• Cognizant 20-20 Insights

Taking Wealth Management to the Next Level — Advisor Lifecycle Management

Executive Summary Among the key issues wealth management firms face include: Despite growing recession fears, the wealth management industry is growing steadily, driven • Sub-optimal advisor productivity due to by the rising high net worth individual (HNWI) time spent on increasing client demands for population,1 increasing consumer awareness investment information. As client satisfaction of investment needs and the emergence of a and trust levels drop,2 advisors need to back up dazzling array of investment opportunities. This investment advice with comprehensive data on exponential growth has attracted a large number product performance, risk levels, fees and fit of industry players, each looking to establish a with the client’s investment strategy. Without dominant position in the market. the right support tools to simplify access to data and report creation, gathering and presenting As a service industry, success in this sector is this information can become overhead that driven by the quality of the customer engagement, detracts from more productive activities. which in turn is highly dependent on the quality Higher resource costs for attracting and of wealth management advisors. With increasing • retaining talent. Having a skilled set of competition and consumer awareness, it is advisors on board is more important than ever, imperative for wealth management organizations as firms strive to deliver on client expectations. to uniquely position themselves and differentiate However, rising industry demand for experi- based on advisor quality. enced advisors has made it increasingly chal- In addition, client expectations of service levels lenging for firms to attract and manage high- are far higher now than they were a decade ago, quality talent. In addition, firms are grappling largely as a result of the global financial crisis. with attrition, as experienced advisors migrate Clients are more demanding, requiring advisors to independent channels that offer higher to a priori demonstrate that they will receive payouts.3 continuous value for their investments. Such • Changing regulatory regime. Heightened guarantees are further complicated by ongoing regulatory scrutiny4 following the financial crisis economic turbulence, which has adversely is forcing firms to reexamine their hiring and impacted the profitability of many wealth training practices. Firms need to ensure that management organizations. Effectively managing potential advisors have the necessary industry the expense side of the ledger, while ensuring certification and qualifications. Targeted and scalability and high standards of customer effective delivery of training materials on new service, is critical to mid- and long-term success. regulations, client communication guidelines and product information is a priority.

cognizant 20-20 insights | january 2012 • Focus on delivering a consistent client into a recruitment and advisor onboarding experience. Firms are moving toward institu- system. Such a system would typically be the tionalizing the client relationship and improving first support system with which a prospective the predictability of client interaction with employee engages. Additionally, a stream- advisors. This is especially important given the lined, easy workflow can make a positive first high churn rate of experienced advisors5 that impression regarding the ease of use of advisor most firms are currently experiencing. systems at the firm.

In such a scenario, technology can be a key lever Third-party interfaces for processes, such for organizations to drive scalability, improve as background checks, can help reduce business efficiencies and increase customer sat- turnaround time. Moreover, consolidating all isfaction, while keeping a focus on cost contain- available data regarding advisor experience, ment. This white paper lays out the systems that registrations and certifications can make it wealth management firms can effectively deploy easier to track conformance with increasingly 6 to achieve this overall objective. These advisor stringent regulations. systems are relevant to the three central stages • Post-hire support. These processes can be of what may be termed the “advisor lifecycle” — integrated into the recruitment system, to track namely, advisor recruitment, practice develop- initial training progress, as well as manage ment and advisor servicing. licensing and registration requirements. Such support will eliminate the need for multiple Advisor Recruitment touchpoints and maximize the time available To streamline and improve the effectiveness of for new advisors to become productive. the talent acquisition and management process, It is also advisable to maintain a clear entitle- wealth management firms should consider the ment policy of linking financial advisor profiles following: to existing model profiles in order to streamline • Pre-hire support. While top advisors are almost access to various applications. always recruited through networking, an online Finally, data from advisor onboarding systems interface with an automated workflow goes a can, in turn, feed training and develop- long way toward increasing the efficiency of ment systems to enable targeted delivery of the advisor hiring process. Figure 1 illustrates customized, need-based training material, such a set of sub-processes that can be integrated as webinars, new product information, etc.

Advisor Hiring

Jobs Portal Referral System

Post-hire Processes

Onboard Financial Advisor Pre-hire Processes Create Profile and Compensation Plan Create Business Plan Create Entitlements Evaluate Business Plan Create Customized Training Plan Perform Credit/Compliance/ Behavioral Checks Undergo Mandatory Training Perform Background Investigation (Product, Processes, Legal and Compliance) Complete Mandatory Certifications

Obtain Licenses and Registrations

Ongoing Development Financial Advisor

Develop Learning Calendar Firm

Undergo Industry Certifications Firm and Financial Advisor Undergo New Product Trainings Track Progress

Figure 1

cognizant 20-20 insights 2 Practice Development • Market information and product support. Firms can assist advisors in achieving their Interactive systems that provide comprehensive revenue targets by providing resources such as information on clients, products and research delivery of research insights and market trends insights can assist advisors to better service their information to advisor desktops. They can clients and boost revenues. These include: also provide comprehensive product support, • Business development support. Firms can such as ongoing new product training and add tremendous value to the business develop- an interface that allows advisors to request ment support they offer advisors by adopting a customized products based on client needs. 360-degree7 solution that integrates the func- tionality of their CRM system with comprehen- Advisor Servicing sive external information (such as market and Firms can evaluate the following advisor servicing client-facing perspectives) and with the firm’s systems to aid advisor productivity and lend internal workflow and product information. transparency to the compensation calculation and performance management processes. A 360-degree solution offers complete visibility of a client’s accounts (such as • Reporting and analytics. Sophisticated retirement, insurance and trading accounts), reporting and analytics capabilities can effi- enabling advisors to offer holistic advice based ciently provide financial advisors with infor- on a complete view of the client’s portfolio. In mation related to compensation, performance, addition, it allows advisors to easily leverage targets and book of business. The alternative the data gathered to derive trends that can — obtaining data from disparate systems and translate into additional revenue opportuni- translating it into an integrated view — can be ties. Business development efforts can become a time-consuming and error-prone process. more effective if profiles of new clients can Moreover, a comprehensive reporting and be correlated with existing ones to devise analytics framework allows advisors to deliver investment patterns, outlooks and general a high-quality client experience, which can be service and relationship requirements (see replicated organization-wide in a consistent Figure 2). manner, while minimizing loss of productive hours in data retrieval and presentation.

360-Degree Solution

Information

Interfaces Performance Wealth Management Tools Positions Account Third-Party Relationship Client Relationship Client Risk & Back-Office Prospect Onboarding Compliance Processing Process Account Workflow Sales & Client Portfolio Management CRM Prospecting Servicing Alerts Financial Planning Reports Trading and External Agents Book 360° View Keeping Contact Management Tools Build The 360° service model is delivered through wealth Transaction Systems Books of Record management processes, relying heavily on the information Tools and specialized tools shown in the other two dimensions.7

Figure 2

cognizant 20-20 insights 3 Compensation reporting provides informa- • Scenario and sensitivity analysis. tion for daily, month-to-date and year-to-date Analysis of hedging opportunities and risk production values. This enables advisors to • analysis for hedging products. view their own production as an individual, as well as for split accounts. It also details • Risk assessment of assets under manage- how a particular advisor is ranked within the ment at the client, branch and advisor firm when compared with peers on attributes levels. such as production, book of business and In addition, advisor systems should allow for new assets. Information on the discounts the adaptation of external analytics sources to provided by advisors to various accounts (i.e., enable greater flexibility, as well as deeper and the effective discount rate and undiscounted more precise market/client insights. commission) can also be obtained. Practice management reporting provides a • Advisor compensation and performance view of the advisor’s book, covering dimensions tracking: Advisor compensation is among such as number of households, total assets, the key levers that firms have to retain top- trailing 12-month production and a current performing advisors. Most firms have linked and historical view of the asset mix across compensation with performance. The complex- the book of business. It also offers insight into ity of a compensation calculation algorithm revenue sources and migration opportunities is increasing every day with the continuous and displays current and historical views of introduction of new grids/plans. An automated credit line growth, margin balances and short process to calculate compensation can reduce positions across the FA’s book of business. a lot of heartache for advisors and home office workers by doing it right the first time. New asset reporting displays the new asset flows and adjustments used to determine A compensation management system with an advisor’s award payouts. It also details built-in flexibility for accommodating and households and new relationships brought by monitoring a varied set of compensation an advisor to the firm (see Figure 3). policies, revenue commission payout grids, splits, overrides and payment schedules can Further to the aforementioned reporting capa- greatly minimize manual effort and errors. bilities, firms can provide decision support Moreover, it should be possible to easily tools to advisors to facilitate faster and more configure new policies on the system without accurate assessments of investment choices. adding IT and operational costs. This can A sample set of features that can be offered to be achieved by designing a compensation advisors includes: computing framework that accepts user- • Ability to perform analytics for a wide defined parameters such as new assets, range of asset classes.

Reporting

New Assets and Compensation Practice Management Relationships Commission Trade Information Net New Areas Ranking Book Information New Relationships Discounting Production Liabilities Error Reporting Client Tiering

Figure 3

cognizant 20-20 insights 4 Compensation Calculation

FA Administration

FA Profile Commission Grid Splits and Teams Compensation Plan Held Away Assets Commission Adjustments and Overrides FA Transactions

Error Reporting System FA Commission Calculation New Assets/New Relationship

Aggregation-Transaction Summary Reporting Payroll YTD and MTD Commission Calculation

Figure 4

new customers, credit line growth, annual Hiring, developing and retaining quality advisors production, etc. are priorities for wealth managers. A workflow- based system can assist firms in evaluating, System design should include the ability to onboarding and training advisors, while ensuring accept inputs captured from other internal compliance with regulations. Performance track- systems (transactions, expense reports, ing and compensation systems provide some etc.), as well as a user-friendly interface transparency in the process and save effort in for corrections. Firms can simplify the error/query resolutions. tracking of awards eligibility by ensuring that data related to advisor performance, Firms are always trying to Goal-setting can new money and new relationships is available improve advisor productiv- be enabled by on a single platform (see Figure 4). ity levels. By reducing manual the consolidated Goal-setting can be enabled by the consoli- effort through the automation dated availability of real-time data. In addition, of menial tasks (such as data availability of timely and accurate reporting capabilities can gathering, report creation and real-time data. help advisors and teams track progress on deriving client trends), firms established performance and revenue targets, can increase advisors’ productive time and, in view commission reports for a given period turn, their satisfaction. Freeing up time from and benchmark performance against peers. administrative tasks allows advisors to dedicate more time to client management, resulting in Developing comprehensive compensation and better business for the advisor, as well as the firm. performance evaluation systems are a step in the right direction for firms looking to retain Advisor management systems can help firms their top-performing talent. create a consistent client experience and institu- Conclusion tionalize client relationships. Selecting an appro- priate set of advisor management systems should Successful implementation of advisor manage- be based on the organization’s market positioning ment systems can dramatically advance a wealth and growth ambitions, as well as the maturity of management organization’s performance, both in existing processes and technology platforms. the short and long terms.

cognizant 20-20 insights 5 Footnotes 1 World Wealth Report 2011, Capgemini and Merrill Lynch Wealth Management, June 22, 2011. 2 “Anticipating a New Age in Wealth Management: Global Private Banking and Wealth Management Survey 2011,” PricewaterhouseCoopers, June 2011. 3 “U.S. Wealth Management Survey: Trends and Emerging Business Models,”Booz & Co, May 19, 2010. 4 “Anticipating a New Age in Wealth Management,” PwC. 5 “U.S. Wealth Management Survey,” Booz & Co. 6 “Anticipating a New Age in Wealth Management,” PwC. 7 “Client Service Challenges in the Interplay of Private and Consumer Banking with Asset Management: Rec- ommendation for a 360-Degree Service Model,” Kirthi Ramakrishnan, Cognizant Business Consulting.

About the Authors Dheeraj Toshniwal is a Manager within Cognizant Business Consulting and leads the Wealth Management Consulting Practice in India. He has experience leading business and IT transforma- tion engagements with global banking and wealth management firms. Dheeraj can be reached at [email protected].

Siddhi Chanchani is a Senior Consultant in the Banking and Financial Services Practice within Cognizant Business Consulting. She can be reached at [email protected].

Acknowledgments The authors would like to thank Cognizant Business Consulting’s Aamod Gokhale (Aamod.Gokhale@ cognizant.com) and Balaji Subramanian ([email protected]) for their valuable review efforts.

About Cognizant

Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out- sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 130,000 employees as of September 30, 2011, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

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