Product innovation in European wealth management 2008

European wealth managers continue to churn out new products and services as a means of keeping pace with or staying ahead of their competitors. This report analyses recent product launch activity, looking especially at new, innovative offerings and assessing anticipated trends in product and service development to 2010.

Report Highlights
new product and service features and benefits;

*Identifies future areas of focus for product and service innovation.



Wealth managers may be missing out on opportunities to drive business among business owners and entrepreneurs in particular, since limited development and launch effort is being committed to private equity investments and lending products, even though these categories are attracting strong interest from this very lucrative client group.

Wealthy investors are benefiting from moderate to significant innovation in three core areas. Just below 60% of wealth managers described new online services as quite innovative or very innovative, while 55% and 50% report significant new features and benefits being introduced to value-added services and capital-protected investments, respectively.

Development in online services is likely to be most vigorously pursued by wealth managers serving the mass affluent market. Providers should note, however, that online services are also highly valued by the critical segments of expatriates, inpatriates and, to a slightly lesser extent, business owners/entrepreneurs.
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Overview 1
Catalyst 1
Summary 1
Methodology 1
Executive Summary 2
Investment in the development of new products and services provides a platform for attracting core target customer segments 2
Innovation is centered on online, value-added and capital-protected solutions 2
Over the next two years, property and private equity products will be given greater focus 2
Profitability is only a secondary driver of innovation 3
Leading wealth managers are making a greater effort to institutionalize customer-driven innovation 3
3
Table of figures 4
Table of tables 5
Targeting Lucrative Customer Segments With New Products 6
Wealth managers have focused on launching new capital-protected investments and online services 6
Capital-protected investments and online services have been dominating product launch activity 6
Product launch priorities take the demands of the most important client segments into account 7
Wealth management service response: Providers need to align their product development strategies with the demands of the most lucrative customer segments 8
Tax planning and online services have broad appeal 9
New private equity investments and credit facilities will attract strong interest from business owners 10
Multi-faceted tax obligations make tax advice and new tax-efficient products a must for entrepreneurs 10
Entrepreneurs are on the lookout for new property investment opportunities 10
Activity in private equity and lending has been muted 11
Wealth management service response: The best banks for business owners will offer an expanded range of private equity and lending offerings 11
Wealth managers are targeting the retired wealthy with protected investments and estate planning 11
Capital-protected investments meet retirees' need for wealth preservation 11
Wealth transfer requirements call for tax-optimizing solutions 12
Wealth management service response: New offers aimed at retirees should focus on maximizing returns in a way that allows them to sustain their current lifestyle and provide for heirs 12
Wealthy women expect to be able to keep abreast of developments in their portfolios and access tax advice, but they also value support services and products for their philanthropic aspirations 12
Growing concern for social justice is prompting interest in charitable giving and socially-responsible investments 12
Wealth management service response: Wealth managers are expanding their portfolios of socially-responsible investments, as a core element of philanthropy and charitable services 13
Wealthy clients based overseas place emphasis on online portfolio management and cross-border tax services 13
Improved online functionality helps expatriates and inpatriates to stay in control of their investments while abroad 13
Wealth management service response: Online services from private banks and wealth managers allow clients to do more for themselves 13
Value-added services are primarily a complementary, but secondary proposition; however they may help to attract wealthy women and expats 14
New value-added services promise easier living at home or abroad 14
Wealth management service response: Third party providers allow wealth managers to provide the best of both worlds 14
Product and service development activity has been largely on target; however there is scope for greater attention to high-interest areas among entrepreneurs 14
Priority Areas For Innovation In Wealth Management 16
Innovation is centered on online, value-added and capital-protected solutions 16
Innovative enhancements of online functionality offer client benefits as well as cost efficiencies 17
Innovation in online services has been focused on enabling seamless international banking and wealth management 17
Wealth managers are also harnessing technology to improve the delivery of advice and service 17
Wealth management service response: Wealth managers targeting customers with international and online requirements must build their propositions around the concepts of one-world banking and access to premium information 18
Innovation in value-added services extends the client relationship beyond the investment portfolio 18
Value-added services are increasingly international in focus 18
Wealth management service response: Innovative value-added services must offer more than local access 18
Wealth managers are responding to client demand for predictability and protection with innovative capital-protected offers 19
New capital-protected investments for wealthy clients aim to provide greater protection and exposure to a wider range of underlying assets 19
Wealth management service response: Providers must be prepared to offer innovative solutions providing higher levels of protection or more diversified investment opportunities 20
Core products and services also offer scope for innovation and differentiation in service delivery 20
Future Trends In Product And Service Innovation 21
Over the next two years, property and private equity products will be given greater focus 21
The most attractive customer groups would welcome meaningful innovations from their wealth managers 21
Online services and capital-protected products top the list for future innovation 22
Future online services will attempt to empower clients more and more 23
Capital-protected investments will continue to harness new underlying assets 24
New value-added services will include more sophisticated advice for mass affluent clients and new complementary facilities related to property and art 24
New property investments will provide exposure to emerging markets 25
Inheritance planning advisory services will cater to the internationally mobile 25
Current market constraints provide strong incentive for building innovative and flexible private equity structures 25
Tax planning services will also be more internationally-focused 26
Emerging markets and hedge funds will also be high-priority areas 26
Profitability is only a secondary driver of innovation 27
Optimising innovative effort to appeal to core target customers groups may call for more emphasis on lending and charity/philanthropy services 28
New credit services will appeal to business owners 29
Wealthy women should be a key target of innovation in charity/philanthropy services 30
Leading wealth managers are making a greater effort to institutionalize customer-driven innovation 30
Wealth managers are leveraging their global scope and encouraging innovation 31
Appendix 33
Data 33
Definitions 38
HNW 38
Mass affluent 38
Methodology 39
Bibliography 39
Further reading 39
Ask the analyst 39
Datamonitor consulting 39
Disclaimer 39
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Table 1: We have identified a number of areas where there may be a lot of product/service launches in wealth management. Please rate each area on the level of activity you are currently seeing (on average). 33
Table 2: We have identified a number of potentially lucrative customer segments in wealth management. Please rate each on its attractiveness as an area to focus on. 34
Table 3: Please indicate if there is ""a lot of demand"" from the following customer segments for the following products and services. 35
Table 4: We don't think that activity = innovation. So, in which areas are you seeing product/service innovation in wealth management? Please rate each area on the level of innovation you are currently seeing (on average). 36
Table 5: How would you rate each of the following segments on their receptiveness to innovative products (on average)? 37
Table 6: In which of these areas do you expect to see more innovation in the next 2 years? 38
Figure 1: Capital-protected investments register the highest number of new product launches 7
Figure 2: Business owners are the most attractive client group for European wealth managers 8
Figure 3: Tax planning and online services have broad appeal 9
Figure 4: Online services have been the focus of innovative effort 16
Figure 5: Entrepreneurs and business owners are most receptive to innovation 22
Figure 6: Over the next two years, wealth managers will focus most on innovations in online services and capital-protected products 23
Figure 7: Wealth managers may need to commit to greater innovation in philanthropy services and lending to appeal to women and business owners 29
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