Banks know that service is key; the trick is figuring out how to deliver it. You may be a gifted investment manager, but if you're not going beyond that to help your clients realize their goals, then your wealth-management practice could be in trouble. That's the main takeaway from a recent SEI "Executive Quick Poll" of bank-based wealth managers. But the survey - just one of several SEI plans to conduct - goes beyond that truism to function as a kind of base camp for SEI's ruminations on the nature of service.

Oaks, Pa.-based SEI, an investment-service and technology outsourcer, commissioned interviews with 41 bank-based wealth management officials. Around 70% of them said the bank's relationship with the client was the most important factor in customer satisfaction. In contrast, less than 5% of the bank officers interviewed cited investment expertise as the number one reason for client satisfaction.

Service and experience

"This isn't a surprising result," says Al Chiaradonna, head of strategy for SEI's private banking and trust group. "To me, it reflects the maturation of an industry."

In other words, as wealth management - taken to mean a set of services and capabilities aimed at helping millionaires retire in comfort, help their families and dispose of their legacies as they see fit - makes its way out of private banks and white-shoe boutiques into "mainstream" financial-service venues like small- to middle-market banks, pure investment performance is taking a back seat to goals-based advisory.

"Given adequate performance, we're finding that clients leave [a wealth-management firm] because of inadequate service," says Chiaradonna - an observation borne out by 75% of the bank-based wealth managers surveyed.

The solution, says Chiaradonna, is to create "a different client experience that ties solutions and services to client needs. We feel this new experience needs to start with the very first interaction between advisor and client."

Of course there's a sales message behind these observations. SEI is pushing for adoption of its Wealth Network platform in the banking channel, though that's available piecemeal now, reflecting a willingness to lend support where needed rather than across the board, as shown in SEI's new approach to the investment-advisory channel. (See SEI campaigns to win more advisor-support business).

Just don't make me say "venti"

SEI's Wealth Network - part third-party investment platform, part practice-development program, part trouble-shooting network - is meant to help wealth managers concentrate on client service by outsourcing just about everything short of the client relationship. In addition to a brand-new outsourcing contract with HSBC Private Bank in the U.K., Mount Joy, Pa.-based Union National Community Bank has been test driving the bank version of the Wealth Network since last fall - and it seems to be a fairly willing guinea pig.

Spend any time talking to SEI executives and you'll soon hear the opinion that businesses that want to prosper in markets - like wealth management - dominated by finicky boomers have to deliver "client experiences" in addition to the straight goods. One of SEI's favorite brands is Starbucks for providing - in SEI's view - a consistent up-market experience to clients. So it's fun to see that Union National has opened a new branch in Lancaster, Pa., that is effectively disguised as a coffee shop.

Open late seven days a week, Union National's first Gold Café features a full-service coffee bar manned by "financial baristas," and provides wifi access, sofas and padded chairs, a working fireplace and lots of reading material - plus all the banking services of Union National itself.

If that kind of "experience" seems a too-literal interpretation of SEI's message, it at least attempts to take service beyond the realm of mere relationship management. And that may help SEI refine its outsourcing services to better help wealth managers strengthen the bonds between client and institution.

Assets outside the toolbox

"Most people think relationship management is service," says Chiaradonna. "We see them as different things and we're trying to figure out how they work together and how to understand their effects on client attrition."

And banks would do well to get a handle on private-client attrition. In the 10 years through 2004 North American private banks saw their share of professionally managed high-net-worth assets fall from 86% to 38%, according to 3C Financial Partners , a Los Angeles-based investment bank and research consultancy. By 2010, 3C reckons banks' share of those assets will have fallen to 29% - just as the lucrative leading edge of the baby-boom generation tilts into retirement.

"Many banks are stuck where they see tools are determining the relationship," says Chiaradonna. "But the [wealth-management] premium isn't driven by tools; it's driven by service."

And although a bank may hesitate to re-make itself in the image of a coffee shop, it still needs to make radical changes if it wants a significant piece of the growing wealth management market, starting with a re-examination of the way it selects, trains and compensates wealth-manager personnel.

"People are loyal first and foremost to people," says Chiaradonna. "So anybody who is trying to drive value in this business needs to figure out how to win and retain the loyalty of personnel who interact with clients." -FWR

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