From the April 2006 issue of Wealth Manager Web • Subscribe!

You Rang?

Customer service--true customer service such as returning phone calls in a timely manner or simply being polite and thoughtful or providing innovative solutions to problems--is so often taken for granted that even a wealth manager's highest-net-worth clientele may feel slighted. What is good customer service? If a wealthy customer has a superior experience working with a wealth manager, then chances are he or she will remain an investor and refer other clients. Customer service may be better measured as the overall "customer experience." That "customer experience" is exactly what the New York-based Luxury Institute calculates by surveying the top 10 percent of America's wealthy.

The Institute is an independent, objective research institution that provides a portfolio of proprietary publications and research that guide and educate high-net-worth individuals and the companies that cater to them on leading edge trends, wealthy consumer rankings and ratings of luxury brands and best practices. CEO Milton F. Pedraza brings with him more than 20 years of experience in finance, marketing, sales and senior management positions at Fortune 100 companies including Altria, Pepsico, Colgate, Citigroup and Cendant.

Recently, the Luxury Institute conducted a customer experience survey of 11 leading brokerage brands, each by its own wealthy customers. These include (in alphabetical order): A.G. Edwards Inc.; Ameriprise Financial; Charles Schwab Corp.; Edward Jones; Fidelity Brokerage Services; Merrill Lynch & Co.; Smith Barney; TD Waterhouse Group; UBS Financial Services; Wachovia Securities and Wells Fargo Investments. Of the 11 firms, Fidelity Brokerage Services led the group with the highest overall "customer experience" index score, measuring experience drivers, price-worthiness, customer retention and customer referral.

"The most critical indicators of Fidelity's strength in client experience are its customer retention and customer referral index scores," explained Pedraza. "Despite all the chatter from consultants and executives about customer relationship management, most companies are in the Stone Age in terms of measuring their own customer experiences--never mind measuring the competition's customer experience. Our survey tells executives what they need to know, although, for some, not necessarily what they want to hear-- and it's all from the voices of their own wealthy customers."

The customers surveyed by the Luxury Institute comprise more than 2,100 households with a minimum of $200,000 in gross annual income and net worth of at least $750,000, including home equity. (The actual median income was $395,000 and median net worth was $2 million)

The Institute's original source for the brokerage firms reviewed in the customer experience survey was the list of "top 50 brokerage firms ranked by number of retail reps" published Dec. 20, 2004 in Investment News, a Crain Communications publication.

"In my years working in consumer marketing and customer relationship management, we became focused on customer centricity and determining what are the best practices," Pedraza said. "Particularly during my years at Cendant, we found that there was not a lot of good information out there about wealthy consumers globally. As we did more research, we found the wealthy consumers were frustrated because they tend to be the best customers receiving poor service. They feel that while the product is good, the service is sub-optimal. They can spend $10,000 on a handbag, for example, and get treated poorly by store personnel, or return something and get treated badly."

In the Luxury Institute's customer experience survey, many wealthy investors said they stayed with a wealth management company, only to find the wealth manager conflicted or the payment structure was not aligned with the investor, or the firm was, in general, not meeting the sophisticated, custom needs of the wealthy investor.

"We've found that wealthy consumers today lack trust in advisors and feel that their compensation is not at all in line with their performance," Pedraza said. "So we surveyed high- net-worth individuals about their 'customer experiences' with wealth managers, asking them to rate their experiences from one to seven on these topics:

Does the company (or wealth manager) deliver consistent quality?

Is the service truly unique and exclusive?

Is it used by people who are respected and admired?

How was the buying experience? Did it make the customer feel special to buy it? What about when you return it?

"All of these questions help paint an accurate picture of the wealthy consumer experience."

Pedraza said he believes all consumers--especially wealthy ones--want to know that their wealth managers can deliver on the core benefit that they promise. Will they maintain, preserve and grow their customers' capital? What about return on investment and performance? Can the clients trust the managers?

"We strongly believe there is no better judge of wealth managers than the clients," the Luxury Institute founder stated. "It's not up to the SEC or the NYSE or any of these intermediaries. Private investors should be the arbiters of the wealth advisors. The wealthy investor's money is the core of everything...for me, it's how I take care of my mom, everyone in my family, my retirement plans, my investments. I believe that wealth management firms should be open to being judged on retention, and should engage their wealthy clients in a continuous dialogue to improve service levels of the firm. This is a real passion of mine because I want to help other wealthy consumers take control of their destinies by making it possible for wealth managers to help them in a constructive way."

Both institutional brokerage firm managers and independent wealth managers interviewed for this article said they take the Luxury Institute's advice and surveys seriously. These managers also believe superior customer experiences are essential to retaining happy high-net-worth clientele.

At TD Waterhouse Institutional Services in New York, Thomas Nally, managing director of institutional brokerage services, said his company focuses on delivering world-class service to their advisors and associates.

"In order to deliver service, you have to understand what customer service is," Nally said. "We conduct an exercise with our associates on the first day of training in which we ask them to become service critics about everything--from filling up their gas tanks, to hotel service, to restaurants, shopping, etc. On the last day of that training session, we ask them to give us a 10-minute presentation on one really fantastic service experience and on one really negative service experience. The bottom line is we make certain they are conscious of all aspects of service."

TD Waterhouse structures service teams to get to know the advisors' business and to be accessible at all times. "Whenever the managers call in, there is someone here on that team who understands their business and can really give them individual attention," Nally added. "The traditional brokers out there may have come from a situation where they had to do margin and legal and cashiering and transfers, which was taking them away from focusing on servicing their customers. Another way we help advisors is by shrouding them from all that day-to-day clerical activity so they can focus on growing their businesses."

Flexibility in operations is important to providing excellent customer service to wealth managers who, in turn, can offer that same level of service to their high-net-worth clientele, Nally said. "We'll never say, 'but it's our policy to...' to our managers. That's just hiding. We try to understand the end goal and come up with a solution to make the advisor happy, the customer happy and [meet] compliance from a legal standpoint."

Unlike many of the companies Pedraza has encountered, TD Waterhouse, he said, conducts third-party customer service surveys on a semi-annual basis. "We also make more outbound calls than [we] take inbound calls," Nally said. "We proactively reach out to our customers and to our advisors, making sure they know of any corrected 1099s or other issues that could otherwise blindside a wealth manager. We want them to be prepared and have all the tools they need to do business."

Schwab Institutional in San Francisco provides customized statements and quarterly reports for its advisors and wealth managers, co-branding them with the advisor so the clients are not confused, explained Barnaby Grist, managing director responsible for business consulting. "We count on our independent advisors to recognize their clients' needs, so we offer them a platform that allows them anywhere from 40 to 2,200 different strategies and they can pick whatever they want for their customers."

Schwab Institutional spends a lot of time and money helping those incredibly successful entrepreneurs become true leaders, Grist added, by sending coaches out to the firm, focusing on the human side of the business. "If advisors and managers need help with an issue, we have a great support system in place, providing supplementation when needed," Grist said. "If they need to explain trusts, we send out our trust experts. Whatever they need is also available through technology, so they can set up strategic funds for complex clients by going straight to the back-office tools for that purpose."

Likewise, Fidelity Registered Investment Advisor Group in Boston has focused resources around providing efficient service to intermediaries such as wealth managers so that they can provide the dedicated support they need, said Gary Gallagher, senior vice president and product manager. "We've found that the complexities of serving high-net-worth clients have really grown in wealth management and managers are doing everything from financial planning to estate planning, investment portfolios and running their own businesses. We recently started a technology platform that integrates products and services to meet the needs of clients, and we've made better partners of the managers in the process."

Fidelity has integrated trusts into their brokerage platform, allowing wealth managers to manage both brokerage and trust aspects seamlessly--a technology platform that Gallagher said is unique to Fidelity and beneficial to wealth managers.

"Regarding alternative investments for wealthy clientele, we're finding that advisors using that asset class as part of their portfolio management for diversification or for additional alpha opportunities have trouble interacting with these vehicles easily," Gallagher said. "What we've launched is an online management platform with a full inventory of every alternative investment, sorted by asset class, from REITs to registered funds to trust funds. Wealth managers can search and sort and find out what they are, who the Fidelity managers are, what the minimums are and whether the funds are open or closed, among other things. This allows the ability for online statusing, which was difficult to navigate before."

The last piece of Fidelity's alternative investment service for wealth managers is online imaging and storage, which allows managers to store limited partnership agreements for wealthy clients and then image them when necessary, Gallagher said. "We're allowing wealth managers more seamless access to managed accounts, providing them easy access to mutual funds, wraps, ETFs and alternatives, with back-office tools, performance reporting and unified managed account capabilities."

Gallagher and other institutional and independent managers agree that customer service is critical to retaining all customers--not just wealthy clientele.

"We believe that service derives from making it easy to interact with providers, so they can focus on servicing the end client," Gallagher said. "We empower wealth managers on a day-to-day basis and provide them the technology and products they need --and their clients need-- to be successful."

At Legend Financial Advisors in Pittsburgh, financial advisor Jim Holtzman said the firm gets involved in all aspects of their clients' financial lives, from cleaning up credit reports to assisting clients in obtaining mortgages to helping them review contracts for nursing homes or retirement centers.

"We do everything we can to make life easier for our clients," Holtzman said. "We've even gone out to our customers' houses to help them set up computers so they can use Quicken to help manage their household cash flow. We'll work with the mortgage company or the bank, so that all the clients have to do is show up for the closing and sign the paperwork. We also take care of their accounting and insurance questions."

Indeed, one might characterize Legend Financial Advisors as a firm that goes above and beyond the call of normal financial planner duty. When their physician clients at a large medical practice decided to split the practice and accordingly, their retirement plan assets, Holtzman and others from Legend visited the doctors and helped them with basic business planning needs, office leases, tax planning, etc., to help them break the big practice down into smaller practices.

"We want our clients to feel happy and empowered," Holtzman said. "We set benchmarks and goals and track and measure all the financial processes, but ultimately, we think of our customers as the independent financial advisor making the final decisions."

In McLean, Va., The Monitor Group helps high-net worth clients simplify their lives, said Cal Brown, vice president of planning.

"We are careful to point out to our clients that we don't sell anything here other than advice," Brown said. "Our clients thank us, because many of them came to us with 20 accounts and may have three when they leave. We make their lives simpler and more tranquil through excellent customer service."

Unlike other small independent firms, The Monitor Group does not assist with paperwork in completing mortgages or helping find retirement homes, Brown said. "We can point our wealthy clients in the right directions for these services, but we don't do that paperwork. I think that's nice that other companies do that, but it's inefficient, and it takes your eye off the ball."

One service they do provide is tax return preparation, Brown said, since managing partner Glenn Kautt is an enrolled agent as well as a financial advisor. Clients with more than $2 million invested receive free tax return preparation and those with less pay a nominal fee of a few hundred dollars for a tax return.

"With higher-net-worth individuals, there are more tax opportunities," Brown said. "You really know your clients when you prepare their tax returns. And with many of our wealthier clientele, we will visit them personally out of town, sometimes in conjunction with a business meeting, sometimes not. They trust us, and this bonds us to them."

Another service The Monitor Group provides wealthy clients is conducting family meetings with their adult children. "Often these kids are in their mid-20s and may have no idea about their parents' wealth," Brown said. "We let them know what's going on with trusts and other things in a controlled environment, do some estate planning and help them make intelligent decisions."

There are select events for wealthy clients as well, Brown added, such as cruises on the Potomac River in the summer months on Kautt's yacht or theater nights at Kennedy Center. "When I think of customer service, I think of answering questions in a timely manner, for all clients, not just high-net-worth customers," Brown said. "We try to get back to everyone in at least 24 hours."

Patti Houlihan, manager of Houlihan Financial Resource Group in Reston, Va., said customer service for wealthy clientele is all about the relationship and providing value to those consumers.

"You have to have your customers' trust and they have to perceive that there is value in what you do," Houlihan said. "You're managing expectations. Clients are never imposing, because that's what we're here for."

Houlihan said she is there to help, even if it means driving four hours to help a client find a place to live. "If I find out, for example, that a client has just been diagnosed with cancer, I go to wherever they are, I organize their office, their statements, make sure Medicare is up to date and do everything I can to make their lives easier," she said. "These things don't have to do with managing assets, but they have everything to do with helping clients get through their lives."

Houlihan says that while she loves numbers and can take the risk balance out of any equation--look at sectors, large-, mid- and small-caps, fixed income and equity--as well as the next advisor, she tries to go the extra mile to serve her wealthy clientele. She once helped a daughter find a condominium in Florida for her mother, because "we're all about building relationships with our clients."

Building relationships means delivering bad news when necessary, doing the gifting but remaining professional, Houlihan said. "I'm strong when I'm in my professional role, when you have to stay on point, deliver the message and offer solutions. It can be emotionally draining to be so available to your clients, but I try to be loving and objective at the same time. At the end of the day, that's what the wealthy clients want--they want to know they're important to you."

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