AnalyticsROI MarketingCRM Comes to Wall Street, Part 2

CRM Comes to Wall Street, Part 2

Part two of a six-part series on wealth management, a new CRM strategy sweeping the securities industry.

In part one, we covered the widespread shift in investor psychology driving the wealth management trend. In this installment, we’ll continue the discussion, focusing on some of the structural changes affecting the securities industry.

Structural Changes in the Industry

In the face of shrinking account values driven by a fear-induced bear market, firms are rededicating themselves to focusing on and retaining people who (unlike the rest of us) actually have money to invest: rich people (or, to use the industry term, “high-net-worth individuals”).

In this sense, the new wealth management is not unlike client profitability management initiatives that banks went through in the ’80s. High-cost branches were focused on lending to big commercial accounts and redirected retail customers to self-service ATMs. The need to attract and retain the right types of customers as well as automate and streamline financial advisory and trade execution processes are driven by fundamental and structural changes in the industry. They affect investment firms of all types, from institutional money managers, specialty hedge funds, and private banking firms to insurance companies, broker-dealers, and even discount brokers.

Structural changes could change the way people manage their finances for decades to come. They include the World War II generation’s multibillion dollar transfer of wealth, the baby boomers’ retirement, the growing affluence of American society, and the increasingly sophisticated investment advice needed to achieve financial goals.

Structural industry changes include growing access to sophisticated online investment analytics and trading applications, the globalization of financial services, and the continuing decline in transaction and commission rates and trading spreads as capital markets become increasingly efficient.

The critical strategic issue facing financial firms is how to differentiate themselves when virtually all their products are becoming commodities. Increasingly, they realize the only way to offer a unique value proposition while growing profitability is to cost-effectively provide more personalized and value-added services.

Given the trends, wealth-management-solution spending is projected to increase, despite the current uncertain economic climate. TowerGroup estimates financial institutions will spend $2.3 billion of their total year 2002 IT budget on the new wealth management. This will grow to $2.7 billion in 2005.

In parts three and four, we’ll look at business drivers for wealth management in private client banks and brokerage firms.

Agree? Don’t agree? Got an insight, opinion, or real-world example to share? What are your thoughts? Write to me. And stay turned for the next four parts.

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