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High hopes, low success rates

Most national brands have moved a significant part of their focus to the high-net-worth sector in recent years and, consequently, have some variant of a wealth management model.

Probably hundreds of millions of pounds have been invested in a myriad of initiatives, yet most of us would be hard-pressed to identify more than one or two beacons of success.

We do, however, know that a number of IFAs have made good progress in this area. Let us face it, this is a growing market of supposedly five million clients who could perhaps be persuaded to pay fees, who can afford high premiums and who are likely to demonstrate high levels of persistency.

But even these growing IFAs often seem to lose their way once past a certain size. If they do retain their original focus, how many are singularly dedicated to this marketplace? With so much effort but with such a huge void of true market leadership, we need to ask ourselves why this nut is proving so difficult to crack.

LloydsTSB recently pulled the plug on Create, Abbey National is short of its customer targets with Inscape, Barclays has adjusted its approach to Premier, Prudential withdrew from PFPS last year and so on. These organisations have deep pockets and big client banks.

On the plus side, St James&#39s Place has unshaking faith in its proposition and has enjoyed consistent growth over recent years (the first quarter of 2002 excepted). Merrill Lynch and HSBC, among others, also have some innovative approaches to managing an equity portfolio.

But we start to struggle for other sizeable examples. Equitable Life fell by the wayside and Inter-Alliance is having to review its way of working despite reaching 1,200 consultants last year (and would its client base meet a truly high-net-worth definition?) Some IFAs are putting forward strong business models but, in the main, they have neither size nor a national, publicly-recognised brand. The Inter-Alliance example is also a good warning to those organisations intent on growing faster than perhaps their management or infrastructure can support properly.

You would think that wealth management is an holistic view of the client&#39s financial position, resulting in comprehensive advice and planning. In many cases, you would be wrong – it is little more than a service to help manage equity and deposit funds. Perhaps this is where part of the problem lies.

What specific issues might be preventing success in what should be a very lucrative marketplace? I would suggest that there are essentially five reasons, which are pertinent in most business models.

The biggest issue is often the organisational infrastructure or, in some cases, lack of it. Where growth has been through acquisition, the various brands often remain intact and efficient access to the client base is prevented.

In many cases, bancass-urers still experience the bank versus financial services culture differences. Legacy systems still abound and management in fast growing businesses may simply lose control of the original model.

Second, high-net-worth clients have to see a reason to deal with a particular organisation. While management of equity or deposit funds is perhaps a reasonably economic model, on its own it is hardly the most compelling of customer propositions. It is not an holistic view of the client and is one that the better IFA propositions can easily rebuff.

I would suggest that the industry needs a modern high-net-worth brand proposition that evokes the same mass-market symbolism as the Man from the Pru, who was enduringly successful for so much of the last century.

Third, the vast level of research into the likely target market has been overdone. Yes, we do need to define who we should be talking to but it is not rocket science. If organisations were to put as much effort into how they can best manage a relationship, then perhaps a more impressive outcome might evolve.

A fourth issue is that an effective sales culture has all but disappeared in some organisations. Fear over regulatory implications and a lack of expertise in these areas are part of the problem, linked with a sense that such an ethos is no longer acceptable in polite circles.

I am not alone in believing that a sales culture is essential, that it can be compliant and that, nurtured properly, it can enhance the customer experience.

Finally, to make future economics work, such a proposition has to work from a multi-channel platform. Most aim to do so but I am not aware of any current model that has fully cracked how to get channels working together effectively or how a high-volume call centre operation can work successfully in this market.

While web-based solutions are improving, they still have significant challenges.

You may conclude that it is perhaps too easy to highlight such issues and, of course, you do not have to agree. However, the implications of CP121 are looming large and business models throughout the industry are being reworked.

Clearly, the opportunities are there to write a success story and, in two future articles, I hope to offer some suggestions as to how organisations might go about creating a more effective outcome.

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