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Certificate ofBanking & Insurance

110.11.11

Banking Wealth Management

Prof. Dr. Hans BrunnerProfessor for Banking and Finance

School of Business Administration Fribourg

November 2011

$CBI $ $

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Wealth Management2 lessons @ 45 min.

Guest Speaker

Marc Lussyobjtec GmbHSenior ManagerSchoenenbergstr. 1008820 Waedenswil ZH

marc.lussy@objtec.chmarclussy@bluewin.ch

More than 20 years experience in Banking

Trader, Relationship / Portfolio Management and Project Manager

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Wealth Management2 lessons @ 45 min.

Overview

Roles and Products

Advisory Approach

From the Past to the Future

Index of Contents

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Wealth Management2 lessons @ 45 min.

Overview

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Wealth Management2 lessons @ 45 min.

Why do wealthy individuals need advice to manage their assets?

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Wealth Management2 lessons @ 45 min.

For the same reasons ill people need a doctor

Diagnosis

Expertise Experience

Hold clientshand

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Wealth Management2 lessons @ 45 min.

What is ment by Wealth Management?

Providing highly customized and sophisticated investment management and financial planning services to wealthy individuals.

Which client groups are covered....and which not?

High Networth Individuals Affluents

RetailInstitutionals

Very High Networth Individuals

Ultra High Networth Individuals

OX

OO

O

X

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Wealth Management2 lessons @ 45 min.

Classification of Clients by Wealth

Ultra HNWI

$ 50 million

Affluent$ 100´000

Very HNWI$ 5 million

HNWI$ 1 million

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Wealth Management2 lessons @ 45 min.

Classification of Clients by Residence

Resident

Resident

Management of Assets Management

of Assets

Onshore Offshore

assets are managed in country in which owners of assets is resident

assets are managed in country in which owner of assets is not resident

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Wealth Management2 lessons @ 45 min.

Types of banks in Wealth Management

Global banks with private banking units

Traditional offshore focused private banks

Traditional onshore focused private banks

Retail or affluent focused local banks

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Wealth Management2 lessons @ 45 min.

Market shares global AuM (on- and offshore)

Total around 110 trillion USD

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Wealth Management2 lessons @ 45 min.

Market shares AuM offshore

Total around 7 trillion USD

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Wealth Management2 lessons @ 45 min.

Importance of Wealth Management for a Global Bank

Core Results Credit Suisse by Division in Billions 2007 - 2010

-15

-10

-5

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5

10

Private BankingInvestment BankingAsset ManagementShared Services

2007 2008 2009 2010

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Wealth Management2 lessons @ 45 min.

Roles and Products

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Wealth Management2 lessons @ 45 min.

Roles in Wealth Management

Relationship Manager

(RM)

PortfolioManager

Analyst Trader

InvestmentConsultant

TaxSpecialist

FinancialPlaner

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Wealth Management2 lessons @ 45 min.

Role Relationship Manager (RM)

Relationship managers are the customer service giants that own the customers, know everything about them, manage that knowledge as an asset, and are able to meet the full complement of financial needs.“ [Ernst & Young ]

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Wealth Management2 lessons @ 45 min.

Key Activities of an RM Client retention

- Make sure that existing clients stay with the bank

Client selection

- Identify profitable clients

Client Acquisition

- Increase client base

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Wealth Management2 lessons @ 45 min.

Key skills and Know-how needed to be a successful RM

Profound product know-how

Social Skills

Sales Skills

Knowledge of compliance regulations

Know-how IT Tools

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Wealth Management2 lessons @ 45 min.

Mandate types 1/3

Advisory Mandate

- Client makes investment decisions himself - RM provides specialists expertise and current market information - Client follows the markets on a regular base

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Wealth Management2 lessons @ 45 min.

Mandate types 2/3

Trading / Investment Consulting Mandate

- Client makes investment decisions himself - Short term approach - Active Trading - Market sentiment is more important than fundamentals - Relationship Manger / Investment Consultant provides trading ideas on a daily base - Client follows the markets on a daily base

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Wealth Management2 lessons @ 45 min.

Mandate types 3/3

Discretionary Mandate

- Relationship / Portfolio Manager makes investment decisions - Relationship Manager informs the client several times per year about development of the portfolio - Client does not need to follow the markets

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Wealth Management2 lessons @ 45 min.

Advisory Approach

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Wealth Management2 lessons @ 45 min.

Advisory Process Analysis

Financial concept

Profile

Strategy

Implementation

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Wealth Management2 lessons @ 45 min.

Analysis

Investments - Get an idea of size and asset types

Wealth creation - Inflows such as earnings on assets, salaries, expected inheritance etc.

Liabilities - Current and future financial obligations

Expenditures - Living costs, regularly payments, tax payments etc

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Wealth Management2 lessons @ 45 min.

Financial concept Channeling and visualization of gathered information including clients

asset and liabilities, annual income and annual spending

The financial concept must reflect the clients overall situation

Allows the RM to provide his client a personalized investment solution

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Wealth Management2 lessons @ 45 min.

Client profile 1/3 Adequate classification of the client in a client profile is a key success factor of a successful advisory process

Client profileRisk profile

Service profile

Risk abilityRisk tolerance

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Wealth Management2 lessons @ 45 min.

Client profile 2/3 Risk abilityIt defines clients ability to cope with financial losses without a noticeable effect on their standard of living

Risk toleranceIt defines how a client deals emotionally with investment risks

1 2 3 4 5 6 7 8 90

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Spalte C

1 2 3 4 5 6 7 8 90

2

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Spalte C

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Wealth Management2 lessons @ 45 min.

Client profile 3/3 Service profileIn order to suit different client requirements it is very important to understand which services he needs and to define an according service profile

Possible service profiles are:

Advisory mandate Investment consulting Discretionary mandates

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Wealth Management2 lessons @ 45 min.

Strategy Risk profile Investment strategy

Low

Moderate

High

Enhanced

Medium

Fixed-income

Income-oriented

Balanced

Capital-gains-oriented

Equities

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Wealth Management2 lessons @ 45 min.

Implementation Implementation and maintenance of a strategy is an continuous process

Every strategy must be reviewed on a regular base

Risk control for every investment is a must

Implementation Control Adjustment

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Wealth Management2 lessons @ 45 min.

From the Past to the Future

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Wealth Management2 lessons @ 45 min.

Wealth Management – from the past to the future

1990 2020

Personal Relation Performance

Excellent Service

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Wealth Management2 lessons @ 45 min.

Diagnosis

Expertise

Experience

Hold clientshand

1990 2020

Wealth Management – from the past to the future

Diagnosis

Expertise

Experience

Hold clientshand

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Wealth Management2 lessons @ 45 min.

Wealth Management – the past Strong banking secrecy

Main goal of a lot of clients was tax optimization

Performance of limited importance

Clients had limited access to market information (→ Newspaper)

Clients were loyal to the their bank

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Wealth Management2 lessons @ 45 min.

Wealth Management – the present . . .

Challenges Client Retention Increase of Sales Potential

Competition New competitors Trading Platforms/ Discount-Broker Consolidation

Client Well informed Decreasing loyalty Complex products

Bank Restructuring Compliance / Legal Higher Quality Standards

Technology Internet Mobile e-commerce

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Wealth Management2 lessons @ 45 min.

CRM Tools in Wealth Management 1/3 Operational CRM market operation

Analytical CRM

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Wealth Management2 lessons @ 45 min.

CRM Tools in Wealth Management 2/3

Portfolio

Issues- Get a new copy of passport due 25.5.11

- Needs to sign risk disclosure due 31.12.11

- Invite for golf turnament

Performance

Remarks05,1,11 Became father

10,2,11Would like to invest in commodities

15,3,11Plans to transfer more money

20.4.11Wife had car accident

Client dataName

Birthday

Riskprofile

Client since

Monthly reports

Hobbies

Name wife

Number of Children

Responsibel RM

Relations with other clients

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Wealth Management2 lessons @ 45 min.

CRM Tools in Wealth Management 3/3 Where can a CRM add value?

Measure activities

Analysis of current situation

Identification of target clients

Manage sales activity

Quick access to client information

Consulting

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. . . the future

?

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Wealth Management2 lessons @ 45 min.

Wealth Management . . . the future Threats Weaker banking secrecy Regulations Decreasing margins Increasing costs Increasing quality standards

The way forward New markets (BRICS / Emerging Markets) Increased effort for client retention Increased tool support (CRM, product selection) BPO (Business Process Outsourcing) Mergers / take overs of smaller banks

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Wealth Management - Impressions2 lessons @ 45 min.