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Wealth Management & Client Advisory

15th May 2012 Marc Lussy

ALTH MANAGEMENT & CLIENT ADVISORY

Guest Lecturer for Banking Fhrungsfachmann mit Eidg. Fachausweis Consultant Banking & Social Media

Experience

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7 years

Trader, Sales, Relationship Manager

8 years

Project Manager in Private Banking Area

5 years Senior Consultant Banking & Social Media

MLI Marc Lussy Innovation Fhrungsfachmann mit Eidg. Fachausweis Senior Consultant Banking & Social Media

marclussy@bluewin.ch www.xing.com/profile/Marc_Lussy www.linkedin.com/in/marclussy 2

CBI

Financial Markets Prof. Dr. Hans Brunner

Index of contents

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Overview Roles & Products Advisory Approach Past to Future New Paradigm

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Topic

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Overview

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Need for advice to manage assets n

Overview

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Why do wealthy individuals need advice to manage their assets?

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Financial Markets Prof. Dr. Hans Brunner

Need for advice to manage assets

Overview

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For the same reasons ill people need a doctor

Expertise

Experience

Diagnosis = Profiling

Hold clients hand

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What is meant by wealth management? n

Overview
What type of services?

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highly customized sophisticated investment management financial planning services

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Financial Markets Prof. Dr. Hans Brunner

What is meant by wealth management? n

Overview
To what clients?

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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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Financial Markets Prof. Dr. Hans Brunner

Classification of clients by wealth en

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

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Classification of clients by residence

Overview
Resident Onshore

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Management of Assets

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Assets are managed in country in which owner of assets is resident

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Classification of clients by residence

Overview
Offshore

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Resident

Management of Assets

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

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Types of banks
Overview

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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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Wealth held in offshore centers, 2010

Overview
2.5 2 1.5 1 0.5 0

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Total 7.8 trillions USD

Source: BCG Global Wealth 2011

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Market share AuM on-/offshore by country

Overview

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2007, total 109.5 trillions USD

New figures for following chart not available

10 trillions USD managed by Swiss banks in Switzerland and abroad

Source SBA, Wealth Management Switzerland, January 2009

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Value creation banking sector Switzerland

Overview
Billions CHF Total Banking Sector - Retail Banking - Wealth Management - Asset Management - Investment Banking 36.7 13.7 15.5 4.5 3.0 % GDP 6.7 2.5 2.9 0.8 0.5

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Importance of wealth mgmt for a global bank

Overview

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Core Results CS by Division in Billions (CHF) 2007 - 2011

Private Banking 25 20 15 10 5 0 -5 2007 2008 2009 2010 2011 16 Investment Management Asset Management

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Financial Markets Prof. Dr. Hans Brunner

Topic

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Roles and Products

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Roles in wealth management

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Roles & Products

Financial Planner

Investment Consultant

Portfolio Manager

Relationship Manager (RM)

Tax Specialist

Analyst

Trader

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Key activities of an RM

Roles & Products

Client retention - Make sure that existing clients stay with the bank

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Client selection - Identify profitable clients

Client Acquisition - Increase client base

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Knowledge an RM needs to be a successful

Roles & Products
Profound product knowledge Social Skills Sales Skills Knowledge of compliance and regulations Know-how IT tools

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Mandate types I/III

Advisory Mandate

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Roles & Products

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

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Mandate types II/III

Trading / Investment Consulting Mandate

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Roles & Products

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 III/III

Discretionary Mandate

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Roles & Products

Relationship Manager / 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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Topic

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Advisory Approach

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Advisory process

Advisory Approach
Analysis Financial statement Profile Strategy Implementation

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Analysis

Advisory Approach
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

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Expenditures Living costs, regularly payments, tax payments etc

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Financial statement

Advisory Approach
Channeling and visualization of information Financial statement must reflect the clients overall situation Allows RM to provide client a personalized investment solution

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Financial statement - example

Financial statement 2012
Liquidity Bonds Stocks Real Estate Funds Stocks Real Est. Loan Mortgage Bonds Funds

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Financial statement 2022

Liquidity Mortgage

Advisory Approach

Inflows

Inflows

Expenditures
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Financial Markets Prof. Dr. Hans Brunner

Expenditures
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Client profile I/III

Adequate classification of the client in a client
profile is a key success factor for a successful advisory process

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Advisory Approach
Client profile

Risk profile Service profile

Risk ability Risk tolerance

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Client profile II/III

Risk ability It defines clients ability to cope with financial losses without a noticeable effect on their standard of living Risk tolerance It defines how a client deals emotionally with investment risks

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Stock price

Advisory Approach

Stock price

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Client profile III/III

Service profile

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In order to suit different client requirements it is very important to understand which services he needs and to define an according service profile

Advisory Approach

Possible service profiles are:

Advisory mandate Investment consulting Discretionary mandates

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Strategy

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Risk profile Low

Investment Strategy Fixed-income Income-oriented Balanced Captial-gainsoriented Equitities

Advisory Approach

Moderate Medium Enhanced High

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Implementation

Advisory Approach
Implementation Control Adjustment

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

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Topic

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Past to Future

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Development of wealth managment I/II

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Excellent Service Performance Personal Relation Personal Relation

Past to Future
1990 2020

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Development of wealth managment II/II

1990 2020 Hold clients hand

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Expertise

Experience

Profiling

Expertise

Past to Future

Experience Hold clients hand Profiling

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Types of CRM tools

Operational CRM Analytical CRM

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Past to Future

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Print screen CRM tool

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

Remarks
05,1,11 Became father 10,2,11 Would like to invest in commodities 15,3,11 Plans to transfer more money 20.4.11 Wife had car accident Name

Client data
Birthday Riskprofile Client since

Portfolio

Monthly reports Hobbies Name wife Number of Children Responsibel RM

Performance

Past to Future

Relations with other clients

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How a CRM tool can add value

Past to Future
Measure activities Analysis of current situation Identification of target clients Manage sales activity Quick access to client information

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Wealth management in 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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Past to Future

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Topic

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New Paradigm

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New paradigm is needed

Although global wealth will keep on rising banking business will not be as it was New models are needed imperatively

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New Paradigm
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Could social media be this new paradigm?

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New Paradigm
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Could social media be this new paradigm?

Google has a banking license

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New Paradigm
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Could social media be this new paradigm?

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New Paradigm
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Could social media be this new paradigm?

Social Media to predict stock prices

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New Paradigm
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Where could social media support banks?

Provide value and fun

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Training/ coaching of RMs

Corporate Branding

Personal Branding

Client Retention
Risk Profiling Product Offering Personal Relation

Client Acquisition
Building up new relations

New Paradigm
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Wealth Management & Questions? Client Advisory

More on:
Presentation Wealth Management & Client Advisory and more reports/documents on banking http://www.scribd.com/marclussy My banking blog http://banking-marclussy.blogspot.com/ CBI
Financial Markets Prof. Dr. Hans Brunner

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Topic

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Annex

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Global wealth on- and offshore, 2010

Overview
45 40 35 30 25 20 15 10 5 0

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Total 121.8 trillions USD

Source: BCG Global Wealth 2011

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Assets managed in Switzerland, 2010

Overview

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Total 5.5 trillions USD

Domestic clients 2.65 tr, 48% Foreign clients 2.85 tr, 52%

Source SBA, Wealth Management Switzerland, January 2009

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Defintion relationship manager

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Roles & Products

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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Situation in the past

Past to Future
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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Current situation

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Technology Internet Mobile e-commerce

Client Well informed Decreasing loyalty Complex products Challenges Client Retention Increase of sales potential

Past to Future

Competition New competitors Trading Platforms Discount-Broker Consolidation

Bank Restructuring Compliance / Legal Higher Quality Standards

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Financial Markets Prof. Dr. Hans Brunner