A new report by Professor Merlin Stone and IBM claims that the majority of firms entering the wealth management market are merely 'window dressing' basic financial products and take little account of the specific needs of affluent customers.
According to the report, "Bridging the Wealth Management Gap", 53 new high net worth individuals are created every hour, and together they have $27 trillion under management. This is expected to grow to $40 trillion by 2005.
Rohitha Perera, head of IBM global services wealth management, and co-author of the report, says: "A number of organisations see wealth management as just an opportunity to push more 'one size fits all' products to wealthy individuals rather than offering them a more tailored portfolio that truly reflects their life aspirations and individual attitude to risk and return."
"Some do not see beyond the fact that private clients tend to hold more products (40% hold four or more) and have responded by throwing more at them, seeing this as an opportunity for cross-selling. This misses the point that as people become wealthier, the complexity of their lives increases and they need more help in managing them," says Perera.
The study claims that most companies define wealth management as clustering products around generic financial needs and pushing these through different channels, mainly the Internet.
Professor Merlin Stone, says: "One of the biggest problems facing the mass affluent is that they have built up portfolios of financial products many of which no longer meet their needs. Many have a 'rag bag' of investments and some of today's wealth management services just add to this problem."
The study found that many companies claiming to offer wealth management services do not possess a consolidated view of the customer and that they have failed to establish the trust necessary for their customers to see them as long term advisors.
IBM outlines key strategic goals for the wealth management industry, including:
* well-equipped staff who can offer a physical presence with proactive services that anticipate the needs of customers;
* contact management facilitating easy access to independent experts; and
* product aggregation, allowing access to all customer data in one place.
Perera concludes: "For the wealth management industry to truly realise its potential, the gap between the product based view of providers and that of customers' which is focused more on lifestyle needs to be bridged. The current position of many wealth managers leaves customers feeling that they are not valued and that they have more sophisticated needs than providers acknowledge."