TowerGroup Finds Rhetoric Continues to Outstrip Practice at Financial Institutions In Terms of Implementing Customer-Centric Wealth Management Strategies

NEEDHAM, MA, September 16, 2003�Over the past 12 months, the retail financial services industry has engaged in intense discussion on the promise of wealth management to unlock greater value from both high-net worth (US$1 million or more in assets to invest) and �mass affluent� (US$250,000 or more in assets to invest) customer segments.

Yet TowerGroup finds that rhetoric continues to outstrip practice at the majority of institutions, where integrated approaches to wealth management have yet to displace existing structures that serve retail clients in relative isolation from one another. In its new research, TowerGroup explores the continued opportunity for � and key barriers to � broader wealth management implementation. Highlights include:

  • Significant wealth is still being created today despite a more uncertain economic context. From pre-1999 through 2000, the number of millionaires in the U.S. was rising at a compound annual growth rate of over 18%. While slowed to a projected growth rate of 12% through 2008, this percentage still exceeds most current projections for both inflation (at 2% to 3% annual growth) and equity returns (at 7% to 10% annual returns). See chart.

  • Existing �silos� separating business units within and across financial services institutions continue to present the single greatest barrier to the implementation of integrated, customer-centric approaches to wealth management.

  • The technology required to break through these silos exists today, including account aggregation, database normalization, portfolio management/reporting and developments in delivery channel architecture. Customer relationship management remains the most crucial subcomponent in integrating customer information with business process to create a wealth management enterprise.

  • The �final frontier� for financial services firms is to integrate these disparate technology efforts across an enterprise-level platform that can provide a truly holistic perspective of clients� financial status across all products � and then serve that view to the institution, financial advisors and the clients themselves.

�Fiefdoms are the single most important reason why wealth management as a financial business model has not achieved the traction anticipated by institutions, software providers and professional service firms,� said Dennis Ceru, director of the Retail Brokerage & Investing practice at TowerGroup and author of the research. �Despite recent rhetoric to the contrary, most financial institutions business units are still engineered to run as distinct entities within an enterprise, and are managed as separate profit and loss centers supported by separate technology groups. This stops customer-centricity dead in its tracks.�

Ceru noted that effectively retooling the siloed financial organization to function as a seamless and client-centered wealth management enterprise requires nothing less than business process reformation. �Slick software, renamed business units, client experience enhancements, and new corporate visions all pale in their fragmented efforts toward what remains a systemic and systems-wide problem,� he said.

The research in the new TowerGroup ViewPoint titled, Wealth Management is Dead! (Long Live Wealth Management), may be purchased by contacting TowerGroup at +1.781.292.5200 or [email protected]

About TowerGroup: TowerGroup�now celebrating its 10th year�is the leading research and advisory company focused on the global financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world�s largest financial services, technology and consulting firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in New York, London, and Kuala Lumpur, TowerGroup serves a global client base.