Client Satisfaction Falls for the Fourth Successive Year

Research published today by strategy consultants Market-Dynamics Research & Consulting Ltd (MDRC) shows that client satisfaction in UK private banks and wealth managers has fallen for the fourth successive year, despite a recovery in investment performance.

Over 1900 high net worth (HNW) individuals participated in the research study which took place in the 2nd half of 2003. The responses covered the entire client experience at the private bank or wealth manager and, in particular, how well the service provider met their clients’ expectations.

From this data MDRC has been able to develop a Client Satisfaction Index for the private banking and wealth management sector, and has been able to identify relative client satisfaction between individual firms, and their peer groups. The index has been constructed to cover the entire client experience from the initial introduction to the firm through to the continuing relationship with the client manager. The weighting attached to each of these components was derived from the relative importance HNW individuals attached to that component.

The study also examined the client satisfaction trends at firms that are wholly or largely investment or wealth managers compared to those that are private banks offering a full range of banking and investment management services. Over the 4 years from 2000 - 2004, full service private banks achieved an average rating 19% higher than firms offering solely a wealth management service. In particular, clients of private banks gave their relationship managers a significantly higher rating for financial knowledge than clients of wealth managers. Richard Williams added, "Wealth managers appear to be less successful in meeting their clients’ expectations. Increasingly, clients are looking for a "One-stop" financial services solution and investment management is only one facet of that solution. We also see a difference in client satisfaction between "True" private banks where all a client’s financial requirements can be met in-house and the private banking "package" offered by some retail banks where many of the services levels are essentially derivatives of the parent bank’s offers, and the relationship manager is often a relatively junior member of staff."

Although there has been an erosion of Client Satisfaction levels across the industry, substantially fewer firms received a "poor" or "unsatisfactory" score than in 2002 and there has been an improvement in client satisfaction in bottom quartile firms. Our research suggests that

many firms now recognise the importance improving client satisfaction and have initiated programmes to understand the key drivers. However, as in previous years, the continuing restructuring of businesses and reconfiguring of business models is having an adverse impact on the relationship between the client and the firm. Many businesses are now aware that previous actions to manage costs have reduced client service, but few have realised the extent to which their actions have strained the relationship with their clients.

Richard Williams added: "There are 3 broad conclusions from MDRC’s research. Firstly, it is possible to improve client satisfaction in a relatively short time by initiating a formal client retention programme, we have seen some scores increase by 30% over 12 months where these programmes have started. Secondly, firms must consider carefully the effect of any change in business model on their client base and any change should only be implemented if the impact on the client is clearly understood. Thirdly, our research has shown that too many firms do not understand the expectations of their clients, and even more disappointing is that fewer than a quarter of firms have a robust method of measuring client satisfaction. Too many firms are relying on an overall improvement in investment performance to improve client sentiment in the private banking and wealth management industry. Although the gap in client satisfaction between the top and the bottom of the industry has narrowed, the difference in approach between the best firms and worst firms is as large as ever."