How closer engagement with clients can boost performance
Wealth management firms which use multiple metrics to gain insight into client relationships are much more likely to see where improvements can be made
When you spend as much time as I do comparing client insight surveys and financial results for wealth management firms, the question of how these different measures interrelate is always in your mind.
Even a simple analysis, comparing the client scores we get from our public HNW research programmes with AuM growth data from annual reports shows strong evidence of the relationship between these two factors. Yet, some firms are driving their financial performance far more effectively than others in this race to the top.
Most interesting among them, and perhaps most surprising, is Santander. Buffeted by the shock waves of the financial crisis and having been declared the “worst bank for customer service” in the UK by Moneysavingexpert.com in 2010, the bank has had a major rethink of its client strategy in recent years.
Led by the bank’s senior management, client engagement was placed at the top of the strategic priority list. A client satisfaction score was introduced to the balanced score card and brand performance started to be measured against a number of client metrics. Fast forward five years, and the bank is now regularly topping retail client service polls.
What the Santander case study highlights is the big difference between simply tracking client metrics and actively managing them.
Indeed, almost all of the top quartile performers in Figure 1 actively manage their client relationships against a blend of metrics – regularly polling clients across a number of key performance indicators (KPIs) and then managing the business to maximise the scores.
When it comes to wealth management, actively managing against a blend of metrics is even more important than among retail financial services providers. Wealth management offers a relationship-based service, which makes it virtually impossible to pinpoint a single client metric that summarises all the complex interactions between client and firm over time.
Yet, many wealth managers – especially in Europe – still take a single metric approach. For these firms, ‘client satisfaction’ boils down to one score, with typically overall satisfaction or net promoter score (NPS) as their favoured KPI.
Quick and simple, these metrics provide a snapshot that can be helpful at board level. On the front line, however, the single score lacks context, making it virtually impossible for senior leaders to know what actions can drive improvement.
By contrast, wealth management firms using multiple metrics to gain deeper client insight are more likely to talk in terms of ‘client engagement’. Their approach allows them to see which parts of the proposition are working well and where improvements are necessary.
A single metric can still be highlighted for the board or the scorecard, but the business can now be managed to drive that score in the context of what other metrics reveal about the proposition.
In our own Client Engagement Tracking process we use three pillars to reflect the wider wealth management relationship: service, proposition and brand. Each pillar is supported by three underlying metrics showing how the business is performing at a granular level.
Within our proposition pillar, we consider how client experience, product satisfaction and client outcomes combine to ensure the client’s financial needs and goals are fully met. Our service pillar focuses on person-to-person interactions and brand considers qualities brought by the organisation.
This blended approach has far more predictive quality – as shown in Figure 1. It also allows us to optimise a firm’s strategy workstreams to gain greatest financial return on investment.
When we talk about client engagement, our focus is to generate deep understanding of client needs to drive financial performance. This requires strong commitment from wealth management firms to institutionalise the process of gathering client insight. But that commitment is supported by the clear opportunity for financial reward.
Cath Tillotson is managing partner at wealth management think-tank Scorpio Partnership
