In today’s competitive and fragmented wealth management industry, standing out from the crowd is imperative. Clients have increasingly high expectations for service breadth, product choice, and digital experience. At the same time, margin pressures and a crowded marketplace make it harder to meet client expectations profitably.
What is the client value proposition?
To compete and thrive in this environment, wealth management firms must have a clear and compelling value proposition.
A firm’s value proposition refers to how it defines, communicates and delivers unique benefits to its target audience. It positions the firm in the market and establishes a competitive advantage.
Done well, the value proposition directly aligns the firm’s strategic objectives with client needs, service offerings, and front office operating model.
Why is the client value proposition important now?
Over a ten-year bull market in wealth management, firms have relied on the front office to drive organic growth through client relationships. Tech-driven scalability has been a lower priority.
Now, economic and regulatory pressures are squeezing margins. To stay competitive, firms must rely on an efficient model and demonstrate true client value for the fees charged. As a consequence, the market is bifurcating towards large, scalable universal offerings or smaller specialized models. Both paths require significant investment in technology, operations, and talent.
Technology investment is expensive, but when done well, brings significant benefits. Firms must know what their clients want, so they can invest their time and resources in the most efficient way possible and work towards a clear end goal.
What makes defining your value proposition difficult?
Taking a step back and clearly articulating why your clients bank or invest with you is not easy. Organic growth is not formulaic and is driven by relationships managed by individual advisors, largely through referrals from existing clients.
Defining the value proposition also requires knowledge of your cost, revenue and profitability drivers, to ensure that the proposition aligns to the target market and can be delivered. A process to systematically analyze these drivers is required, along with a deep understanding of the shifting market and changing client demands that need to be met.
This information must be synthesized with the operating model, governance and processes, to ensure your firm is optimized to deliver the client value proposition in practice.
Alpha’s seven step solution can support your firm in defining and clarifying its value proposition.
- What is happening in the market? Understand the market landscape now and over the next 3-5 years, and where your business fits within it.
- What do your clients think? Survey your clients and client advisors to understand why they bank with you, and what you are known for in the market.
- Which of your propositions are most profitable? Which are most scalable? Do they align to the needs of your target market? Analyze your cost and revenue data to identify your cost and revenue drivers. Overlay client demand and market trends to identify priorities for investment and market development.
4. What is your USP, and how should you communicate brand value? Define your commercial positioning and USP, and create a plan to communicate brand value.
5. How can you improve your market position? Identify strategic and operational levers and develop targets and goals which will bolster the value proposition. This should include target client segments, and personas.
6. How do you need to organize the business to deliver the value proposition? Understand how the operating model comes together to deliver the value proposition, including segmentation, incentives, product management and governance. Identify and prioritize changes to the model.
7. How and when can I deliver the changes? Create a roadmap to deliver the identified changes, assign responsibilities and work to deliver it.
What next?
- Are you confident that your value proposition differentiates your firm in the market?
- Do you articulate it well enough to establish a competitive advantage?
- Is your entire organization oriented around your value proposition in a way that will enable you to continue to meet the needs of existing clients and attract the client of the future?
- Can you scale and grow your business in this environment?
Alpha is well positioned to support wealth firms with the answers to these questions so come and talk to us to see how we can help.
About the Authors
Robin Nowell
Senior Manager
Robin is a Senior Manager at Alpha, where he leads the Client Value Proposition offering within Alpha’s UK Wealth Client & Digital practice. He has 9 years of experience in strategic planning and project management, including 5 years of consulting within Financial Services. His recent experience includes working with wealth managers to develop their client management strategy, operating model design and complex transformation delivery.
Caroline Burkart
Partner
Caroline is a Partner at Alpha and has had an extensive career in private banking and wealth management, both as a consultant and practitioner. She has led and consulted on multiple projects for leading private banks and wealth managers across the client value proposition. These include the client experience and client journey, client segmentation and pricing, with a strong focus on using data and insights to inform and shape strategy and business models.