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Certificate of Banking & Insurance

Banking
Wealth Management
$ $ $
CBI

Prof. Dr. Hans Brunner

Professor for Banking and Finance School of Business Administration Fribourg November 2011

10.11.11

Wealth Management
2 lessons @ 45 min.

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Guest Speaker
Marc Lussy objtec GmbH Senior Manager Schoenenbergstr. 100 8820 Waedenswil ZH marc.lussy@objtec.ch marclussy@bluewin.ch

More than 20 years experience in Banking Trader, Relationship / Portfolio Management and Project Manager

CBI

Financial Markets Prof. Dr. Hans Brunner

Wealth Management
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Index of Contents Overview Roles and Products Advisory Approach From the Past to the Future
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Overview

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Financial Markets Prof. Dr. Hans Brunner

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Why do wealthy individuals need advice to manage their assets?

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Financial Markets Prof. Dr. Hans Brunner

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For the same reasons ill people need a doctor

Expertise

Experience

Diagnosis

Hold clients hand

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Financial Markets Prof. Dr. Hans Brunner

Wealth Management
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What is ment by Wealth Management?

Providing highly customized and sophisticated investment management and financial planning services to wealthy individuals.

Which client groups are covered....and which not?

O Ultra High Networth Individuals O Affluents O High Networth Individuals X Institutionals X Retail O Very High Networth Individuals
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Classification of Clients by Wealth

Ultra HNWI $ 50 million Very HNWI $ 5 million HNWI $ 1 million Affluent $ 100000

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Financial Markets Prof. Dr. Hans Brunner

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Classification of Clients by Residence

Onshore
Resident Resident

Offshore

Management of Assets

Management of Assets

assets are managed in country in which owners of assets is resident

assets are managed in country in which owner of assets is not resident

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Financial Markets Prof. Dr. Hans Brunner

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Types of banks in Wealth Management

Global banks with private banking units Traditional offshore focused private banks Traditional onshore focused private banks Retail or affluent focused local banks

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Market shares global AuM (on- and offshore)

Total around 110 trillion USD

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Market shares AuM offshore

Total around 7 trillion USD

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Importance of Wealth Management for a Global Bank

Core Results Credit Suisse by Division in Billions 2007 - 2010
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2007

2008

2009

2010

-5

Private Banking Investment Banking Asset Management Shared Services

-10

-15

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Roles and Products

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Roles in Wealth Management

Investment Consultant

Portfolio Manager

Financial Planer

Relationship Manager (RM)

Tax Specialist

Analyst

Trader

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Role Relationship Manager (RM)

Relationship managers are the customer service giants that own the customers, know everything about them, manage that knowledge as an asset, and are able to meet the full complement of financial needs. [Ernst & Young ]

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Key Activities of an RM Client retention - Make sure that existing clients stay with the bank

Client selection - Identify profitable clients

Client Acquisition - Increase client base

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Key skills and Know-how needed to be a successful RM Profound product know-how Social Skills Sales Skills Knowledge of compliance regulations Know-how IT Tools

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Mandate types 1/3

Advisory Mandate - Client makes investment decisions himself - RM provides specialists expertise and current market information - Client follows the markets on a regular base

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Mandate types 2/3

Trading / Investment Consulting Mandate - Client makes investment decisions himself - Short term approach - Active Trading - Market sentiment is more important than fundamentals - Relationship Manger / Investment Consultant provides trading ideas on a daily base - Client follows the markets on a daily base

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Mandate types 3/3

Discretionary Mandate - Relationship / Portfolio Manager makes investment decisions - Relationship Manager informs the client several times per year about development of the portfolio - Client does not need to follow the markets

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Advisory Approach

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Advisory Process

Analysis Financial concept Profile Strategy Implementation

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Analysis

Investments - Get an idea of size and asset types Wealth creation - Inflows such as earnings on assets, salaries, expected inheritance etc. Liabilities - Current and future financial obligations Expenditures - Living costs, regularly payments, tax payments etc

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Financial concept

Channeling and visualization of gathered information including clients asset and liabilities, annual income and annual spending The financial concept must reflect the clients overall situation Allows the RM to provide his client a personalized investment solution

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Client profile 1/3 Adequate classification of the client in a client profile is a key success factor of a successful advisory process

Risk profile

Client profile
Service profile

Risk ability Risk tolerance

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Client profile 2/3 Risk ability It defines clients ability to cope with financial losses without a noticeable effect on their standard of living
20 18 16 14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 Spalte C

Risk tolerance It defines how a client deals emotionally with investment risks

20 18 16 14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 Spalte C

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Client profile 3/3 Service profile In order to suit different client requirements it is very important to understand which services he needs and to define an according service profile Possible service profiles are:

Advisory mandate Investment consulting Discretionary mandates

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Strategy

Risk profile Low Moderate Medium Enhanced High CBI

Financial Markets Prof. Dr. Hans Brunner

Investment strategy Fixed-income Income-oriented Balanced Capital-gains-oriented Equities

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Implementation

Implementation and maintenance of a strategy is an continuous process Every strategy must be reviewed on a regular base Risk control for every investment is a must

Implementation

Control

Adjustment

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From the Past to the Future

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Wealth Management from the past to the future

Excellent Service Personal Relation 1990 Performance 2020

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Wealth Management from the past to the future

1990 2020
Expertise

Expertise

Experience Experience Diagnosis Hold clients hand Hold clients hand Diagnosis

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Wealth Management the past

Strong banking secrecy Main goal of a lot of clients was tax optimization Performance of limited importance Clients had limited access to market information ( Newspaper) Clients were loyal to the their bank

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Wealth Management the present . . .

Client Well informed Decreasing loyalty Complex products

Competition New competitors Trading Platforms/ Discount-Broker Consolidation

Challenges Client Retention Increase of Sales Potential

Technology Internet Mobile e-commerce

Bank Restructuring Compliance / Legal Higher Quality Standards

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CRM Tools in Wealth Management 1/3 Operational CRM market operation Analytical CRM

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CRM Tools in Wealth Management 2/3

Issues
- Get a new copy of passport due 25.5.11
- Needs to sign risk disclosure due 31.12.11 - Invite for golf turnament

Remarks
05,1,11 Became father Name

Client data

Birthday 10,2,11 Would like to invest in commodities Riskprofile 15,3,11 Plans to transfer more money 20.4.11 Wife had car accident Client since Monthly reports Hobbies Name wife Number of Children Responsibel RM Relations with other clients

Portfolio

Performance

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CRM Tools in Wealth Management 3/3

Where can a CRM add value? Measure activities Analysis of current situation Identification of target clients Manage sales activity Quick access to client information Consulting

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. . . the future

?
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Wealth Management . . . the future Threats Weaker banking secrecy Regulations Decreasing margins Increasing costs Increasing quality standards The way forward New markets (BRICS / Emerging Markets) Increased effort for client retention Increased tool support (CRM, product selection) BPO (Business Process Outsourcing) Mergers / take overs of smaller banks

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Wealth Management - Impressions

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