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Wealth Firms Changing, Or Want To Change How They Segment Clients - Refinitiv Study

Tom Burroughes

24 February 2020

A study of wealth management firms around the world shows that the vast majority (90 per cent) of them have reviewed or changed how they segment clients, moving away from an approach of placing clients based on minimum asset sizes, a new report by data and analytics provider says. 

A White Paper from the organisation, entitled The Transformation of Wealth Management – Five Trends For 2020 and Beyond (see full details here), also finds that all (100 per cent) of respondents to its survey think that the transfer of wealth will be one of their top-three concerns. As a result, organisations are changing the way in which they are set up to handle this multi-trillion shift in assets from Baby Boomers to succeeding generations. (The report is based on views taken from 46 firms (19 Americas, 16 Europe, and 11 Asia).

And another headline finding is that 65 per cent of people interviewed said that operational scale is “very important”, suggesting that advisor productivity – more clients per advisor – will need to increase. 

And such a productivity imperative plays into the strengths of data-driven organisations, which is where a firm such as Refinitiv, with its technology to serve the wealth industry, comes in. Some 61 per cent of respondents said that analytics and creating insights were “very important” and 39 per cent of them said this would be “important” for firms over the next 12 to 18 months.

Large wealth transfers, digitalisation of financial services, changing client expectations and intensifying regulatory requirements continue to drive the industry. A rising equity market since 2009 may have lifted assets overall, but pressures such as very low/negative interest rates, and compliance costs, for example, have prompted wealth managers to seek efficiencies. At the same time, they want to draw in new clients and extract more value from existing ones. 

Discussing its findings about client segmentation, the report’s authors said that if firms want to move away from only using AuM minimums as a criterion, and use other factors to decide where to put customers, this will require more data and analytics than firms typically have.

And regulations don’t help with this, Refinitiv’s report said. “While aiming for mass customisation would suggest that firms would have to expand their product lines to meet the needs of a diverse client base, the opposite has been observed,” it continued. Regulations such as the European Union’s MiFID II rules have actually prompted firms to narrow their traditional product offerings. 

Fewer than half (46 per cent) of respondents said they were only partly satisfied or not at all satisfied with their digital offerings, suggesting potential spending to shake up systems if the budget is available. In a related point, 80 per cent of respondents said there had been a rise in spending related to “change the bank” over recent years. 

The study said that a “significant” 86 per cent of respondents ranked servicing clients (including managing daily tasks, account opening and onboarding) as a highly important digital capability, followed by 69 per cent who view the provision of information…..as “highly important”.

“While over 70 per cent of the firms surveyed in this report say organic growth is a high priority, over 25 per cent state inorganic as the primary source of growth over the next five years,” Christopher Sparke, global head of front office and digital, wealth management at Refinitiv, said. 

Refinitiv commissioned global research and advisory firm, Aite Group, to conduct executive interviews with leading wealth management firms around the globe.