Client service and effective use of new distribution channels are overtaking cost leadership as key competitive differentiators in the increasingly crowded European wealth management market, says a new survey by PricewaterhouseCoopers.
PwC says participants of its European 2000/2001 Private Banking/Wealth Management Survey are facing tougher competition as an increasing diversity of institutions now offer private banking/wealth management services. However, respondents to the survey remain optimistic in the short term and most expect their businesses to grow at a faster pace than the market.
Commenting on the fifth edition of the survey - which canvassed the views of 130 private banks and wealth management institutions from fourteen European centres - Bruce Weatherill, partner, PricewaterhouseCoopers, warns: "For the first time in the survey’s history, PricewaterhouseCoopers believes that Europe’s private banking/wealth management industry may be too optimistic about its growth in the short-term, given the fierce competition, current volatile market conditions and participants’ abilities to manage the significant changes required within their organisations."
He adds: "We expect to see more mergers, acquisitions and alliances as institutions seek to serve their more demanding clients."
According to the survey, over 90% of respondents plan to focus their strategies on differentiation rather than cost leadership in the next three years to attract and retain clients. Client service is ranked first or second as a key differentiator by almost half of survey respondents. An organisation’s image and reputation has also significantly increased in importance and, in the future, product innovation and client segmentation will become more important as key differentiators.
Additionally, use of the latest technology in the front office is expected to grow, reflecting the greater use of e-channels for distribution and communication with clients. Respondents are also investing in programmes to improve customer relationship management to generate additional business with existing clients.
Yet, recent market share shifts and implementation write-offs imply that management may be underestimating the difficulties and risks of delivering as well as resourcing these strategies, says PwC. Survey respondents highlight employee retention as a major issue, with some having staff turnover levels in excess of 20% of the total workforce.
Ian Woodhouse, director, PricewaterhouseCoopers, comments: "European and North American institutions as well as new entrants are all competing aggressively for a share of the lucrative private banking/wealth management market. The survey findings are a wake up call to participants to significantly upgrade their offerings, particularly in the areas of client service, product range and the use of new technologies."