Private bankers could be forgiven a sense of deja-vu as 2014 unfolds. A quick glance at the trade press suggests that for many it’s a case of “new year, same challenges”. So, what does the future hold for wealth management marketing strategy? Do more cost-effective models exist for private banks and wealth advisers and what role can digital technology play in helping the wealth community broaden its appeal amongst HNWI as well as newer and more profitable segments.

1. WILL DIGITAL WEALTH MANAGEMENT HALT DEJA-VU DOOM AND GLOOM?
Private bankers could be forgiven a sense of deja-vu as 2014 unfolds. A quick glance at the
trade press suggests that for many it’s a case of “new year, same challenges”. So, what does
the future hold? Do more cost-effective models exist for private banks and what role can digital
technology play in helping the wealth community broaden its appeal amongst newer and more
profitable segments.
Keen to kick off the 2014 Scorpio Partnership blog with some positive, expert commentary, we
are delighted to publish a guest post from Mash Patel, Executive Chairman of Kurtosys, a global
provider of digital marketing and client reporting tools.
Most of us kick off a new year with a resolution or two, promising ourselves healthier food, more
exercise and the willpower to finally kick those bad habits. By February, most people have fallen off the
wagon.
Businesses, too, promise themselves a leaner, healthier future too, more often than not dressed up as
strategic objectives and three year plans. Many of those fall by the wayside too, in fact many are
doomed from the start.

2. Time is running out though, at least for private banks. The global wealth industry doesn’t simply need a
new exercise regime, it needs to start playing a whole new ball game.
Private banking is less and less lucrative
According to Euromoney, “Regulatory pressures mean private banking is less and less lucrative”. Data
from Scorpio’s Global Wealth Management M&A Deal Tracker 2008-2013 reveals that purchase prices
have fallen to just 1.22% of managed assets, down from 3.7% in 2008 when “having a private bank was
seen as better than having an investment bank”.
It’s tempting to blame regulation. As Euromoney point out, “the costs of doing business are proving too
much and banks are realizing that the cash cow they thought private banking would be after the credit
crisis is not as easy to milk as they imagined.”
So what’s the solution? Put crudely, the banks have two options. Fight even harder for the 1% and find
new ways to squeeze margin out of HNW clients… or take the more positive road towards a new market
of investors. The mass affluents.
Is Mass Affluent the New Black?

3. Back in November 2013 I read a great article on Financial-Planning.com penned by Stacey Haefele,
president and CEO of HNW. Stacey wondered aloud whether “we may have finally arrived at a new age
of the mass affluent”?
Her reasoning is sound. After all, “the market is there, in the enormous generational wave of retiring
baby boomers. At the same time, the unprecedented consolidation in the banking and wealth
management sectors has pushed advisors to cast a wider net for profitable growth.”
But Stacey was also realistic about the industry’s skepticism: “people suspect that mass affluent will
want the same service as HNW but be unable to pay”.
Can these clients afford to pay for the propositions offered by private banks? Is there enough margin to
be had if AUM are lower per client? Do we have even enough advisors to service a new segment of this
size?
These are valid questions but I passionately believe that Stacey is right when she says that “actually the
trick to serving the segment is not necessarily to “size down” but rather to reimagine the entire business
and set up a model that drives value for all”, a new model that has technology at its heart.
Is there a demand for digital wealth management?
It’s fitting to answer that question here on Scorpio’s blog because the work that Seb and Cath and the
rest of the Scorpio team do has always been at the forefront of proving the case for digital wealth
management.
Long before most were convinced, Scorpio gave me – and Kurtosys – the confidence to build tools that
could help deliver financial reporting and fund tools online. Why? Because investors said it was
something they wanted and valued.
Now, those investors that trail blazed a path towards digital channels look decidedly mainstream. The
Capgemini, RBC Wealth Management, and Scorpio Partnership Global HNW Insights Survey 2013, a
great new addition to the annual World Wealth Report, showed that real-time / anytime reporting is now
the strong preference of the majority of investors.

4. Digital can underpin a service model that drives value for all
As you move down through the wealth chain, mass affluent investors can be well serviced by digital
tools that delight clients whilst simultaneously improving profitability for the bank.
Returning to Stacey Haefele’s article, “high value doesn’t have to mean high touch. By providing strong
online account access and self-help tools you will be supporting the natural inclination of many selfservice and value conscious mass affluent.”
Investing now in the right digital technology will pay dividends for year’s to come. Today, it offers a
chance to connect with a new segment of clients, a segment without the preconceptions of HNW
investors that can be serviced cost effectively without sacrificing service.
Digital wealth management for the mass affluent isn’t about shoving customers towards cheap, remote
channels. Retail banking tried that for years before realizing that they’d lost touch with customers and
now faced an even higher bill tempting them back again.
Rather, it’s about leveraging the very best of digital technology to increase dialogue and engagement
but at a cost that’s sustainable for the bank and in a way that promises to grow AUM and lengthen client
relationships.
Re-imagining the digital future
I believe that digital technology has a role right at the heart of the wealth industry. I think that the banks
that crack a hybrid model of digital and face to face will be the leaders who emerge from the aftermath

5. of the financial crisis with the right model and right business plan to secure long term growth. That’s
why I’ve been so passionate about taking that technology to asset managers and private banks. But
alongside all the positivity, I do want to leave you with a challenge, too.
To get digital right takes some imagination. It takes an ability to embrace rather than shy away from
change. The way that products are bought and sold has changed in every single sector. The way we
learn about products, research where to buy them and find the best service – all these things have been
radically disrupted by digital tools.
To date, the wealth community has been reluctant to accept this change and both banks and the
customers they serve have suffered. To put that right, private banks have to look outwards. They have
to accept that the bar for digital service lies outside of wealth management and they have to accept that
data will be at the heart of knowing, understanding and serving the investors of tomorrow.
Are you ready for the challenge?
About Kurtosys:
Kurtosys is a global provider of digital marketing and client reporting tools that help asset managers
attract and retain investor assets. Since 2002, Kurtosys has been using digital media to transform the
way that financial information is presented, shared and consumed.
Kurtosys offers a broad range of fund marketing and investor servicing solutions – from Fund
Factsheets andFund Tools to Client Reporting and Secure Portals.
About Scorpio Partnership’s Wealth Management Deal Tracker:
The 2014 M&A Dealtracker report is the 3rd report in a series tracking deals in the wealth management
industry. Below is a selective list of the analytical tables in the report.

6. The report is available for purchase. For more information email annie@scorpiopartnership.com
To read more blog posts from Scorpio Partnership visit http://www.scorpiopartnership.com/interactive