The rich and confused: spooked by the economy's twists and turns, an emerging mass market of newly affluent customers is desperately seeking wealth management services. Savvy bank marketers are responding.

• Author: Bernstel, Janet Bigham
• Position: Cover Story

First, there was the meltdown in the technology sector. Next, an across-the-board slide in the stock market Now, consumers are panicked and uncertain as to where to invest. What reads like a recipe for disaster may actually turn out to be a boon for the financial services industry. Shaken retail investors today are looking for reassurance. And, an emerging "mass affluent" market has new needs to be satisfied.

"If we look at the marketplace, the biggest opportunity is in wealth management for the newly affluent mass market," says Mike Cardiff, president and CEO of Fincentric in Vancouver, Canada, which in 1999 became the first software company to announce an enterprise solution for wealth management. "And by nature they're bringing in new demands on the institution."

Retail investors today want to be involved in managing their own portfolios as well as measuring the performance of their professional investment managers. The more assets a client has, the more functionality they want in their products and services.

"You've got to provide the affluent client with superior consultative advice and solutions," says Dan Arnold, president and chief operating officer of the Charlotte, N.C.-based UVEST Investment Services. "You have to sit down with the client and understand their objectives and needs with respect to their lifetime goals, then put together strategies to meet those needs."

Filling the position of trusted adviser is especially important now, when cash accounts are flush with money that's been diverted from a volatile stock market.

"As the economy improves and people start to invest again, banks need to hold onto those assets or they'll have the same problem they had in the late '80s when they lost them to brokers and others," warns Gardiff.

If fact, according to Meridien Research analyst Stephen Ross, these new market conditions and customer dynamics may make it impossible for banks to survive without a wealth management strategy. Advanced technologies have combined with altered market conditions to raise competition another notch.

"Wealth management has always been around; it's just been targeted to the high end of the market," claims Ross, analyst and author of the reports, "Wealth Management-Broker Productivity Tools," and "Wealth Management: Getting Downright Personal." "Technologies being introduced today are becoming more robust and allowing institutions, advisers and brokers to target the retail market--the mass affluent."

Give them what they want

What customers want is help in achieving their lifetime goals. To gain market share, Ross maintains that banks need to provide a higher level of customized, personalized and appropriate services to help these clients do that. There are a number of methods a financial service institution can undertake in that direction based on their core competencies and their target audience. Some, Ross says, axe fairly obvious, but "not necessarily that easy."

1. Acquire new products that would help round out the firm's competencies.

2. Attempt a merger and acquisition strategy, thereby purchasing additional expertise to enhance value for your customers.

3. Target new channels with existing offerings.

   The third approach, he says, is the quickest way to market. There are many independents providing a high level of service. With the right technologies, a larger institution can operate through those independent channels to target their existing customers.

   "Clearly the institution is going to need the technology to do this," explains Ross. "Extending those capabilities to independent channels is a quick and fairly inexpensive way of reaching new customer segments and new revenues."

   Key factors to remember about the dynamics of the technology needed to service this audience:

   * Wealth management is designed for the "masses," versus private banking, which is very personalized and expensive to deliver.

   * The unit cost of service must be kept down, which is where technology enters the picture.

   "You need to take advantage of technology and the Internet to allow people to develop their own plans, to be able to do that online and do it...