth at a firm and those with a more limited relationship. What we find, is that the most deeply invested Futurewealthy want a relationship manager who can easily filter discussions to what is most relevant and deliver an overall progress review.

We believe that technology has a fundamental role to play in helping relationship managers to effectively and efficiently distil client data into meaningful, pertinent insights. Not only can this give clients the insight they need, it can also deepen relationships.

Alfred P. West Jr. Chairman and Chief Executive SEI

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IN BRIEF

Welcome to our second instalment in this year’s Futurewealth series on the relationship manager. In this paper, we explore when the global wealthy want to hear from this primary contact point, and when liaison with other communication channels are desirable. These findings are based on the views of a group of 3,113 high-net-worth individuals from around the world. We know them as the Futurewealthy because they are leading the sprint up the global wealth curve with an average net worth of USD2.7 million. This is what we have found:

Finding equilibrium

Broadly, the Futurewealthy believe that their wealth management firms are getting the fundamentals of the contact strategy right. On average, they speak to their relationship manager 11 times and other specialists seven times a year. Clients who have lower satisfaction levels hear from their relationship managers less than those who give positive scores. The Futurewealthy with ‘moderate’ or ‘poor’ satisfaction ratings hear from their relationship manager 8.8 and 6.3 times a year respectively.

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Tipping the balance

The global wealthy who are most financially invested in their wealth management firm are more likely to tip the balance of interaction towards their relationship manager for all discussions. This key contact is the preferred access point for 59% of those with more than three quarters of their assets at their firm, compared to fewer than 10% of those with just a quarter of their wealth at the firm.

The difference in communication for these most financially committed clients is the quality of interaction. They want a trusted advisor who can filter discussions to what is relevant to their wealth creation targets, rather than having to go through the detail themselves.

A swing of the pendulum

Across all product and service types, specialists play an important supporting role; 49-58% of the global elite want either temporary or full access to the experts.

In Asia Pacific these product virtuosos become more central to the dialogue. Like their counterparts in Europe and the Americas, the Futurewealthy in this region believe these specialists can deliver new opportunities and technical knowledge. The difference is that specialists in Asia Pacific help them to understand the values of the business.

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SPEAKING COMES BY NATURE, SILENCE BY UNDERSTANDING The communications revolution has been one of the most transformative movements of the 21st century. The fundamental nature of human interaction has evolved to harness a burgeoning new industry of technologies for keeping in touch and expressing ourselves. Connecting with friends, colleagues or even strangers now takes just a touch, a tap, a swipe or a click.

But thriving and surviving in this evolutionary new environment is not just about adopting such tools for interaction. It requires being a conscious communicator. Reputation, security and relationships are all determined by our ability to say the right thing in the right place at the right time. Or, in fact, to know when to say nothing at all.

During our discussions with the Futurewealthy over the last six years, we have found them to be consummate conversationalists, highly adept at interacting in new and effective ways. In this latest research, we explore whether their wealth management firms and relationship managers are matching their dialogue with a compelling contact strategy.

What we find, is that the duty for delivering desirable client communications hangs in equilibrium between the relationship manager and supporting product specialists. But, that this needs to be a flexible balance as clients alternate between these two contact points.

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A WISE MAN NEVER KNOWS EVERYTHING BUT HE KNOWS WHERE TO FIND IT As some of the world’s most successful individuals, the Futurewealthy can be characterised by their knowledge, passion and determination. They are also masters of balancing a book of contacts and information resources to reach their wealth creation ambitions.

Traditionally, wealth management firms have relied on a principle liaison point to interact with these global go-getters – the relationship manager. For a portion of the Futurewealthy, this contact point is their single ballast for engagement with a firm, particularly when discussing simple products and services. With funds, for example, the relationship manager is the favoured contact for 43% of them [Figure 1].

But for a number of our worldly wealth creators, relationship managers need to be counterbalanced by a line-up of product virtuosos. Across all product and services, 49-58% of the Futurewealthy want either intermittent or unhindered access to specialists.

Understandably, as products become more complex, interaction tips in favour of expert exchanges and there is less talk time with the relationship manager. Lending solutions, hedge funds and estate planning services are the areas where specialists are most widely used.

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Figure 1: Product and service access How would you like access to each of these products and services to be structured?

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But this oscillation between liaising exclusively with a relationship manager and employing the supporting cast of specialists is not simply determined by product complexity. Actually, a client’s commitment to the firm – the proportion of their wealth invested in this single organisation – also upsets this symmetry.

The Futurewealthy with a lower engagement level are far more likely to tip towards expert or digital access points. Among those with less than a quarter of their assets at their wealth management firm fewer than 10% want to interact exclusively with their relationship manager [Figure 2].

But for the global wealthy who are most financially invested in a particular institution the pendulum swings towards their relationship manager for all discussions. This key contact is the preferred access point for 59% of those with more than three quarters of their assets at their firm.

Increasing interaction with the relationship manager as engagement rises hints that committed clients are searching for a ‘trusted advisor’ relationship. They want their investment to be rewarded with a client contact who can act as the conduit to all products and services, rather than having multiple channels weigh in on discussions.

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Figure 2: Product and service access How would you like access to each of these products and services to be structured? (Share of wallet segmented responses)

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THE MOST PRECIOUS THING IN SPEECH ARE THE PAUSES If excellence is the hallmark of success, it is unsurprising that our high-achieving Futurewealthy believe quality rather than quantity is the essence of a desirable dialogue. Simply, becoming a ‘trusted advisor’ to the Futurewealthy is not about delivering an abundance of communications but rather, about what those communications consist of.

Actually, the regularity of interaction between client and relationship manager remains relatively consistent across all engagement levels.

Over the last year, those with more than 75% of their assets at the firm spoke with their relationship manager roughly ten times [Figure 3]. Those clients with less than a quarter of their wealth at the firm were in touch with their client contact just a nudge less at nine-and-a-half times.

These consummate conversationalists believe that the structure of this contact strategy is just right. The Futurewealthy believe that many more than 15 connections a year is excessive while five to eight are not quite achieving critical mass.

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Figure 3: Relationship manager interaction frequency How many times have you interacted with your relationship manager at your primary wealth management firm in the last 12 months? And do you feel that this amount of contact is sufficient? (Share of wallet segmented responses)

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The fact that, broadly, the numbers are right is not a reason for wealth management firms to get complacent. While the frequency of communications has no direct influence on the level of their financial investment, dipping below this interaction sweet spot can leave clients more than a little disgruntled. The Futurewealthy who give a satisfaction score of ‘moderate’ or ‘poor’ have interaction frequencies of 8.8 and 6.3 times a year respectively [Figure 4]. These clients tend to feel that the right amount of communication is above their current interaction levels. They want more contact. By contrast, those citing ‘good’ or ‘very good’ satisfaction levels believe they are getting the attention that they need, hearing from their key contact 10.7 and 11.9 times a year.

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Figure 4: Relationship manager interaction frequency How many times have you interacted with your relationship manager at your primary wealth management firm in the last 12 months? And do you feel that this amount of contact is sufficient? (Firm satisfaction segmented responses)

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BAD CONVERSATION IS A MONOLOGUE DELIVERED IN THE PRESENCE OF A WITNESS So, if wealth management firms are generally hitting the mark with their communication framework, what differentiates a good conversation from a bad one for the Futurewealthy?

Among these worldly wealthy, there is an emphasis on having a key contact that can deliver new investment opportunities and comprehensive conversations across every area of the wealth strategy.

Significantly, for those with a larger portion of their assets with their wealth management firm, the relationship manager should be an information filter; 51% of the most highly invested Futurewealthy say that reviewing overall progress is important compared to just 37% of the least committed clients [Figure 5].

Furthermore, 43% of those with more than three quarters of their assets with the firm say that relationship managers should only reference portfolio changes that are relevant.

So for the most committed clients, less is more. Those who place more weight on their relationship manager as their exclusive touch point at a firm expect more streamlined interaction. Their ‘trusted advisors’ are those who know them well enough to distil information into what is relevant.

Figure 5: Features of a good interaction with a relationship manager

What are the most important features of a good interaction with your relationship manager?

(Share of wallet segmented responses)

We establish if new goals are required

We have a detailed discussion about every element of

my wealth strategy

We review overall

progress towards existing goals

We discuss new investment

opportunities

I receive specialized advice related

to a niche product or service

51%

41%

37%

28%26%

16%

32%30%29%

51%49%47%42%

36%35%31%29%

60%

40%

20%

0%

% o

f res

pond

ents

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Figure 5: Features of a good interaction with a relationship manager

What are the most important features of a good interaction with your relationship manager?

(Share of wallet segmented responses)

I am introduced

to other specialists

We just discuss relevant changes

and developments to my portfolio

We talk about how my needs could be met in other areas

We complete necessary paperwork

We develop a stronger personal

relationship

We discuss changes to my own life

0%-24% 25%-49% 50%-74% 75%-100%

43%

37%

33%

30%

25%23%19%

26%

20%19%18%

18%16%15%

24%

18%

11%10%7%

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WISDOM IS THE REWARD YOU GET FOR A LIFETIME OF LISTENING WHEN YOU’D HAVE PREFERRED TO TALK Engagement in a firm may be one element that tips the typical equilibrium between relationship manager and specialist interaction in the contact strategy. Another is the cultural context, which swings firmly towards the experts as we move further East.

Our consummate communicators from the Americas exhibit the strongest preference for interacting with a relationship manager over product virtuosos. Roughly half of the Futurewealthy from this region would rather speak to their day-to-day contact when purchasing a fund and this dips to a not-insignificant 42% when investing in more complex products like private equity [Figure 6].

By contrast, just 31% of those from the Asia Pacific region want to use their relationship manager as a sole point of contact when investing in funds. Instead, Asia Pacific stands out as a market where expertise is more central to the conversation. Here, well over half of clients want specialist access across a range of investment types.

Europeans sit somewhere in the middle; 44% of them choose a relationship manager over the experts or digital platform when investing in funds. Interestingly, as investments become more complex, Europeans still prefer some relationship manager involvement with a large proportion selecting periodic rather than full access to specialists.

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Figure 6: Product and service access How would you like access to each of these products and services to be structured? (Regionally segmented responses)

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TRUE GENIUS SHUDDERS AT INCOMPLETENESS AND USUALLY PREFERS SILENCE TO SAYING SOMETHING WHICH IS NOT EVERYTHING IT SHOULD BE As the wise men of wealth, these knowledge masters are being called upon to support the relationship managers with their expert insight. It makes sense, therefore, that on average, they are conversing with the Futurewealthy in half as many instances as this core client contact.

In the Americas, communication with a specialist four times a year is the norm and this is broadly seen as sufficient [Figure 7]. In Europe, expert interactions are slightly more frequent at five times annually.

But the same contact strategy cannot be transplanted into the Asian wealth management market. In this region, the number of conversations with experts bounces up to ten times a year. That does not mean our worldly wealthy in the East have an insatiable hunger for specialist access. Those who are interacting with these doyens of wealth more than 15 times every year tend to feel that it is unwieldy.

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Figure 7: Interaction frequency with specialists How many times have you interacted with other specialists at your primary wealth management firm in the last 12 months and do you feel that this amount of contact is sufficient? (Regionally segmented responses)

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As with their relationship managers, our opportunity-hungry elite believe that conversations with the specialists should revolve around new ventures. On top of this, gaining technical knowledge is a desirable outcome of expert interaction for 46% of the Futurewealthy [Figure 8].

Europeans are the most hungry for this education. For 43% of them, receiving interesting content is another core function of conversations with the experts.

In the Americas, there is a sense that the culture of the communications strategy is still focussed on key contact. For 38% of the Futurewealthy from this region, dialogue with the experts simply serves to bolster conversations that clients have already had with their relationship manager.

By contrast, in Asia Pacific, where dialogue with these doyens is much more highly sought after, the conversation delivers a little something extra. Almost 40% of clients in this region believe that getting a sense of what matters to the business is a key component of communication.

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Figure 8: Features of a good interaction with specialists What are the most important features of a good interaction with specialists? (Regionally segmented responses)

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WE LISTEN TO REPLY

So, the Futurewealthy have spoken. Their verdict is that wealth management firms are getting the fundamentals of the contact strategy right when it comes to the frequency of interaction.

But developing a contact strategy that is tightrope taut relies on achieving balance in a client’s engagement with their two preferred touch points; the relationship manager and supporting product specialists.

This is an equilibrium that must be agile to the Futurewealthy’s investment or service preferences and their cultural context. Interaction preferences swing firmly towards the experts as products become more complex or, as we move from West to East.

In spite of this, wealth management firms also need to be mindful that, as clients become more financially engaged in the relationship, there is an expectation that relationship managers will act as a conduit to all products and services.

Next time, we explore this interplay between the relationship manager and the wider firm further by considering whether this group of global go-getters believe their relationship manager or their firm take more responsibility for delivering on important client outcomes.

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ABOUT THE PARTNERS Scorpio Partnership Scorpio Partnership is a pioneer in the art of translating the complex needs of wealthy clients into practical, innovative and profitable solutions to target these customers. This award-winning firm has developed client insight from thousands of millionaires and billionaires around the world. With this knowledge, the firm has implemented strategic research, practical consulting and business innovation projects in over 35 countries.

NPG Wealth Management As a well-established life assurance specialist, NPG Wealth Management (NPG) develops holistic, cross-border financial planning solutions for (Ultra) High Net Worth and High Affluent clients across Europe. Together with a solid network of select partners – private banks, family offices and independent financial advisers – our fresh approach helps anticipate and understand the needs of wealthy clients in a world of change. With EUR6bn Assets under Management, NPG is owned by J.C. Flowers & Co, one of the leading investment firms in the international finance industry. Behind NPG is a dynamic team of experts united by a common mission: offering compliant and sophisticated solutions that exceed clients’ needs and expectations. Trust, dynamism and proximity are at the heart of our philosophy: www.npgwm.com

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SEI SEI (NASDAQ:SEIC) is a leading global provider of investment processing, investment management, and investment operations solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of March 31, 2015, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $648 billion in mutual fund and pooled or separately managed assets, including $258 billion in assets under management and $390 billion in client assets under administration. For more information, visit seic.com.

Important Information All graphical and image material in this report are sourced by and to Scorpio Partnership.

SEI solutions may be offered internationally by different SEI Investment Company subsidiaries and affiliates according to local regulatory requirements. This material has not been approved by any of the SEI subsidiaries or affiliates as a financial promotion or marketing communication for any prospective investor. The information contained in this document has not been independently verified by SEI or any legal entity of the SEI Group of Companies. This document is not intended in any circumstances as an offer or solicitation to subscribe for or acquire any securities or sale of any securities in any jurisdiction.

The content of this Futurewealth report is intended solely to provide general guidance to the reader of these pages on the services offered by NPG Wealth Management Group, its subsidiaries and affiliate companies. The information contained within these pages is not intended as an offer or solicitation for the purchase or sale of any life assurance product. Neither is the information intended to constitute any form of legal, fiscal or investment advice and it should therefore be used only in conjunction with appropriate professional advice obtained from a suitable qualified professional source. NPG Wealth Management Group, its affiliated companies and subsidiaries do not guarantee that the information contained within these pages is complete, accurate or up to date.NPG Wealth Management Group therefore expressly disclaims any and all liability to any person in respect of any cause or consequence of anything, done or omitted to be done wholly or partly in reliance upon the whole or any part of the contents of the Scorpio Partnership Futurewealth report.

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