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RETAINING CLIENTS AND WINNING NEW BUSINESS THROUGH CLIENT ONBOARDING

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Ian Hallam

The automation of the client onboarding process has long been discussed, but the technology now exists to change the way wealth managers operate in this area writes Ian Hallam, CEO, 3i Infotech (Western Europe).

Client onboarding involves a high proportion of manual processes that create an environment for operational and compliance risks. Initial checks such as proof of identity and anti-money laundering are followed by a series of portfolio management rigours. Wealth managers must also bear in mind the FCA requirements applicable to firms providing investment advisory and discretionary portfolio management services.

Ian Hallam

Ian Hallam

A fundamental part of the process is the creation of the client’s risk profile. This is a complex and often lengthy procedure. Establishing the risk profile usually involves the client manually completing a questionnaire – sometimes in a face-to-face meeting.

It soon becomes evident that if the wealth manager gets the onboarding process correct then there is every likelihood that it will commence the client relationship strongly, with no compliance risks and a clear mutual understanding of the portfolio’s goals. Getting it right, however, is often not that easy,

Improved end-investor servicing

Needless to say this is a costly process for the wealth manager. Typically, wealth management firms will involve many staff (working in various departments that may also be using several different systems) to onboard a client. Multiply these costs by the number of clients being onboarded throughout the year and one can rapidly see why this area presents such an opportunity for greater efficiencies, thereby allowing increased capacity for improved end-investor servicing.

As far as the end-investor is concerned, onboarding can also sometimes be a challenging time. Clients can be frustrated by some aspects of the experience, including answering the same questions repeatedly, not knowing the status of their new accounts, and having their assets tied up in delays rather than earning valuable income. Is it possible that far more of this onboarding process could be streamlined?

Enabling wealth managers to target clients even more effectively

In today’s wealth management world, Heads of Operations and Compliance should be able to use process control screens and other business process management (BPM) tools to view how far along the onboarding pathway the client has travelled and to spot any potential blockagesbefore they occur.

Additionally, if the wealth management firm has integrated its back office system with a centralised database, the data can then be automatically channelled to all the other relevant applications once the onboarding process has been completed.

Systems architecture like this will also enable wealth managers to target clients even more effectively. With all this data gathered and stored centrally, it could be used on an on-going basis to more effectively tailor the service to the end-investor. In this way, clients can decide between paper reports versus mobile updates; how frequently and in what situation would they like to be contacted; and so on. BPM tools can therefore be applied to control and manage – not just to onboard.

The problem with most business process management (or ‘workflow’) tools is that they are not contextualised for the industry in which they are being deployed, be it wealth managers, institutional asset managers or hedge funds. The functionality therefore exists, but the wealth manager’s IT team still has to do some bespoke systems development around the workflow tool to make it suit the client base.

Conclusion

Of course, there are other benefits that can be accrued from automating the client onboarding process. For example, some of the recent thematic reviews from the Financial Conduct Authority have focused on the lack of effective, enhanced ongoing monitoring of high-risk persons. This has led to subsequent enforcement actions, where failings in firms’ systems and controls in this area have been identified.

A reduction in manual interventions would reduce operational and regulatory risk, generate goodwill from the investor and also garner efficiencies and cost savings for the wealth manager – delivering the capacity for growth. In this way, an efficient onboarding process can assist in retaining clients and winning new business.

Investing

Are clients truly getting value from their BR solution?

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Are clients truly getting value from their BR solution? 1

By Matt Dickens, Senior Business Development Director at Ingenious

Financial planners and wealth managers strive to deliver on the needs of their clients by always providing the most suitable and effective advice. But as with any service, this advice should also be delivered at the best possible value for the investor. Value can be simplistically defined as the service that delivers the most benefit, balanced against the financial cost, but in the estate planning space, how do you assess what good value is?

1. Total fees and charges

Product fees are guaranteed to negatively impact returns, so it is important to minimise their impact when looking to gain the best value from the investment. Some managers report little or no fees paid by the investor to the manager, but instead charge the company or investment service itself. While this might initially be seen as better value for the investor, it is not as simple as that. Investors in unlisted BR services become a shareholder of the portfolio companies, so the reality is that any fees paid by the companies are effectively being paid by the shareholder (or investor). Therefore, both investor fees and company fees will both negatively impact the final return and must be considered together.

Analysis of what a manager is paid by the investor and by the company over a significant period will enable an adviser to conclude if the manager is offering good value, or if a disproportionate amount of fees is going to the manager at the expense of their investors.

2. Real investment returns

Another key component of assessing value is what the investment actually delivers. For BR solutions, investors’ main objective is commonly to pass on the maximum sum possible to their beneficiaries upon death. This may lead to a conclusion that delivering Inheritance Tax relief at the lowest possible cost is the primary driver of value. However, especially for clients with longer time horizons, the one-dimensional goal of avoiding a potential 40% Inheritance Tax bill can easily over-shadow the equally important goal of aiming to steadily grow the investment, preventing erosion by inflation, drawdowns and investment fees. Unlike some IHT-focused solutions, such as trusts or gifting, investors in BR services do not have to accept zero growth of their wealth from the point of investment.  Instead, investors can continue to earn returns, either taking an income stream or increasing the final sum to be passed onto their beneficiaries, precisely in line with their original objective.

While most BR managers predict their ongoing returns at a certain level, those targets are not guaranteed and historic performance varies widely.

3. The relationship between fees and risk

Given that the majority of managers in the BR space state their performance targets net of fees, to produce positive growth and achieve their target return, those managers must first earn back any fees they are taking. Let’s take the below scenario to illustrate this point.

 Are clients truly getting value from their BR solution? 2Manager 1

Annual performance target, net of fees: 3%

Annual fees: 3%

Gross performance target: 6%

 

Are clients truly getting value from their BR solution? 3Manager 2

Annual performance target, net of fees: 4%

Annual fees: 1%

Gross performance target: 5%

Initially, it might appear that Manager 2 must be taking more risk to target a higher net return of 4% than Manager 1, who is targeting 3%. However, Manager 1 has to deliver an additional 2% of gross return than Manager 2, to make up for charging higher fees. Higher fees not only impact returns and value, but they can also mean greater risk.

Market comparison

In the Tax Efficient Review’s most recent analysis of Unlisted BR Services1, they released data that ranks services in the market in terms of both investor returns and total fees. IEP Private Real Estate achieved the top rank for returns delivered, with the second lowest total fees in the market, demonstrating that it represents attractive value for investors in comparison to other services.

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Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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