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What do you do to get a suitable client? Part 2

“There can be no disparity in marriage like unsuitability of mind and purpose.” 
― Charles DickensDavid Copperfield


The Financial Conduct Authority (FCA) requires all wealth managers to demonstrate that they have taken reasonable steps to ensure that any personal recommendation is suitable for their client.  This means they must have obtained enough information to show that

  • The service being provided meets the client’s investment objectives;
  • The client is able financially to bear any related investment risks consistent with his investment objectives; and
  • The client has the necessary experience and knowledge in order to understand the risks involved in the transaction or in the management of his portfolio.


In Part One we explored some of the challenges this requirement poses the wealth manager: determining the ownership of accounts within a portfolio; a client’s unwillingness to disclose details of their personal wealth and capacity for loss; an organisation’s unwillingness to undertake the in-depth probing necessary to get to the required level information.  And added to all this is the fact that the required level of information is itself open to interpretation.


Clearly, the suitability requirement is client-based. However, most of the back office wealth management systems currently on the market are account-based – they were designed before the suitability requirement came into being, and are unable to easily capture and retrieve this additional information. 


The key issue therefore is how to resolve this disparity without either abandoning costly investment in an existing, effective back-office system or imposing an extra layer of data capture on client-facing wealth managers who are then faced with trying to shoe-horn data into inflexible forms – and swiftly give up.


The solution is a front-office CRM system which is easily integrated with the existing methods wealth managers use for communication with their client, including email, letters, proposals and review forms.  These communications are most often done using Microsoft Office: if the CRM system is tightly integrated with Microsoft Office, it can bring them all together,  generate the required documents, file them automatically and easily retrieve them.


There are of course many CRM solutions out there, but to be really effective they need to be tailored for the wealth management industry and for your organisation in particular. This requires on the part of the provider:

  • A sound, up-to-date understanding of the wealth management industry and the regulatory requirements, including suitability.  This includes not only the take on of information initially, but also the reminders when the suitability reviews are due and the workflow and processing that is required to ensure that the reviews are checked and carried out effectively.
  • Thorough knowledge of your existing back office system. Issues occur with a CRM database is that it does not synchronise well with the back office, and that people change data in both the front office and the back office.  It has to be decided who is the “master” record, and this can be split across 2 systems, with one system holding phone numbers for example, and the books and records system  holding the address- so that the reports go to the right place!
  • An understanding of the level of data  requirements appropriate to your client and service offerings.  As we explored last time, the interpretation of the amount of data is down to the compliance department, not the investment manager and as such a level of standardisation needs to be put in place, with the management information and statistics to support it when the FCA comes looking for evidence. 


The key characteristics to look for in a CRM system are:


  • The right data model which distinguishes the person or corporate as the legal entity that advice is being given to


  • A flexible approach to form design that allows each organisation to define the level of detail appropriate to its clients and service offerings


  • A flexible approach to process definition and workflow enabling the efficient collaboration of tasks and data capture


  • A powerful document generation tool to produce client facing letters, proposals and  review forms so that client documentation so forming an evidence trail.


  • A desktop integration with calendars, email and client files


  • Good integration to the back office system so as to have a clear mastering approach.


Suitability is a requirement for Wealth Managers which they can no longer ignore.  The right technology is not a nice to have feature, it is now an absolutely essential component that enables Wealth Managers to actually do their job.   I would suggest that you need to take care in selecting the system and your partner to implement the system.  This is core to proper client management which can extend to client communication. 


As such I would recommend that you do not leave this to an in-house team, since the range of experience that comes from experts in this field and that have delivered solutions in compliant environments is invaluable. 


So for want of one of my worst puns- make sure your software and implementation partner are suitable!



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