The Juxtaposition: Relationship Management vs Wealth Management

The terms Relationship Management and Wealth Management are often used interchangeably because most people assume they refer to one and the same thing

The Juxtaposition: Relationship Management vs Wealth Management

In general, relationship management is a process that involves anticipating the needs of individual customers and taking steps to satisfy those needs. The underlying concept of this approach has to do with working relationships with each client, assessing his or her individual situation, and making suggestions for various services offered by a bank to improve the well-being of the customer.

 

From experience, relationship banking is mainly transactional and will in most cases not have a strategy to go along with it (long term or short term). It is mainly about supporting the journey of a customer alongside the financial quadrants, namely credit, transaction, insurance and savings. This is not to say relationship management is less important. It is the relationship manager or private banker who usually acquires customers and ensures they are retained by the bank. Moreover, a relationship manager is the gatekeeper and will play the role of establishing the client’s initial needs through an interaction with normal banking needs and products.

 

Wealth management is largely about taking the advisory to the next level and goes beyond relationship management. This is an investment advisory that combines other financial services to address the needs of affluent clients. Using a consultative process during the initial meetings, the advisor extracts information about the client’s wants and specific situation and then tailors a personalised strategy that uses a range of products and services. Wealth managers manage clients’ portfolios and offer brokerage accounts, helping clients to virtually invest in all the instruments of their choice. The following are some of the services that are commonly offered by wealth managers.

 

Risk Management: This is intended to minimise financial and other losses potentially associated with risks to your assets, business or health. Risk Management is an everyday occurrence and becomes more pronounced and ought to be done right when one has accumulated assets or there is an active investment in place. It is incumbent upon individual investors to be comfortable with the level of risk associated in their portfolio based upon their investment objectives and asset allocation established to implement the objectives. The Wealth Manager assists the client with the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions.

 

Retirement Planning: This is an aspect that brings chills to most people. Not that people are scared of retirement but the question is: Am I doing or have I done enough to retire happily and not to have to depend on anyone or on government welfare? Although we are discussing wealth management, in private banking not only affluent clients need to plan for their retirement. We all need to. The retirement planning process helps in setting retirement income goals and in taking the necessary steps for attainment of the goals. In the planning with a wealth manager, a client is able to identify sources of income, control of everyday expenses, and implementation of a savings and investment programme.

 

Philanthropy: According to Investopedia, this is defined as charitable acts or good works that help others or society as a whole. Philanthropy can include donating money to a worthy cause or volunteering time, effort or other forms of altruism. For some affluent banking clients, this is a big portion of the self-actualisation process and therefore they need to plan towards it.

 

Debt Structuring: It is a common occurrence that debt structuring seems to become a priority when one is in financial distress. This can also be done in line with the goals that a client wants to achieve. A client may want to reduce a loan term and pay a premium over the stipulated monthly instalment.  Debt restructuring examples can include extending or reducing the repayment term, reducing the interest rate and reducing the remaining balance. Banks also come up with new products from time to time and a debt instrument taken a while ago can always be substituted with a more relevant instrument matching the client’s profile.

 

Estate Planning: Don’t we all just wish we could live forever, if it was possible? Estate planning is the preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or demise. The planning will include a bequest of assets to heirs and settlement of estate taxes. Estate plans are commonly set up with the help of an attorney experienced in estate law. Private banks also have an in-house counsel to address this need for clients. It is worth noting that most people in Botswana die intestate (not having a will), hence we often witness unnecessary family fights and squabbles.

 

Our local affluent banking may not be on par with most of our peers internationally. However, in my view wealth management is one aspect that we really need to drive Customer Value Proposition in Affluent Banking. Currently, our private banking is skewed towards transactional banking, which is a great disservice to clients because they are not getting a holistic value as HNWI’S. Moreover, international private banks are moving away from transactional banking as they key driver but are becoming more focused on wealth management.

 

Your Relationship Manager should be able to lead the way if you have not signed up for any of the   wealth management services. A few banks do have wealth managers working side by side with the private bankers. Other banks can arrange a meeting with wealth managers who might be based elsewhere. It is a conversation worth having because almost everything is done in line with your goals as a client.  It is structured because it follows the strategy agreed between the client, the wealth manager and sometimes the relationship manager or private banker.

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e-mail: Gomolemo.manake@icloud.com