Recent data reveals that ‘know your client’ (KYC) processes cost banks on average USD60 million annually with 25 per cent of applications carried out in the UK being abandoned due to KYC friction, says Alessandro Tonchia, founder and director of Finantix.
Tonchia cites another study which shows that KYC efforts can take over 30 hours spanning several months, which, he points out, for wealth managers translates to having unsatisfied clients.
Since last being interviewed for Wealth Adviser, Tonchia reports growth for his company and development in three main areas. Firstly, in the client intelligence area, specifically the KYC area, and that this has led to other developments, within secondly, holistic wealth management and thirdly, in personalisation of services.
“This all stems from KYC,” Tonchia says. “KYC allows you to know proactively what your client might be interested in.” With KYC allowing wealth managers to gain insights into how to manage clients effectively, the holistic approach opens up, he says.
“You aren’t then just looking at investable assets but also looking at the entire wealth of a customer,” Tonchia says. “This might include property and its related mortgages; private equity investments; share options if you work for a big or growing company and so on.
“It’s not just your portfolio but your full balance sheet of assets and liabilities – what is the exposure, where are the risks and how can we help the client holistically across his whole financial life?”
The third development has been in personalisation. Tonchia says: “How do you personalise the reports the clients get? What research gets sent to them? What technology can make it a meaningful interaction with the client?”
Tonchia says that private banks and wealth advisers will naturally offer investment performance, but investors now want more from them in terms of looking after their global risk.
“You may already have a risk exposure with property in a country with a wobbly currency or you are in a start-up or there may be a wealth planning angle. When you understand the holistic assets and liabilities you can do a lot of advisory work that might be meaningful to the client.”
Tonchia believes that in terms of investment performance, wealth firms have good and sound methodologies but that there is only so much a firm can do with an extended portfolio.
“If performance is the key driver, then the standard investable products may not help you – you might want a different mix to add value.”
This is where personalisation comes in, he believes.
“A lot of our clients are in the private bank high net worth space,” Tonchia says. “The benefits clients appreciate is relevant, personalised and holistic advice, this includes matching research and recommendations to the clients interests and preferences.”
“It also goes back to the KYC argument,” he says, “because if I know this client has a lot of personal investment in fintech for instance, I can be mindful of that.”