Key Challenge Areas

While immense business potentiality of this emerging sector is a driving point for most of the firms, they face many challenges in formulating winning services offering meeting the client needs. In the following section, we would briefly take a look on the key challenges area in the present context.

Highly Personalized and Customized Services

Unlike other stream of financial services, mostly being transactional /commoditized in nature, wealth management services require client specific solution and service offering. No one solution exactly meets the needs of other client. In a situation of highly personalized and customized nature of service offering, developing any form of generic service model does not support growth of the business.

Personal relationship driving the business

To meet client expectation of personal attention, mode of communication in wealth management services tends to be highly personalized. Thus, the conventional grids of communication, such as call centre, data centre does not fit well. Success of wealth management services heavily draws on personal interaction with the dedicated relationship manager, who takes care of whole investment management lifecycle for bunch of clients on one-to-one basis. This essentially requires service firm to invest heavily in human processes to groom and retain a team on competent relationship managers with cross functional skills.

Evolving Client Profile

The biggest challenge in providing wealth management service offering is to factor and reckon the evolving nature of client profile, in terms of investment objective, time horizon, risk appetite and so on. Thus, a service model developed for a particular client cannot remain static over a period of time. Any service model has to be flexible enough to consider the dynamic nature of client profile and expectations arising out of it.

Client Involvement Level

The conventional adage – the more money you have, more effort is needed to manage it – proves to be otherwise in case of HNWIs. Generally, client involvement in managing the finance remains on the lower side. This brings onus of managing the whole gamut of investment and due performance single-handedly on the shoulders of investment manager.

Passion Investment (Philanthropy and Social Responsibility)

In the recent years a trend has been observed that bulk of investments by HNWIs has been directed towards passion investments (art, antique, jewellery, coins, unique assets, luxury), philanthropy and social/community causes.

As per World Wealth report, 11% of HNW investors worldwide contributed to philanthropic causes with a contribution over 7% of their wealth in year 2006. Ultra-HNWIs contribution was even more - 17% of Ultra-HNW investors that gave to philanthropy contributed over 10% of their wealth. In total, this equates to more than US$285 billion globally.

Against this backdrop, new breed of HNWIs expect to strategically manage the wealth and personal resources allocated to philanthropy purpose, in order to maximize its impact. This demands a relationship manager not just to be a passive financial advisor rather a passionate partner sharing interest and inclination of the associated client.

Limited Leveraging Capabilities of Technology (as an enabler)

In the recent times, we have witnessed technology a key enabler to help business to expand its market reach with reduced cost of services offering. Online banking and online trading/brokerage services are the best examples in this regard. Technology leveraging has helped services firm to achieve universal proliferation of market with substantially reducing transaction cost. As business rules and service definitions to guide the applications tends to be quite composite in wealth management services, leveraging the capabilities of technology to meet the business requirement may not be highly feasible in the initial years.

Technical Architecture and Technology Investment

As business architecture is still evolving, a proven basis of resilient technical architecture and framework to support the emerging business greatly remains missing. In absence of this framework, any investment commitment towards application development / system implementation would be fraught with severe risk.

Intricate Knowledge of Cross-functional Domain

By very nature of wealth management, it not just involves matters of plain vanilla finance but has intricate relationship with many elements of domestic / international law, taxation and regulatory norms. In order to provide sound investment guidance, a relationship manager is required to have intricate knowledge of domestic/cross-border finance, accounting, legal and taxation subjects.