Bank executives are touting holistic financial planning advice as a strategy to attract assets from the baby boomer generation, but few banks actually offer fully integrated guidance to customers, according to recent research by SEI Investments.
Though banks say that boomers are demanding financial advice tailored to their individual life goals, these institutions have not substantially changed their business models to accommodate the demand, said Al Chiaradonna, the vice president of strategy and innovation in the private bank and trust segment at SEI in Oaks, Pa.
SEI has worked with banks to develop holistic financial planning models, he said, but in his company's experience most banks lack a fully integrated advice model. Most are still pushing individual products rather than offering comprehensive solutions that include "life events" such as planning for a second home or paying for long-term medical care, he said.
A company survey of 21 bank wealth management executives last month found that 52% believed they are differentiating their wealth management services from competitors' offerings by supplying comprehensive advice. But when asked what their customers ask advice about, the executives most often mentioned traditional topics such as estate planning and financial planning (19% each), not life events like elder care or special-needs children, the survey said.
Banks are actively courting baby boomers because many are affluent or expect to inherit substantial wealth from their parents, Mr. Chiaradonna noted. Earlier generations were more focused on preserving assets rather than funding life goals in retirement, he said.
"The emerging wealthy are creating a need for finances built around life events," he said. "It's a tremendous opportunity for banks, but it's also a tremendous challenge."
Though few banks have begun to adopt a holistic financial planning platform, most recognize the need to reorient their wealth management business models, he said. "You need a process to get the right products to the right person at the right time," he said.
Sixty-two percent of the executives said technology is the most significant stumbling block to a fully integrated advice offering. Bank divisions often do not share customer data and client relationships, Mr. Chiaradonna said, and they often must struggle to link disparate product platforms.
Banks can begin to develop a comprehensive wealth management strategy by designating a "point person" who acts as a client relationship manager and as liaison with other bank divisions to get customers products that address their life goals, he said.
"Banks need to have an integrated approach to becoming a trusted financial adviser," he said. "They're trying to create a centralized relationship conduit - someone who manages the client's relationship and reaches back into the organization to put products in place."
Client segmentation - for example, affluent, high-net-worth, and ultra-high-net-worth - is also recommended. Each should be offered a different level of service, Mr. Chiaradonna said.
Customer communications based on life goals rather than investment performance will also help banks supply more holistic financial planning, he said. For example, banks could issue statements specifying how much more savings a customer needs to cover college tuition or some other life event.
