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SOLUTIONS International

We have been keeping a closer eye on the Facebook phenomenon of late. Until recently, companies in every sector saw social media as the way to go, and Facebook’s IPO was hailed as the next big thing; now the initial euphoria has evaporated somewhat. The performance of Facebook’s shares continues to disappoint, and doubts seem to be emerging about the substance and earnings potential of social media. The optimism on which Facebook’s business model is based is reminiscent of the battle between bricks-and-mortar companies and internet firms around a decade ago. Then, as now, the new business models contain the nucleus of future trends, even though the future still has to pass the test of experience. The emerging nations, chief among them China, may prove to be the drivers of the transition from the old world to the new. It is here that we can expect to see the fastest economic growth globally in the years ahead. Increasing purchasing power is raising the needs and expectations of consumers. According to Google’s «Our Mobile Planet 2012» study, China already has a higher market penetration than Germany when it comes to smartphones (33%). That will undoubtedly lead to changes in habits and behaviour that are especially relevant for the financial industry, trading as it does in intangible assets. This issue of SOLUTIONS brings the two worlds together. The Avaloq project at Coutts and the new distribution models for the reinsurance sector represent the «classic» approaches. On the other side are trends such as social media in banking and insurance, and external asset managers in Asia, who still have to demonstrate their future viability. But one thing that, for all the technological innovations, will remain key – and perhaps even gain in importance – is interpersonal relationships. That applies across corporate management (as strategy expert Harry Korine explains in the «From Outside In» interview), client advisory services at banks and insurance companies – and, of course, the contact that Solution Providers maintains with its clients. We hope you enjoy reading these fascinating assessments of the old world and the new, and look forward to our next face-to-face meeting.

We have been keeping a closer eye on the Facebook phenomenon of late. Until recently, companies in every sector saw social media as the way to go, and Facebook’s IPO was hailed as the next big thing; now the initial euphoria has evaporated somewhat. The performance of Facebook’s shares continues to disappoint, and doubts seem to be emerging about the substance and earnings potential of social media.

The optimism on which Facebook’s business model is based is reminiscent of the battle between bricks-and-mortar companies and internet firms around a decade ago. Then, as now, the new business models contain the nucleus of future trends, even though the future still has to pass the test of experience.

The emerging nations, chief among them China, may prove to be the drivers of the transition from the old world to the new. It is here that we can expect to see the fastest economic growth globally in the years ahead. Increasing purchasing power is raising the needs and expectations of consumers. According to Google’s «Our Mobile Planet 2012» study, China already has a higher market penetration than Germany when it comes to smartphones (33%). That will undoubtedly lead to changes in habits and behaviour that are especially relevant for the financial industry, trading as it does in intangible assets.

This issue of SOLUTIONS brings the two worlds together. The Avaloq project at Coutts and the new distribution models for the reinsurance sector represent the «classic» approaches. On the other side are trends such as social media in banking and insurance, and external asset managers in Asia, who still have to demonstrate their future viability.

But one thing that, for all the technological innovations, will remain key – and perhaps even gain in importance – is interpersonal relationships. That applies across corporate management (as strategy expert Harry Korine explains

in the «From Outside In» interview), client advisory services at banks and insurance companies – and, of course, the contact that Solution Providers maintains with its clients.

We hope you enjoy reading these fascinating assessments of the old world and the new, and look forward to our next face-to-face meeting.

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Management know-how for practical use<br />

SolutionS<br />

Social Media<br />

Retail banks take<br />

their first steps<br />

Page 4<br />

Professor Harry Korine<br />

Why companies choose<br />

impracticable strategies<br />

Page 8<br />

Asian Private Banking<br />

Client focus as a key<br />

distinguishing feature<br />

Page 16<br />

Reinsurance distribution<br />

Of «Hunters» and «Farmers»<br />

in client marketing and care<br />

Page 34


Editorial<br />

«Then, as now, the new business models contain the<br />

nucleus of future trends, even though the future still has<br />

to pass the test of experience.»<br />

2 SolutionS<br />

Michael Gerber<br />

Managing Partner & CEO<br />

Solution Providers Switzerland<br />

I’ve been keeping a closer eye on the Facebook phenomenon of late. Until<br />

recently, companies in every sector saw social media as the way to go, and<br />

Facebook’s IPO was hailed as the next big thing; now the initial euphoria has<br />

evaporated somewhat. The performance of Facebook’s shares continues to<br />

disappoint, and doubts seem to be emerging about the substance and earnings<br />

potential of social media.<br />

The optimism on which Facebook’s business model is based is reminiscent of the<br />

battle between bricks-and-mortar companies and internet firms around a decade<br />

ago. Then, as now, the new business models contain the nucleus of future<br />

trends, even though the future still has to pass the test of experience.<br />

The emerging nations, chief among them China, may prove to be the drivers of<br />

the transition from the old world to the new. It is here that we can expect to see<br />

the fastest economic growth globally in the years ahead. Increasing purchasing<br />

power is raising the needs and expectations of consumers. According to Google’s<br />

«Our Mobile Planet 2012» study, China already has a higher market penetration<br />

than Germany when it comes to smartphones (33%). That will undoubtedly lead<br />

to changes in habits and behaviour that are especially relevant for the financial<br />

industry, trading as it does in intangible assets.<br />

This issue of <strong>SOLUTIONS</strong> brings the two worlds together. The Avaloq project<br />

at Coutts and the new distribution models for the reinsurance sector represent<br />

the «classic» approaches. On the other side are trends such as social media<br />

in banking and insurance, and external asset managers in Asia, who still have<br />

to demonstrate their future viability.<br />

But one thing that, for all the technological innovations, will remain key –<br />

and perhaps even gain in importance – is interpersonal relationships. That<br />

applies across corporate management (as strategy expert Harry Korine explains<br />

in the «From Outside In» interview), client advisory services at banks and<br />

insurance companies – and, of course, the contact that Solution Providers<br />

maintains with its clients.<br />

I hope you enjoy reading these fascinating assessments of the old world and<br />

the new, and look forward to our next face-to-face meeting.


2<br />

4<br />

8<br />

10<br />

13<br />

16<br />

19<br />

22<br />

26<br />

30<br />

34<br />

38<br />

42<br />

Editorial<br />

Social media strategies of financial services providers are still at an experimental stage<br />

Retail banks take their first steps with Facebook and Twitter<br />

Professor Harry Korine shares his observations on why companies choose impracticable strategies, the increasing use<br />

of generic language in senior management communication, and the utility of realistic strategies<br />

«The top management of companies whose strategies fail often includes people who lack inside knowledge»<br />

Communication, transparency, speed, and integration as trump cards for interacting with discerning clients<br />

Investment advisory services à la carte – fit for the future<br />

FATCA – regulatory imperialism or general trend towards absolute fiscal transparency<br />

US public authorities set high regulation hurdles<br />

The importance of efficient customer communication as the foundation of an outstanding client relationship<br />

Satisfied clients in Asia thanks to a focus on interaction<br />

Client focus as a key distinguishing feature in Asian private banking<br />

Kaizen process management in Asia<br />

Wealth Division of the Royal Bank of Scotland implements Avaloq<br />

A huge step for Coutts and British private banking<br />

How financial services providers can profit from the cognitive process of cost-benefit perception<br />

From classical pricing theory to behavioural pricing<br />

New communication technologies are changing consumer behaviour – opportunities and risks for insurance companies<br />

What insurance companies can learn from Apple<br />

Reinsurance distribution in transition<br />

«Hunters» and «Farmers» in customer marketing and care<br />

Portfolio segment profitability maps support decisions on the possible courses of action<br />

Optimizing portfolio profitability in life insurance<br />

CRM implementation at Swiss Re<br />

Efficient focus on the customer<br />

Content<br />

Publishing details<br />

Articles can be accessed via www.solutionproviders.com.<br />

Published by: Solution Providers Schweiz AG, Dübendorf/Zürich, Switzerland, www.solutionproviders.com / Editor: Ballhaus Wording, Zurich,<br />

Switzerland / Realization: Andy Braun Gestaltung, Zurich, Switzerland / Visual Concept: Maximalism GmbH, Auslikon, Switzerland /<br />

Printer: Neidhart + Schön AG, Zurich, Switzerland, using FSC-certified paper. Feedback and inquiries to: Solution Providers Schweiz AG,<br />

Neugutstrasse 89, CH-8600 Dübendorf/Zürich, Switzerland, phone +41 44 802 2000, fax +41 44 802 2001, solutions@mailsp.com<br />

Copyright: The reproduction of articles is permitted with the agreement of the publisher if the source is acknowledged. Articles by guest<br />

authors do not necessarily represent the opinion of the publisher.<br />

Photos: p. 1, 4, 11, 17, 22, 26, 30, 34, 38 iStockphoto; p. 8 Harry Korine.<br />

SolutionS 3


Strategy<br />

Social media strategies of financial services providers<br />

are still at an experimental stage<br />

Retail banks take their first steps<br />

with Facebook and Twitter<br />

4 SolutionS<br />

Transparency<br />

cultural Integration<br />

Entering new markets


Social media are omnipresent in the<br />

press and are also on the agenda 2012+ of<br />

many banks and financial services providers.<br />

For several years, Gartner Technology<br />

Research has positioned the various<br />

business applications of «social<br />

technologies» on a hype cycle. However,<br />

as expected most technologies have been<br />

placed in the segments «technology trigger»<br />

and «peak of inflated expectations».<br />

Closer inspection shows that financial<br />

services providers in particular are finding<br />

it difficult to position their core business<br />

or brand on the new channels and<br />

with the new technologies.<br />

In the last quarter of 2011, Solution<br />

Providers supported a survey on the current<br />

position of Swiss retail banks in the<br />

area of social media. The survey was carried<br />

out at 12 retail banks as part of<br />

a Master’s thesis at the Department of<br />

Informatics, University of Zurich. The<br />

primary focus was on the current use of<br />

external social media channels, the potential<br />

that the institutes saw in the<br />

future and which models and approaches<br />

the banks followed to reach, interest and<br />

even to bind their target groups via<br />

these channels. In the survey, eleven of<br />

the 12 largest suppliers of retail banking<br />

services (measured by balance-sheet<br />

total) and one of the smaller regional<br />

bank group companies were questioned.<br />

Keyword social media<br />

The term social media was coined in 2005<br />

and is difficult to define. The term social<br />

web, which represents part of Web 2.0 and<br />

focuses on those areas, which include the<br />

support of social structures and interaction<br />

over the network is used in a similar<br />

way. A social media application usually<br />

consists of three components: firstly<br />

a (Web-based) application which enables<br />

people to communicate and therefore exchange<br />

information to develop and cultivate<br />

relationships and cooperate in social<br />

and community life, and secondly the<br />

data generated by users in the application<br />

(user generated content). The third component<br />

is the relationship between the<br />

people (e. g. friends, «like» and other ratings,<br />

«follower», places, etc.). What makes<br />

it so special is that the application uses the<br />

relationship structure and can utilize it in<br />

many ways. Thus various forms of application<br />

are summarized under the generic<br />

term «social media» which covers<br />

numerous subareas of interpersonal<br />

communication via electronic channels.<br />

These include «media sharing» (e. g. You-<br />

Tube, Flickr), «social bookmarking» (e. g.<br />

Mister Wong, Delicious), web blogs,<br />

micro blogs (e. g. Twitter), wikis, rating<br />

platforms (e. g. dooyoo.com, holidaycheck.<br />

com), interactive sales consulting via the<br />

web and, of course, social networks (e. g.<br />

Facebook, Google+).<br />

Where do Swiss banks stand today?<br />

Results regarding the current use of social<br />

media channels show the following picture:<br />

nine of the twelve banks have a Facebook<br />

presence. As can be expected, the<br />

content on offer differs greatly: most of the<br />

banks (seven of nine) focus on non-bank<br />

subjects such as competitions, prize draws<br />

and announcing sponsoring events. It is<br />

therefore hardly surprising that only three<br />

of the banks surveyed concentrate on<br />

financial issues. It appears that a recipe for<br />

the successful combination of basic retail<br />

services and social media has yet to be<br />

found. Swiss banks are also hardly leaders<br />

as regards activity and interaction in their<br />

presence. Daily entries by the banks on<br />

Facebook are rather seldom in Switzerland.<br />

However, eight of nine banks with a Facebook<br />

presence make regular postings (last<br />

posting less than two weeks old). At least<br />

three banks support customer services via<br />

social media to some extent; interestingly<br />

Strategy<br />

«Even if one only considers personal credits<br />

(social lending) or joint investment decisions<br />

(social investment), social media have the potential<br />

to fundamentally change banking. It is not yet<br />

clear just how long existing technical and<br />

regulatory barriers will continue to protect the<br />

traditional business model of banks.<br />

Many Swiss banks are therefore experimenting<br />

with social media, but the traditional business<br />

model is not being questioned. Are social media<br />

really only a question of channel management?»<br />

Prof. Dr Gerhard Schwabe,<br />

Chair for Information Management, University of Zurich<br />

two of these banks are those which have<br />

financial content. User comments can be<br />

found in half of the banks and five banks<br />

respond to these relatively promptly. However,<br />

only one of the banks which offer<br />

financial subjects answered user comments<br />

on a page. There is a long way to go<br />

to achieve active communication and a<br />

dialogue between banks and users, and a<br />

dialogue between users on events, subjects<br />

or questions has (so far) not developed.<br />

A glance across the border shows a picture<br />

with certain parallels as regards positioning,<br />

but with a significantly wider distribution.<br />

In the report of the British market<br />

research and industry service VRL on the<br />

top 150 banks on Facebook, the leading<br />

positions are taken by institutes which<br />

have also built their presence around<br />

non-financial subjects. The subject for JP<br />

Morgan Chase bank, surveyed at first<br />

place, is the charitable activity of its<br />

«Chase Community Giving». Capital One<br />

focuses its Facebook page on college sport<br />

and virtual Facebook games, and Barclays<br />

deals with the football Premier League,<br />

which it sponsors. American Express is<br />

the only mixed platform. It offers dis-<br />

SolutionS 5


Strategy<br />

counts and competitions in connection<br />

with using its card, which is at least a business-related<br />

positioning. These banks<br />

have between one and three million<br />

«likes» on their pages – which represents<br />

a community of considerable size. However,<br />

it is necessary to mention that the<br />

number of «likers» is not a major rating<br />

parameter for a social media presence.<br />

These «likes» cannot be equated to active<br />

participants. Following Jakob Nielsen’s<br />

90-9-1 principle, of 100 participants 90<br />

are observers only (or inactive), nine participants<br />

are sometimes and only one participant<br />

is really actively involved. The<br />

number of Facebook likers in Swiss retail<br />

banks seems rather modest in international<br />

comparison. Only one Swiss bank has<br />

more than 38,000 likers and would thus<br />

rank around 40th in the top 150 banks,<br />

four banks have 1,000 to 10,000 (rank<br />

100+) and the rest disappear into the social<br />

media fog with less than 1,000 likers.<br />

Five banks have a channel on Twitter, the<br />

most important micro-blogging service<br />

in Switzerland. Two focus on customer<br />

service and two on providing information<br />

on bank and non-bank-related subjects.<br />

Only one bank covers various areas<br />

in its communication. Twitter is only<br />

used by one bank for competitions and<br />

prize draws. With all «twittering» banks<br />

the most recent information is less than<br />

two weeks old. It is questionable whether<br />

this is sufficient in our fast-paced times.<br />

A rather modest picture can also be observed<br />

as regards coverage: only one<br />

Swiss bank has more than 5,000 followers,<br />

three others have at least a small group<br />

6 SolutionS<br />

of between 100 and 999 followers. In<br />

international comparison only one bank<br />

can compete and just manages a position<br />

within the top 30.<br />

50% of banks surveyed have their own<br />

YouTube channel but only four of these<br />

banks regularly update. If one considers<br />

that YouTube is currently the second<br />

largest search engine after Google, the<br />

positioning of Swiss banks is hardly<br />

outstanding.<br />

However, seven of the Swiss retail banks<br />

surveyed have a reference on their<br />

homepage, sometimes small and almost<br />

hidden, sometimes very prominent, to<br />

their social media presence. It appears<br />

that financial institutes rely on new<br />

media with varying degrees of confidence<br />

or at least rate their potential differently.<br />

Experience and plans<br />

In addition to the survey of current positioning,<br />

a structured interview with the<br />

responsible banking representative was<br />

carried out. Experiences gained with social<br />

media are as diverse as the number of<br />

interview participants. The fast pace and<br />

the associated opportunities and risks<br />

were mentioned most frequently. However,<br />

interviewees also frequently named<br />

the aspect of careful navigation through<br />

the various existing directives, restrictions<br />

and limitations. Technical issues<br />

were generally seen as resolvable. During<br />

the interviews, bank representatives<br />

often talked of the difficulty of finding<br />

the right or relevant content for the presence<br />

or the communication. Surprisingly,<br />

«The growing wish of customers to have<br />

a coordinated deployment of online media<br />

poses great challenges for the banks involved –<br />

and not only in the selection and supply of relevant<br />

content. It is also necessary to rethink the entire<br />

concept of customer address and service.»<br />

the majority of the banks surveyed have<br />

yet to define the target group for social<br />

media activities. However, three banks<br />

have aligned their activities and offers to<br />

young people. The basic idea of the surveyed<br />

banks is to build up a social media<br />

presence and then to see who responds to<br />

it. In principle, the early but reserved entry<br />

into social media is beneficial; ensuring<br />

that the company’s presence on these<br />

channels is not created by third parties<br />

who could damage the company’s image<br />

through unauthorized content. This happened<br />

to the Bank of America with a<br />

«brand jacked» presence on Google+.<br />

The effort for channel maintenance (excluding<br />

creation of content) currently<br />

varies from «along the way» to a FTE<br />

for the banks surveyed. However, most<br />

banks stated that they plan to dedicate<br />

additional effort to the subject in the<br />

next years. The interview participants<br />

see the greatest benefits in positive image<br />

and branding. But four interviewees<br />

have yet to observe an advantage from<br />

their social media presence. Eight banks<br />

state that they carry out statistical social<br />

media monitoring. Eight banks also<br />

check and evaluate content, although<br />

only three of these said that they react<br />

to critical content. Here it can again be<br />

seen that the interaction bank–customer<br />

has yet to gain a foothold.<br />

When asked about plans and approaches<br />

for the future, half of the banks said<br />

they intended to develop their channel<br />

portfolio and to establish it professionally.<br />

Another target often mentioned<br />

was the further integration of the<br />

channels, either in the company homepage<br />

or in another social media application.<br />

The companies also want to focus<br />

on the challenges of content, finding<br />

relevant information and subjects,<br />

setting up better monitoring and<br />

strengthening customer dialogue. There<br />

is still widespread uncertainty as to<br />

whether this can be achieved with bankspecific<br />

subjects.<br />

Quo vadis?<br />

It is widely recognized that the spread of<br />

the Internet in general and social media<br />

in particular will change communication<br />

and cooperation with customers. Today<br />

interested customers are better informed<br />

than ever before as a great amount of information<br />

is available on the Internet at<br />

any time and products and services can<br />

be compared and commented upon. The<br />

growing wish of customers to have a coordinated<br />

deployment of online media


poses great challenges for the banks involved<br />

– and not only in the selection and<br />

supply of relevant content. It is also necessary<br />

to rethink the entire concept of<br />

customer address and service. A coordinated<br />

advisory process via numerous<br />

channels could become the backbone of<br />

new bank business in the future, if financial<br />

services providers are prepared to<br />

closely scrutinize the traditional processes<br />

and patterns, which have been<br />

cultivated over the years.<br />

Strategy<br />

«Most banks have recognized social media as an additional<br />

channel by which to communicate with customers and have taken<br />

first steps in this direction. A major challenge is the formulation<br />

of the business-related utility of social media strategies and the<br />

link between open-hearted social media and the traditional rather<br />

reserved and also statutorily regulated communication culture<br />

surrounding banking products.»<br />

Robinson Aschoff, Head of Research Unit «Social Media in Organizations»<br />

at Prof. Dr Gerhard Schwabe’s Chair for Information Management, University of Zurich<br />

In addition to marketing and distribution<br />

tasks, banks will possibly face other challenges:<br />

new services and forms of cooperation<br />

are developing on social media<br />

platforms in the financial area. A few keywords<br />

are «social lending», «crowd<br />

funding/financing», «social investing»<br />

and «personal finance management».<br />

They all describe services around the subject<br />

of money which exploit the advantages<br />

of social networks and their recommendation<br />

structure and no longer need<br />

to be obtained from a bank. To what extend<br />

these new forms of cooperation will<br />

develop into serious competition for<br />

established financial services providers<br />

remains to be seen. Meanwhile during<br />

the interviews, the impact it would have if<br />

a company the size and character of<br />

Google or Facebook decided to open some<br />

form of bank was often reflected upon. It<br />

is possible that the bank of the future is<br />

being actively discussed by a number of<br />

institutes behind closed doors.<br />

In the last quarter of 2011, Solution Providers supported a survey on the current<br />

positioning of Swiss retail banks in the area of social media as part of a Master’s<br />

thesis at the Department of Informatics, University of Zurich. Of the 12 largest<br />

retail banks, 75% have discovered new media for themselves and have a presence<br />

on Facebook or a Twitter account. However, currently it is non-bank subjects which<br />

are generally available on the new channels with only isolated instances of financial<br />

and product information or even customer interaction to be found. In general,<br />

at this point Swiss banks have reserved channels to ensure a presence but it is at<br />

an experimental stage. The opportunities and challenges which result from new<br />

media for banks are noteworthy – be it in the new definition of customer<br />

communication or in the development of new forms of financial services.<br />

SolutionS 7


From Outside In<br />

Professor Harry Korine shares his observations on why companies choose<br />

generic language in senior management communication, and the utility<br />

«The top management of companies<br />

often includes people who lack inside<br />

Harry Korine is an Adjunct Professor of Strategy at INSEAD. He combines<br />

expertise in strategy and governance to offer a unique perspective on business.<br />

As an educator, consultant, and public speaker, he engages with executives, board<br />

members, and owners to address questions of strategy development and longterm<br />

value generation, especially in a multinational context. His research has<br />

resulted in several books and numerous articles, including «The Leap to<br />

Globalization» (Jossey-Bass, 2002), «Entrepreneurs and Democracy»,<br />

(Cambridge University Press, 2008) and «When You Shouldn’t Go Global»,<br />

(Harvard Business Review, 2008). His newest book, «Firm Ownership,<br />

Management, and Strategy», is scheduled for publication next year (Cambridge<br />

University Press, 2013). In bridging the worlds of research and practice, he is able<br />

to help companies turn leading edge ideas into concrete business actions. Further<br />

information can be found at www.harrykorine.com.<br />

8 SolutionS<br />

Solutions: Harry Korine, what unusual<br />

developments in strategy terms have you<br />

noticed recently?<br />

Harry Korine: Companies basically<br />

want to grow, and to do that they need<br />

a good story. But often their strategy<br />

comes to grief after two or three years.<br />

So for me, the fundamental question is:<br />

why do companies persist in adopting<br />

strategies that are impracticable or<br />

extremely difficult to implement?<br />

Solutions: And what conclusion have you<br />

reached?<br />

Korine: It’s noticeable that the top<br />

management of companies whose<br />

strategies fail often includes people<br />

who lack inside knowledge – individuals<br />

who’ve been parachuted in from<br />

outside or haven’t been in their jobs for<br />

long, and so don’t have an in-depth<br />

understanding of the company. Moreover,<br />

they’ve often moved rapidly up the<br />

career ladder, mainly in staff rather<br />

than line functions.<br />

Solutions: What does that mean for<br />

those companies’ strategies?<br />

Korine: When strategic decisions are<br />

taken in that kind of environment, it’s<br />

hardly surprising if they prove impossible<br />

to follow through. In the past, unrealistic<br />

strategies that failed the test<br />

when it came to actual feasibility were<br />

normally the province of management<br />

consultants and the board of directors;<br />

now, though, the phenomenon can increasingly<br />

be seen at top management<br />

level. There’s also an absence of – or<br />

not enough – internal communication<br />

on matters of strategy.<br />

Solutions: How do the shortcomings in<br />

communication manifest themselves?<br />

Korine: Often, managers and staff are no<br />

longer talking the same language. More<br />

and more managers deploy buzzwords


impracticable strategies, the increasing use of<br />

of realistic strategies<br />

whose strategies fail<br />

knowledge»<br />

«What you have is a senior management that<br />

is increasingly divorced from reality agreeing with<br />

the portfolio investors on a strategy that is difficult<br />

to implement, because its members do not have<br />

a good enough grasp of what is actually feasible<br />

within the company.»<br />

such as challenge, change and transformation<br />

without being able to explain to<br />

their staff what they actually mean. I believe<br />

this is a worrying development, because<br />

it is difficult for employees to buy<br />

into their company’s strategy if they<br />

don’t understand it. The ability to speak<br />

the employees’ language is rarely a criterion<br />

when it comes to recruiting<br />

senior managers; and where it is, not<br />

much weight is given to it. That can<br />

mean that promotion to senior management<br />

goes not to the in-house candidate<br />

with many years of practical experience<br />

in production who talks the company’s<br />

language, but to the outsider who communicates<br />

in management speak but<br />

doesn’t have the inside knowledge.<br />

Solutions: What do you believe are the<br />

causes of this development?<br />

Korine: With listed companies, the focus<br />

is very much on communicating with<br />

the financial markets: shareholders,<br />

analysts and journalists. So as time goes<br />

on, the company’s own language is progressively<br />

replaced by the language of<br />

external stakeholders. In practice, that<br />

means that internal communication is<br />

geared to an outside audience, or external<br />

communication is used internally. If<br />

you look at the shareholder structure,<br />

you essentially have portfolio investors<br />

on the one hand, and owners with a<br />

long-term horizon on the other. Until<br />

recently a company’s strategic course<br />

was mostly set by its owners, with the<br />

portfolio investors having little say.<br />

Nowadays, though, the portfolio investors<br />

are often in the majority or they<br />

simply exert more influence, and they<br />

place management under intense pressure<br />

to deliver a good growth story. They<br />

entice the board of directors and management<br />

into risky strategies intended to<br />

bring rapid results. Such strategies are<br />

risky because they are often difficult or<br />

even impossible to implement.<br />

From Outside In<br />

Solutions: And where is this development<br />

heading?<br />

Korine: What you have is a senior<br />

management that is increasingly<br />

divorced from reality agreeing with<br />

the portfolio investors on a strategy<br />

that is difficult to implement, because<br />

its members do not have a good<br />

enough grasp of what is actually<br />

feasible within the company. This<br />

trend is becoming increasingly pronounced<br />

as more and more independent<br />

outside members are appointed to<br />

boards of directors, and larger numbers<br />

of top managers without an adequate<br />

knowledge of the company are<br />

brought in from outside. They may be<br />

good at assessing the opportunities<br />

and risks for the company from the external<br />

perspective, but they inevitably<br />

fall short when it comes to gauging the<br />

company’s strengths and weaknesses.<br />

Solutions: What needs to be done to<br />

ensure that the strategies chosen are<br />

ones that can be implemented?<br />

Korine: One solution is to look at the<br />

approach of family companies. It’s<br />

much less common for their strategies<br />

to fail because they are impracticable.<br />

What’s different about family companies<br />

is that the people running them<br />

are closer to their day-to-day business<br />

and have been in their jobs for con-<br />

siderably longer. I believe the key to<br />

success is having a good mix in top<br />

management and the board of directors.<br />

That also means involving the<br />

board more closely in corporate projects.<br />

One good example is Hilti, a privately<br />

held firm in Liechtenstein that<br />

is one of the world’s leading manufacturers<br />

of equipment for the construction<br />

industry. It requires its external<br />

board members to commit between 20<br />

and 40 days of their time and follow<br />

important projects on an ad hoc basis.<br />

SolutionS 9


Strategy<br />

Communication, transparency, speed and integration<br />

as trump cards for interacting with discerning clients<br />

Investment advisory services<br />

à la carte – fit for the future<br />

The private banking market is currently<br />

characterized by various changes: uncertain<br />

development on the financial<br />

markets; emancipation of customers on<br />

various levels; and growing legal and<br />

regulatory barriers, which govern the<br />

definition of services. All these factors<br />

herald a change in services provided to<br />

discerning private banking clients. In<br />

particular, offerings in the area of investment<br />

advisory services must be further<br />

developed to ensure that these remain<br />

an important pillar in the competition<br />

for market shares and revenues. With<br />

these changes, the orchestrated use of<br />

modern tools in investment advisory<br />

services is the central aspect for the differentiation<br />

of a bank as the premium<br />

service partner in this area.<br />

In particular, defending the premium<br />

claim requires a constantly high level of<br />

quality in advisory services, which is<br />

only possible to ensure with a standardized<br />

advisory process. However, as<br />

a consequence of a strategic decision to<br />

provide services internationally or across<br />

10 SolutionS<br />

borders, special attention must be given<br />

to the subject of investment advisory services<br />

to ensure that their cross-border<br />

provision is efficient and conforms to<br />

domestic law.<br />

Tools and success factors<br />

in investment advisory services<br />

Currently, the central tools and success factors<br />

in investment advisory services are<br />

� an integrated advisory process<br />

� customer-oriented products<br />

� timely and consistent advisory<br />

content<br />

� flexible and agile services and<br />

� holistic integration, coordination<br />

and IT support<br />

An integrated advisory process guides<br />

clients through each step of customer<br />

services, from onboarding, profiling<br />

and investment advice to the end of the<br />

business relationship. This ensures the<br />

quality of services, particularly the consulting<br />

service, supports compliance in<br />

various legal and regulatory require-<br />

«The advisory process ensures not only<br />

the quality of advisory services, through<br />

intelligent design it also supports compliance<br />

and has a significant influence on the<br />

customer experience.»<br />

ments with its intelligent design, and<br />

greatly influences the customer experience<br />

– also a significant factor for differentiation.<br />

In addition to standard client profiling,<br />

matching the assessed customer needs<br />

and investment objectives to a bank’s<br />

product offering are becoming increasingly<br />

important. With careful adjustment<br />

of products to customer needs,<br />

a bank demonstrates its solution skills<br />

even before contract closure, ensuring<br />

added value to the customer with a service<br />

delivery tailored to his or her needs.<br />

Here the eagerly but also suspiciously<br />

awaited distribution rules by the Swiss<br />

Financial Market Supervisory Authority<br />

FINMA will provide further regulation,<br />

be it in the area of risk disclosure or in<br />

the implementation of such aspects as<br />

suitability and appropriateness.<br />

Making products understood<br />

The former «one size fits all» investment<br />

advisory mandate no longer applies.<br />

Today advisory services must be tiered,<br />

thereby clearly addressing individual<br />

customer needs and demonstrating<br />

added value. A clear market strategy<br />

which defines the targeted segments<br />

and thus identifies combines and<br />

delimits clients’ needs is a prerequisite<br />

for consistent alignment of products<br />

with identified customer needs.<br />

Today, in addition to classic segmenting<br />

criteria such as assets, willingness to<br />

delegate, or knowledge and experience,<br />

it is necessary to consider the customer<br />

life-cycle in the development of a product<br />

portfolio. This should ensure that<br />

customers receive optimal service before,<br />

during and after (demand-characterizing)<br />

events such as career advancement,<br />

starting a family, purchasing<br />

property or coming into inheritance.


High demands<br />

For some time banks have also been trying<br />

to align their investment policies<br />

and risk governance to the new financial<br />

market rules. Current market research<br />

reports on initiatives to adapt the rigid<br />

structures of asset allocation with a risk<br />

budgeting approach. Other approaches<br />

go in another direction: instead of asset<br />

allocation, the customer is provided<br />

with a selection of investment building<br />

blocks from which he or she can assemble<br />

a «product» according to individual<br />

needs. A number of these modular investment<br />

blocks could then be efficiently<br />

managed centrally. The investment<br />

building blocks concept would also allow<br />

mixed forms of discretionary and nondiscretionary<br />

elements. For example,<br />

the customer could purchase actively<br />

managed hedging solutions without<br />

having to delegate the management of<br />

the entire portfolio.<br />

As regards defining costs and fees for<br />

advisory products, the trend is towards<br />

clarity and simplicity. Customers have<br />

realized that in the past few years, banks<br />

have attempted to camouflage real costs<br />

with obscure price models. More transparency<br />

is now being demanded. However,<br />

differentiated product offers with<br />

clearly defined services provide banks<br />

with an impressive tool to clarify both<br />

their investment advisory services and<br />

their fee structure.<br />

Advisory content as the central commodity<br />

of investment advisory services<br />

An increasingly important aspect for<br />

differentiation is above-average advisory<br />

content – the fundamental driver for<br />

customer portfolio performance. In<br />

addition to the consistency of such<br />

advisory content, a high level of relevance<br />

is a key element.<br />

Strategy<br />

Within the broad field of advisory content,<br />

contradictory recommendations<br />

from different organizational levels<br />

(chief investment officer, investment<br />

advisory services, relationship manager)<br />

must be avoided. To minimize this<br />

risk, the level of freedom as regards asset<br />

allocation, applying research and selection<br />

of securities should not only be<br />

restricted at the front. Wide application<br />

of research requires target market and<br />

target group appropriate preparation.<br />

In the future this could bring smaller<br />

«Above-average advisory content, in which<br />

not only content consistency but also relevance<br />

is becoming increasingly important, is evolving<br />

to a significant differentiation characteristic<br />

on the market.»<br />

SolutionS 11


Strategy<br />

«Integration of tools requires integrated and<br />

reliable IT systems. They enable cross-silo<br />

integration for the processes and information flows<br />

relevant for the services. Integration increases the<br />

quality of services, ensures the reproducibility and<br />

also enables a new structuring of services.»<br />

financial services providers in particular<br />

to their capacity limit. A way out<br />

could be provided by the integration of<br />

external research services. The inclusion<br />

of such services from third-party<br />

banks or external brokers could also be<br />

complementary, to enlarge the investment<br />

universe. However, this must be carefully<br />

drafted and constantly monitored.<br />

Segment-specific alignment<br />

Segment-specific alignment of advisory<br />

content is a further trend. A differentiation<br />

can be made as regards time horizon<br />

of the recommendation, frequency<br />

of publication or the form and channel.<br />

It would also make sense to take into account<br />

basic types of available content in<br />

the product definition.<br />

The most difficult challenge for private<br />

banks is the consistent alignment of information<br />

acquisition and processing,<br />

opinion-building and taking (invest-<br />

12 SolutionS<br />

ment) decisions with customer objectives<br />

and needs. Whether alternative<br />

models work such as outsourcing advisory<br />

content remains to be seen.<br />

Differentiation through integration<br />

An important success factor is the<br />

orchestration and integration of tools.<br />

So far the latter have often been optimized<br />

in isolation and not been used in<br />

an orchestrated way. Symptoms are<br />

investment recommendations that are<br />

produced in an ad hoc way and various<br />

suppliers and sources, which are taken<br />

into consideration. The result is that<br />

advisory content does not fit customer<br />

needs, is no longer relevant, or that services<br />

do not match up seamlessly, as<br />

should be expected from an interface<br />

between financial planning and investment<br />

advisory services.<br />

Tool integration requires integrated and<br />

reliable IT systems. Only in this way are<br />

the integration of relevant processes and<br />

information flows for providing services<br />

possible. Integration increases the quality<br />

of services, ensures reproducibility<br />

and also enables the provision of services<br />

to be restructured. An example of pooling<br />

value-adding activities is the development<br />

and production of investment<br />

recommendations. This process usually<br />

requires countless inquiries with the<br />

various contributors for investment<br />

advisory services solutions, which have<br />

not been integrated. In contrast, the integration<br />

of investment architecture,<br />

content, customer information and output<br />

functionalities enables the relationship<br />

manager to efficiently create investment<br />

recommendations himself or herself.<br />

Eliminating inquiries with suppliers not<br />

only reduces effort and production time,<br />

it also increases the quality of services.<br />

Tools unfold all their potential only<br />

when integrated and orchestrated. The<br />

integration of tools through information<br />

technology allows an expansion of<br />

investment advisory services into new<br />

channels. Complementary partial services,<br />

for example, could be made available<br />

online or customers could be received<br />

in interactive meeting rooms.<br />

Integration of tools<br />

creates sustainability<br />

The quality of advice and the customer<br />

experience can only be sustainably<br />

shaped and increased through the integration<br />

of the required tools. Isolated<br />

optimization can resolve issues shortterm.<br />

This should, however, be carried<br />

out in a strategically specified scope to<br />

ensure that they lead to a consistent and<br />

functioning overall solution.<br />

The difficult market environment and the strategic importance of investment<br />

advisory services imply that it is no longer sufficient to optimize the individual<br />

elements of investment advisory services. To improve the client experience and<br />

customer value long-term, all investment advisory service tools must be coordinated<br />

and consistently aligned with strategic objectives and customer segments.<br />

Successful and sustainable implementation is made possible by the integrated<br />

support of services by IT systems.


FATCA – regulatory imperialism or general trend<br />

towards absolute fiscal transparency<br />

Trend<br />

US public authorities set<br />

high regulation hurdles<br />

FATCA stands for the Foreign Account<br />

Tax Compliance Act, a new regulation<br />

from the US authorities (Internal Revenue<br />

Service, IRS). Its aim is to make tax<br />

evasion impossible for Americans. Today<br />

virtually every type of foreign financial<br />

institution is affected by FATCA. Avoidance<br />

of the new regulation has drastic<br />

consequences and effectively eliminates<br />

foreign financial institutions (FFI) from<br />

the US market. On the other hand, correct<br />

implementation of FATCA is complex<br />

and requires huge effort as it differs<br />

fundamentally from the previous withholding<br />

tax.<br />

FATCA versus USQI<br />

Today, foreign tax agreements with<br />

Switzerland are based on withholding<br />

tax. Switzerland has agreed to levy a tax<br />

on income generated with foreign assets<br />

on Swiss soil. In return countries<br />

have agreed to dispense with the disclosure<br />

of names and account details of the<br />

respective individuals. The system is<br />

simple, can be applied at little cost, protects<br />

the interests of customers and<br />

guarantees countries constant tax revenues.<br />

Currently such a tax agreement is<br />

in place with the US, the US Qualified<br />

Intermediary (USQI).<br />

With FATCA the US is turning the system<br />

of withholding tax (USQI) upside<br />

down (cf. figure 1) as it requires the<br />

automatic transfer of account and personal<br />

data but dispenses with the payment<br />

of US withholding tax. Consequently<br />

with FATCA banking secrecy and the<br />

privacy of American customers worldwide<br />

will become a thing of the past.<br />

FATCA utilizes withholding tax in a completely<br />

new way, namely to apply pressure<br />

for the disclosure of US customer<br />

and account data. Thus financial institutions<br />

outside the US (e. g. banks, life<br />

insurance companies, asset managers,<br />

etc.) will have a 30% tax forced on them<br />

on all income from US sources. To avoid<br />

this penalty tax, FFIs must agree to a<br />

so-called disclosure agreement with the<br />

IRS. With this agreement the institution<br />

commits itself to full implementation of<br />

the FATCA regulation requirements and<br />

achieves the status Participating FFI<br />

(PFFI). US customers of PFFIs who do<br />

Customer<br />

opening<br />

Customer<br />

dossier<br />

check<br />

Withholding<br />

tax<br />

Reporting<br />

1<br />

US Qualified Intermediary (USQI) vs. FATCA<br />

not agree to the data exchange with the<br />

IRS are subject to a 30% withholding tax<br />

on income from US sources. It is the PFFI<br />

itself, which is responsible for the complete<br />

identification of its customer and<br />

the correct retention of withholding taxes.<br />

In addition to customer requirements,<br />

the PFFI is also obliged to apply<br />

withholding tax on all payments from US<br />

sources which are transferred to a nonconforming<br />

institution (Non-Participating<br />

FFI, NPFFI).<br />

USQI FATCA<br />

Based on the KYC process, customer documented as either US or non US Yes Yes<br />

US information check: address, green card, standing instructions, family... – Yes<br />

Waiver for permission of data transfer to IRS – Yes<br />

New category: «recalcitrant» customer – Yes<br />

Annual check via «Know Your Customer» process Yes Yes<br />

Document-based check: passport, domicile... Yes Yes<br />

US information check: address, green card, standing instructions, family... – Yes<br />

Waiver for permission of data transfer to IRS – Yes<br />

Withholding tax (30%) imposed on US accounts Yes No<br />

Withholding tax (30%) for «recalcitrant» customers or NPFFI No Yes<br />

Withholding tax imposed on all revenues Yes No<br />

Withholding tax only imposed on revenues from US sources according to PPP No Yes<br />

Reporting of name and account details to IRS No Yes<br />

Reporting on US withholding tax Yes Yes<br />

Reporting on the overall position of «recalcitrant» customers – Yes<br />

The central aspect of FATCA is the disclosure of customer data and not the payment of anonymous<br />

withholding taxes as with the USQI.<br />

Source: Solution Providers<br />

SolutionS 13


Trend<br />

FATCA requirements<br />

of financial institutions<br />

In addition to the far-reaching requirements,<br />

the IRS is introducing a passthrough-payment<br />

percentage (PPP). In<br />

future, a company with assets in the US<br />

(e.g. shares in American companies,<br />

business units or factories in the US)<br />

must report the US percentage of its assets<br />

as a PPP. If a company pays interest,<br />

dividends, salaries or other incomerelevant<br />

revenues, then the PPP of the<br />

company will be applied. This means<br />

that the FATCA withholding tax will be<br />

deducted from the US percentage for all<br />

NPFFIs or for customers of PFFIs, which<br />

do not disclose their data.<br />

PPP also has complex implications for<br />

companies which manage assets such as<br />

investment funds. The PPP of a fund is<br />

calculated, for example, from the PPPs<br />

of all securities within the portfolio.<br />

Particularly in the case of funds of<br />

funds, this can lead to extremely complex<br />

calculations. There are still many<br />

questions open in the area of PPP, and<br />

the IRS has yet to publish a conclusive<br />

version of the regulation in detail.<br />

From a technical point of view, the<br />

FATCA regulations require extensive<br />

changes in monetary transactions, in<br />

the processing of corporate actions and<br />

securities transactions. Master data for<br />

customers, correspondence banks and<br />

securities must be expanded to include<br />

various new fields such as the PPP, the<br />

FATCA status and US-relevant infor-<br />

14 SolutionS<br />

mation. Concrete initial estimates of<br />

effort show that the modification of<br />

processes and systems will incur massive<br />

costs due to the complexity, which<br />

is a major strain on smaller financial<br />

institutions in particular.<br />

However, most effort will be generated<br />

by the re-examination of existing customers.<br />

Current customer assessments<br />

(Know Your Customer, KYC) are not sufficient<br />

for the IRS. The PFFIs must clarify<br />

and document with absolute certainty<br />

«Concrete initial estimates of effort show<br />

that the modification of processes and systems<br />

will incur massive costs due to the complexity,<br />

which is a major strain on smaller financial<br />

institutions in particular.»<br />

2<br />

Auswirkungen Impacts of FATCA von FATCA<br />

Tax<br />

Processes<br />

Existing<br />

customers<br />

Reporting<br />

Addition of<br />

master data<br />

Implementing<br />

new withholding<br />

tax<br />

Customer<br />

opening<br />

Customer<br />

identification<br />

US customers<br />

Customer<br />

data<br />

Dismantling<br />

old withholding<br />

tax<br />

Customer care<br />

(KYC)<br />

Company<br />

identification<br />

US account<br />

data<br />

Account/<br />

custody<br />

account data<br />

FATCA impacts the entire value chain<br />

Payment<br />

transactions<br />

Identification<br />

of funds,<br />

trusts, ...<br />

«Recalcitrant»<br />

customers<br />

Securities data<br />

(PPP)<br />

Securities<br />

transactions<br />

Identification<br />

of FFIs<br />

Payment<br />

data<br />

FATCA impacts almost all financial institution processes and master data and is therefore<br />

significantly more complex than previous tax laws.<br />

Corporate<br />

actions<br />

Financial<br />

institutions<br />

(PFFI, NPFFI)<br />

Source: Solution Providers<br />

whether a customer is liable to pay US<br />

tax or not. Specific information must be<br />

checked and the effort for such «diligence<br />

reviews» is massive for even<br />

a small institution and will occupy the<br />

entire financial system in the future.<br />

The impact of FATCA<br />

on the finance industry and markets<br />

According to estimates of the current<br />

FATCA regulations there is little chance<br />

for FFIs to avoid FATCA. Even if a financial<br />

institution does not have a single US<br />

customer it is not FATCA compliant until<br />

it has checked and documented every<br />

customer in detail. Also an NPFFI is at<br />

a considerable disadvantage when competing<br />

with a PFFI as the former is<br />

effectively excluded from the US market.<br />

It can no longer offer its customers lucrative<br />

US investments because of withholding<br />

tax. After the introduction of<br />

PPP it will become almost impossible to<br />

find investments without a US interest.<br />

Investments will then be restricted to<br />

local offerings.<br />

In summary, FATCA will have a serious<br />

impact on FFIs, their customers and<br />

their systems. Every PFFI will face enormous<br />

implementation costs and small<br />

institutions in particular will hardly be<br />

able to cope with this effort. With the<br />

PPP, the US is encroaching on the tax<br />

authority of every nation, a fact that will<br />

certainly not be accepted everywhere.<br />

Certain countries such as China and Japan<br />

have already refused to implement


FATCA. Withholding tax already makes<br />

US investments less attractive in general.<br />

American customers will have difficulty<br />

finding a bank in another country<br />

in the future. The worldwide<br />

administrative effort will likely be significantly<br />

higher than the income from<br />

tax revenue.<br />

With the most recent opposition to withholding<br />

tax from Germany but for the<br />

disclosure of customer data, it is unfortunately<br />

likely that FATCA will become<br />

the standard for other tax authorities.<br />

The trend is clearly towards disclosure of<br />

customer data to foreign tax authorities.<br />

A financial institution can therefore<br />

make sustainable cost savings, if it<br />

already today keeps the solution developed<br />

for FATCA open for other countries. In<br />

particular aspects such as reporting and<br />

automatic scanning of customer dossiers<br />

for information should be reusable for<br />

future tax-related requirements. A financial<br />

institution, which acts early can<br />

already today develop reusable solutions<br />

and thereby save costs by preparing itself<br />

for future tax activities. Thus FATCA<br />

should also be seen as a chance to make<br />

a financial institution fit for future tax<br />

treaties and thus differentiate itself from<br />

its competitors by low implementation<br />

costs.<br />

Insights from current projects<br />

Solution Providers currently supports<br />

various financial institutions in Switzerland,<br />

Germany, Austria and Asia on<br />

the subject of FATCA and we are con-<br />

Trend<br />

«The trend is clearly towards disclosure<br />

of customer data to foreign tax authorities.<br />

A financial institution can therefore<br />

make sustainable cost savings, if it already<br />

today keeps the solution developed for FATCA<br />

open for other countries.»<br />

tinually faced with the same questions<br />

and challenges. The needs of our customers<br />

focus on the following:<br />

� Transparent evaluation of costs with<br />

a business/cost case<br />

� Interpretation of the IRS notices and<br />

evaluation of impacts on processes<br />

and systems<br />

� Reduction of costs with appropriate<br />

measures, in particular as regards<br />

customer dossier examination (diligence<br />

review)<br />

� Dealing with uncertainties caused<br />

by the current incomplete regulations<br />

� Customer communication<br />

� Guidelines for handling US customers<br />

in the future<br />

Financial institutions are concerned that<br />

the current regulations are neither com-<br />

plete nor correct. The areas of «pass<br />

through payments» and trusts are particularly<br />

patchy at the moment. There is<br />

also a considerable amount of lobbying<br />

by financial institutions to get the IRS to<br />

change a number of points. All these uncertainties<br />

are tempting many customers<br />

away from actively analyzing FATCA.<br />

However, this approach can interfere<br />

with the timely implementation, as the<br />

costs of reviewing customer dossiers can<br />

be significantly reduced if started early.<br />

It can also be assumed that the IRS will<br />

not significantly simplify or weaken<br />

FATCA; indeed an increase in complexity<br />

can also be the result. Our customers are<br />

currently following FATCA with small<br />

teams of experienced employees who are<br />

preparing the foundations for the later<br />

implementation and can quickly react to<br />

any changes in the regulations.<br />

The USA is forcing financial institutions around the world to join them in the fight<br />

against tax evasion by American citizens. Those who refuse will effectively be excluded<br />

from investments on the American financial market. FATCA compliance is therefore<br />

an absolute must for financial institutions and can lead to significant competitive<br />

advantages for those who implement early.<br />

SolutionS 15


Trend<br />

The importance of efficient customer communication<br />

as the foundation of an outstanding client relationship<br />

Satisfied clients in Asia<br />

thanks to a focus on interaction<br />

Wealthy individuals often have more<br />

than one banking relationship; in Asia<br />

they frequently have more than ten. On<br />

the one hand, different providers appear<br />

to have different strengths and clients<br />

try to get the best for a particular<br />

investment need wherever they can. On<br />

the other hand, the cause can be<br />

a change in client advisor. The client<br />

wants to continue with the advisor he or<br />

she is used to and at the same time save<br />

the face of the advisor who has taken<br />

over the account at the old bank.<br />

Within these multi-relationships each<br />

private banker aspires to achieve the<br />

status of so-called «first call banker» –<br />

to be the first person contacted by a customer<br />

who encounters a problem. The<br />

CEO of a Swiss private bank in Singapore<br />

once said that in light of the<br />

constant change in advisors, he now<br />

16 SolutionS<br />

focused on the happiness of his clients<br />

rather than that of his advisors. After<br />

all, an advisor would carefully consider<br />

a change if his or her client were happy<br />

with the current bank. This so-called<br />

«client experience» has a strong position<br />

in marketing communications.<br />

However, it is seldom implemented in<br />

the organization.<br />

Client satisfaction<br />

in the various phases of care<br />

There is a wide range of literature on the<br />

subject of customer satisfaction. In addition<br />

to the definition itself, the degree of<br />

its implementation is even more relevant<br />

if sustainable business success is to be<br />

achieved. An important approach is the<br />

focus on all direct interaction with the<br />

client, from marketing, account opening,<br />

advice and implementation to a possible<br />

end of the customer relationship.<br />

«For most banks the so-called ‹client<br />

experience› has a strong position in marketing<br />

communications. However, it is seldom<br />

implemented in the organization.»<br />

Generally speaking most banks are very<br />

good at new customer marketing, where<br />

impressive events and glossy brochures<br />

promise above-average customer services.<br />

The first real experience the client has<br />

is during account opening. Some wealth<br />

managers have already recognized the<br />

importance of this «first impression» (cf.<br />

<strong>SOLUTIONS</strong> 3/2010 «Improving current<br />

Client Onboarding Processes»).<br />

No doubt the central element of customer<br />

care remains the traditional investment<br />

advice where the client advisor,<br />

in Asia often an investment<br />

specialist, dispenses investment recommendations<br />

based on the client analysis.<br />

It might sound rather elementary,<br />

but it appears to be difficult to ensure<br />

sustainable and above-average customer<br />

satisfaction in this area.<br />

Last year more than one quarter of wealthy<br />

clients reduced capital or ended a relationship<br />

due to lack of trust. A different<br />

survey documents that 48% of clients<br />

where disappointed in advisors during<br />

the financial crisis, as they were not contacted<br />

enough and received insufficient<br />

information. A further study shows that<br />

29% of all clients today are not really<br />

happy with their advisor’s service.<br />

Efficient system support<br />

remains central<br />

The reasons for this obvious lack of customer<br />

satisfaction are various, but in the<br />

majority of cases they can be traced back<br />

to the advisor. Either the latter lacks expertise,<br />

or because, despite expertise, the<br />

advisor wants to close on a product quickly<br />

rather than get caught-up in a tedious<br />

analysis of needs. Often the client is the<br />

reason, preferring to remain on the product<br />

level to allow a direct comparison of<br />

the prices and product characteristics of<br />

various providers and playing them off<br />

against one another. However, new


egulations in Asia are forcing more<br />

thorough customer analysis and recommendations<br />

according to risk profile. The<br />

financial centres in Singapore and Hong<br />

Kong have already implemented measures,<br />

which should uniformly and sustainably<br />

increase the expertise of advisors.<br />

However, it is rather one-sided to focus<br />

exclusively on the expertise of advisors.<br />

The average workplace of an advisor in<br />

Asia is often anything but efficient: in<br />

their daily work they have to use various<br />

systems, one for customer information,<br />

one or more for trading and various<br />

portals for economic and product information.<br />

Additionally, various internal<br />

departments, such as compliance, product<br />

specialists, account opening and<br />

credit, submit their information in<br />

a continuous flood of e-mails. In addition<br />

there are the requests from clients.<br />

Within this diversity of information the<br />

client advisor has the demanding tasks of<br />

filtering out the relevant data for a particular<br />

client, setting and implementing priorities.<br />

Proactive client counselling is then<br />

often more an aspiration than a reality.<br />

Only with efficient system support providing<br />

timely and relevant information and<br />

analyses can an advisor help a client in the<br />

investment process. To this end the re-<br />

nowned research company Gartner issued<br />

the following statement: «The nature of<br />

wealth management means that client<br />

communications must move beyond basic<br />

deliverables and the limitations of legacy<br />

systems to provide value-added information<br />

and insight to clients.»<br />

Trend<br />

People<br />

Asia<br />

Content is just as important<br />

as communication channels<br />

New communication channels such as<br />

the iPad and iPhone seem to be the<br />

focus of attention at the moment.<br />

Approaches to providing relevant content<br />

for client advisors and customers<br />

«New regulations in Asia are forcing more<br />

thorough customer analysis and<br />

recommendations according to risk profile.<br />

The financial centres in Singapore and<br />

Hong Kong have already implemented<br />

measures, which should uniformly and<br />

sustainably increase the expertise of advisors.»<br />

1/2011 SolutionS 17


Trend<br />

«Advisors should have access to<br />

a platform where the entire advisor cycle<br />

can be processed, where information<br />

on a customer relationship is available<br />

at a glance.»<br />

and displaying it in a meaningful way<br />

do not yet seem to be very popular.<br />

Years ago, a number of wealth management<br />

companies began to invest in efficient<br />

client advisor user interfaces.<br />

The CEO of a globally active private<br />

bank once said that although his system<br />

landscape wasn’t the best, his institution<br />

had the leading advisor workplace<br />

in the industry, creating a clear<br />

competitive advantage.<br />

18 SolutionS<br />

Advisors should have access to a platform<br />

where the entire advisor cycle can<br />

be processed, where information on<br />

a customer relationship is available at<br />

a glance. This is a huge challenge as it far<br />

exceeds the usual presentation of a client<br />

portfolio. It should show the relevant<br />

economic and production information,<br />

the management of the specific customer<br />

relationship as well as give notice of<br />

outstanding documents and other<br />

compliance activities. In short, it should<br />

aggregate the flood of information received<br />

by e-mail or other channels<br />

directly in the relevant client portfolio.<br />

An advisor with such an infrastructure<br />

at his or her fingertips can service<br />

clients effectively and efficiently. Banks<br />

could boost customer satisfaction considerably<br />

thanks to better advisory services.<br />

In Asia customers are much more<br />

involved in the investment decision.<br />

However, this does not mean that the<br />

work of the advisor is less important. On<br />

the contrary, customers frequently want<br />

to base their decisions on available information<br />

and then verify them with<br />

the advisor.<br />

The better the relevant information is<br />

tailored to customers, the easier decisions<br />

can be made and customer satisfaction<br />

can be sustainably increased.<br />

A number of banks have already taken<br />

the first steps towards preparing certain<br />

information for the clients via Internet<br />

portals. In addition to the attractiveness<br />

of new communication media, improvement<br />

of information content should be<br />

worked on intensively. This will increase<br />

the quality of advisory services and thus<br />

also customer satisfaction. Ultimately<br />

the client advisor who, with the support<br />

of a good system user interface, achieves<br />

lasting relevance for his or her clients is<br />

more likely to stay with the institution.<br />

With the increasing attractiveness of Asia as a growth market for the wealth<br />

management industry, a growing number of providers are setting up or extending<br />

their platforms in Singapore and Hong Kong. In addition to Asian investment<br />

behaviour and increasing regulation effort in both Asian hubs, lasting high-quality<br />

advisory services are indispensable. Defining standards of competence and market<br />

behaviour is insufficient. In the face of demanding and dynamic clientele, customer<br />

advisors often have to cope with inefficient system landscapes and a flood of<br />

information. Thus the advisor has to increasingly deal with information preparation<br />

rather than being able to use the information proactively for the client. Efficient<br />

advisor and client information user interfaces increase the quality of advisory services,<br />

customer satisfaction, and with it, customer relevance.


Trend<br />

Client focus as a key distinguishing feature in Asian private banking<br />

Kaizen process management<br />

in Asia<br />

The private banking industry is in a state<br />

of change – saturated markets in Europe<br />

and frequent new regulations are complicating<br />

the banks’ ability to grow their<br />

business. A further challenge to the business<br />

models of private banks are the<br />

attacks against banking confidentiality<br />

as well as risks arising from the current<br />

sovereign debt crisis.<br />

In Asia – Hong Kong and Singapore in<br />

particular – private banks face fierce<br />

competition between local and foreign<br />

players. The local banks are rapidly closing<br />

the gap in the areas of client-oriented<br />

processing and robust banking platforms,<br />

thus establishing sustainable<br />

client relationships.<br />

Clients have learned from the 2008 financial<br />

crisis and have started to diversify<br />

their banking relationships across<br />

multiple banks. The fight for clients is<br />

Aspect Top-down Bottom-up<br />

Approach Managed, also using parameters from<br />

a reference model<br />

Participants Management, department heads,<br />

process owners<br />

Type of process<br />

changes<br />

Implementation<br />

time<br />

Large changes, system adjustments,<br />

big-bang implementations<br />

often won by banks which have optimized<br />

their processes towards a positive<br />

client experience. A client account<br />

opening process that takes three days<br />

results in a considerably better client<br />

experience than one that lasts 30 days.<br />

According to the PWC Wealth Report<br />

2011, the future focus of private banks lies<br />

in client orientation and a reduction in<br />

cost through increased efficiency. 72% of<br />

the institutes questioned indicated a cost/<br />

income ratio of over 60%. Sophisticated<br />

and customer-oriented process management<br />

built on solid methodology can<br />

address the above challenges.<br />

Process management:<br />

top-down vs. bottom-up approach<br />

Process methodologies have the goal of<br />

improving operations by eliminating<br />

inefficiencies. Differences in the various<br />

methods manifest themselves pre-<br />

Interactive, result and type of solution<br />

diverse and dynamic<br />

Employee along the process value<br />

chain, no hierarchy selection<br />

Quick wins. Small improvements in<br />

the sequence of operations, no system<br />

adjustments<br />

Six months to a year Three to four weeks<br />

Acceptance Greater risk that changes are not<br />

understood and thus short-term<br />

1<br />

Process model: top-down and bottom-up<br />

High acceptance. Employees personally<br />

involved in developing the solution<br />

Source: Solution Providers<br />

dominantly in the areas tools, reference<br />

models and measurement techniques.<br />

Modern methodologies also include<br />

a plan-do-check-act approach (PDCA in<br />

Kaizen, Define Measure Analysis Improve<br />

Control in Six Sigma) in which<br />

continuous monitoring and improvement<br />

of processes prevail.<br />

Independent of the chosen methodology,<br />

there are two procedural models,<br />

which anchor process management in<br />

the organization: top-down and bottom-up<br />

(cf. figure 1).<br />

Top-down (re-engineering): using information<br />

from interviews and workshops,<br />

cross-functional process experts optimize<br />

business processes. An existing<br />

reference model (e. g. BANKINABOX®<br />

from Solution Providers for core banking<br />

system development) can also serve as<br />

a starting point.<br />

Bottom-up (Kaizen): employees are the<br />

focus of the process event; the process<br />

experts facilitate the discussion as<br />

moderators only. Key users from the<br />

departments involved model processes<br />

independently using interactive methods.<br />

The focus is on simple, pragmatic<br />

improvements, which the department<br />

can push forward and resolve independently.<br />

All solutions are developed<br />

within the team.<br />

Process management approach: cultural<br />

differences between Europe and Asia<br />

In Asia, a bottom-up approach like Kaizen<br />

has proven more successful for implementing<br />

sustainable changes. There are<br />

a number of cultural reasons for this:<br />

� Asian organizations tend to be more<br />

hierarchical than their western<br />

counterparts. The decision-making<br />

processes are always led by the higher<br />

ranks. Even simple process-related<br />

changes are not usually decided<br />

directly in workshops. Instead, subsequent<br />

consultation processes are<br />

SolutionS 19


Trend<br />

«Kaizen has proven itself successful<br />

as a bottom-up approach particularly<br />

in process projects, where, in addition<br />

to inefficiencies, the focus lies on<br />

the client experience.»<br />

required, whereby the higher-ranking<br />

individuals (typically C-level)<br />

will have to provide their approval.<br />

� End-to-end process knowledge is<br />

seldom available due to highly fragmented<br />

and separated functional<br />

organizations. A process champion<br />

with an overview of the process is<br />

often not at hand. Instead a picture<br />

of divided responsibility emerges<br />

which often reaches only to the borders<br />

of the department.<br />

� Group consensus as opposed to individual<br />

decision-making prevails in<br />

Asia. To gain acceptance for a change,<br />

20 SolutionS<br />

2<br />

a broad consultation process through<br />

several departments is expected, while<br />

individual decisions are reserved<br />

strictly for the upper management.<br />

What is Kaizen?<br />

Kaizen is a process methodology developed<br />

and pioneered around 1950 by Toyota<br />

in Japan. «Kai-Zen» can be loosely translated<br />

as «continuous improvement» and<br />

covers improvements in the areas of quality,<br />

technology, processes, corporate culture<br />

and leadership. The central idea is<br />

that Kaizen becomes a part of the company<br />

DNA. Each employee can and should<br />

continually suggest improvements to the<br />

production processes.<br />

Example of customer account opening process, Kaizen-optimized<br />

Key is the focus on improvements that<br />

can be implemented quickly and costeffectively.<br />

This is in contrast to topdown<br />

approaches where major changes<br />

are introduced in the form of a «big<br />

bang». Kaizen methods help to define<br />

solutions to locate and eliminate inefficiencies.<br />

Additionally, they provide<br />

metrics, which allow inefficiencies to<br />

be quantified and improvements to<br />

become visible.<br />

The form of Kaizen implementation can<br />

either be «daily/continuous» or «eventbased».<br />

In a project context, the emphasis<br />

is almost always on the latter, whereby<br />

a so-called «focused» Kaizen or<br />

one-week Kaizen event on a particular<br />

functional topic is conducted.<br />

Optimizing customer processes in<br />

banks using Kaizen methodology<br />

Kaizen has proven itself successful as<br />

a bottom-up approach particularly in<br />

process projects, where, in addition to inefficiencies,<br />

the focus lies on the client<br />

experience. All identified changes must<br />

be implemented within a period of three<br />

to four weeks.<br />

A typical process is organized as a fourday<br />

Kaizen event and has the following<br />

goals:<br />

Day 1<br />

� Analysis of the current process within<br />

the group followed by a «waste<br />

walk» during which a process ticket<br />

Process metrics Current process Kaizen result (future)<br />

Number of process steps 80 59% reduction 33<br />

Number of hand-offs 38 87% reduction 5<br />

Number of systems 36 72% reduction 10<br />

Total cycle time 30 days 68% reduction 9.5 days<br />

Total processing time 20 hours 33% reduction 13.5 hours<br />

Number of value-adding steps 5.5 Improved client experience 6<br />

Average first pass quality 0% Less rework 50%<br />

Travelling distance of documents 8 km 160x reduced way 50 metres<br />

Total working hours 6,000 hours/year Total savings > 1FTE 4,029 hours/year<br />

Source: Solution Providers


is registered for all relevant data in<br />

each process step (cf. figure 3).<br />

� Calculation of the current process<br />

metrics, development of a «handoff»<br />

map, visualization of routes and<br />

transport paths.<br />

Day 2<br />

� Modelling of a target process via simulation<br />

of a «perfect» world, regardless<br />

of regulations/directives, department<br />

and system hurdles.<br />

� Gradual approximation to reality with<br />

a constant focus on client experience<br />

and questioning of efficiency.<br />

� Calculation of target process metrics.<br />

Day 3<br />

Decision day: the team condenses all suggestions<br />

for improvements from the first<br />

two days and presents them to the management<br />

for decision. This requires all<br />

necessary decision makers to be present.<br />

Day 4<br />

The decisions reached on the third day<br />

must be transferred to an implementation<br />

plan for each department. This plan also<br />

serves as a basis for further, weekly monitoring<br />

of the degree of achievement.<br />

All process areas in which inefficiencies<br />

are assumed and/or where the focus of<br />

the client experience should be checked<br />

are ideally suited as Kaizen events. A<br />

process project carried out by Solution<br />

Providers for a private bank in Hong<br />

Kong on the subject of client account<br />

3<br />

Process step description<br />

Trigger<br />

What initiates this step? What makes you<br />

start this part of the process?<br />

Completion<br />

What ends this step? How do you know this<br />

part is completed?<br />

Cycle time<br />

Total time for this step, start to end?<br />

Processing time<br />

Time spent on actual processing<br />

Systems and tools<br />

Number and kind of systems and tools<br />

used for this step<br />

Walking and transport distance<br />

Distance covered for this step<br />

First pass quality (FPQ) and paper used<br />

Work correct after first attempt<br />

Work waiting (WW) and interruptions<br />

Average quantitity of jobs waiting<br />

and stops<br />

Waste and other remarks<br />

Current Process<br />

opening shows the optimization potential<br />

of the Kaizen method: numerous<br />

small changes not only improved the<br />

processing time and thus the client experience,<br />

but also freed up the equivalent<br />

of a full-time process resource. An interesting<br />

aspect was that the solution was<br />

developed and implemented by the bank’s<br />

employees themselves, simply by illumi-<br />

Process Ticket<br />

Trend<br />

nating inefficiencies and reorganizing<br />

the departments involved (cf. figure 2).<br />

In Asia both margin pressure and customer<br />

demands are on the rise. By strict<br />

application of the Kaizen methodology<br />

a bank can create a strategic advantage<br />

by reducing costs and improving the<br />

client experience.<br />

The Kaizen process optimization methodology enables companies to search their<br />

process landscape for inefficiencies and helps firmly anchor improvements using<br />

interactive methods. Kaizen focuses on incremental, small changes, which can be<br />

implemented within a period of three to four weeks. As a bottom-up approach, which<br />

places employees at the centre, the methodology is particularly successful in Asia.<br />

Private banks in Europe and Asia are currently struggling for a greater share of<br />

the market in an environment of shrinking margins. With consistent application<br />

of process management à la Kaizen, process inefficiencies and a deficient client<br />

experience can be identified, thus improving capabilities to build and retain a new,<br />

larger client base.<br />

No.<br />

Actor<br />

days/hours/minutes<br />

days/hours/minutes<br />

Walk m Transport m<br />

FPQ % Paper Sheets<br />

WW Interruptions/steps<br />

The process ticket allows the observation of optimization opportunities.<br />

The Solution Providers process ticket<br />

Source: Solution Providers<br />

SolutionS 21


Case Study<br />

Wealth Division of the Royal Bank of Scotland<br />

implements Avaloq<br />

A huge step for Coutts<br />

and British private banking<br />

22 SolutionS


Since April 2, 2012 the entire Wealth Division<br />

of the Royal Bank of Scotland has<br />

been using Avaloq as its uniform core<br />

banking system (cf. figure 1). From the<br />

initial preparation of the first business<br />

cases, establishment and documentation<br />

of business requirements in connection<br />

with a gap analysis, the development and<br />

communication of a completely new<br />

organizational structure to the implementation<br />

at Adam and Coutts, it took just<br />

three years. Now synergies can be realized<br />

which, despite the fact that the organization<br />

was already a division, could<br />

not be before due to the different and<br />

fragmented system landscapes.<br />

The implementation at the private bank<br />

Adam & Company at the beginning of<br />

2011, which was also part of the overall<br />

project, was a historic moment for all parties<br />

involved and for British banking. For<br />

the first time in history, a bank in an English-speaking<br />

country executed its transactions<br />

using the Swiss software solution<br />

Avaloq. However, the road was long and<br />

rocky as with each new market entry numerous<br />

modules need to be adapted to the<br />

special statutory requirements and the<br />

market-specific conditions of the country<br />

in question (cf. text box for examples).<br />

Shorter project duration<br />

by using a reference bank<br />

Already at the beginning of 2008 Coutts<br />

<strong>International</strong> (Switzerland and Asia) successfully<br />

implemented Avaloq. Based on<br />

Additional <strong>SOLUTIONS</strong> articles<br />

the time-limited project plan in Great<br />

Britain and particularly the goal of realizing<br />

synergies between the various RBS<br />

Group entities, it was decided to use the<br />

Coutts Switzerland Avaloq system as the<br />

reference for Great Britain, to build on it<br />

consistently and wherever possible to adhere<br />

to existing functionalities.<br />

Articles (in German only) are available for download on www.solutionproviders.com<br />

Case Study<br />

«The going live of the Wealth Management<br />

platform programme was a key stepping stone for<br />

Coutts as this will allow us to operate as a global<br />

organization on a single IT platform transforming<br />

the way we serve our clients. This is the largest<br />

investment the bank has ever made and the new<br />

infrastructure will strengthen our competitive edge<br />

and ensure we can continue to provide exceptional<br />

private banking and wealth management in<br />

the future. Solution Providers played a significant<br />

role in achieving this milestone.»<br />

Dr Jürgen Pulm, Chief Operating Officer, Coutts & Co Ltd<br />

The advantages of such an approach were<br />

numerous. In addition to a restriction of<br />

development to necessities, it allowed<br />

British users to come into early contact<br />

with a functioning and real-life implementation<br />

which was in operation. At the<br />

same time a psychological basis was created<br />

which allowed the unification of<br />

UK banking series (2010–2011)<br />

Regulatory requirements ask for a new specification of the reporting solution (<strong>SOLUTIONS</strong> 1/2011)<br />

Standards in Switzerland as regards regulatory reporting cannot be easily internationalized. Comparison of requirements in<br />

Switzerland and Great Britain and identification of challenges and approaches in the specification of the solution.<br />

Comparison of tax-optimized pension solutions (<strong>SOLUTIONS</strong> 3/2010)<br />

Structured comparison of the Swiss 3a Pillar solution with the British product «Individual Savings Account» (ISA) with a focus<br />

on flexibility and security in pension provision.<br />

The international trend for trusts (<strong>SOLUTIONS</strong> 2/2010)<br />

Why trusts are also gaining importance outside English-speaking countries and a discussion of market potential.<br />

Avaloq implementation at RBS Coutts (2008)<br />

<strong>International</strong> implementation of Avaloq (<strong>SOLUTIONS</strong> 2/2008)<br />

The greatest challenges and highlights from the first simultaneous «going live» at various locations around the world.<br />

SolutionS 23


Case Study<br />

processes at the various locations (Great<br />

Britain, Asia and Switzerland) as a result<br />

of the project wherever possible.<br />

Replacement of a core banking system<br />

as an opportunity<br />

The replacement of an ageing system<br />

landscape offers organizations a good<br />

opportunity to rethink the existing value<br />

chain and the fundamental business<br />

processes.<br />

A central project task was to break down<br />

the existing value chain, to simplify<br />

processes and to review the organizational<br />

structure. To strengthen and use<br />

the synergies between the various entities<br />

(Great Britain, Switzerland and<br />

Asia), a new operating model was developed<br />

which was based on the entry into<br />

service of various new business hubs.<br />

Each hub would be assigned specific,<br />

cross-location functions.<br />

An example of this is the role of the<br />

Swiss entity, which gained importance<br />

within the Wealth Division through the<br />

hub structure. The back office executed<br />

1<br />

Uniform IT platform for RBS Wealth Division<br />

24 SolutionS<br />

Project start<br />

July 2009<br />

Gap analysis<br />

Coutts & Adam<br />

Analysis and<br />

design Adam<br />

Implementation<br />

and testing Adam<br />

January 2011<br />

Go live Adam<br />

Analysis and<br />

design Coutts<br />

Implementation<br />

and testing Coutts<br />

April 2012<br />

Go live Coutts<br />

Starting<br />

position<br />

RBS Wealth Division<br />

Today<br />

RBS Wealth Division<br />

transactions for the British business as<br />

well as for domestic and Asian business.<br />

Corporate actions, maintenance of<br />

securities master data and fund transactions<br />

are examples of services, which<br />

the Swiss location now provides for the<br />

entire Wealth Division.<br />

Another example is IT: since the implementation<br />

of the Avaloq-based platform<br />

in Great Britain, the Swiss IT department<br />

has taken over the responsibility for<br />

maintenance and further development<br />

of functionalities for the entire division.<br />

Highly integrated teams<br />

as the key to success<br />

The challenge of international project setup<br />

was met by fully integrated project<br />

teams. Project streams united business<br />

specialists from Great Britain, internal IT<br />

and in part business experts from the<br />

Swiss branch Coutts & Co, as well as additional<br />

Avaloq and project specialists.<br />

Project members were spread over the<br />

various locations in Great Britain<br />

(London, Edinburgh, Bristol, Guernsey,<br />

etc.) and Zurich.<br />

Adam & Company<br />

Edinburgh, Guernsey<br />

Proprietary<br />

legacy system<br />

Adam & Company<br />

The degree of intensity and location of<br />

face-to-face collaboration was adapted<br />

to each project phase. The initial gap<br />

analysis was mainly carried out in Zurich.<br />

On the one hand this was to ensure<br />

close proximity to the reference bank<br />

and on the other to enable an exchange<br />

between specialists already familiar<br />

with Avaloq. During the actual development<br />

cycles the teams mainly worked in<br />

separate locations. In the acceptance<br />

testing phase that followed, and in particular<br />

during all cutover-related activities,<br />

the personnel focus of the project<br />

was then consistently shifted to Great<br />

Britain to guarantee shorter lines of<br />

communication and distances.<br />

Advantages and disadvantages<br />

of the MESI principle<br />

The multi-client capability of Avaloq was<br />

an important prerequisite for a strategy,<br />

which utilized synergies between the<br />

different locations. An advantage of<br />

using the MESI principle (Multi Entity<br />

Single Instance: running numerous<br />

entities on a single technical instance)<br />

becomes clear when developing and<br />

RBS Group platform<br />

RBS<br />

Coutts & Co Ltd<br />

London<br />

Fragmented legacy<br />

application landscape<br />

RBS Group platform<br />

RBS<br />

Coutts & Co Ltd<br />

Wealth IT platform<br />

Coutts <strong>International</strong><br />

Switzerland, Singapore<br />

Hong Kong, Isle of Man<br />

Avaloq<br />

(since 2008)<br />

Coutts <strong>International</strong><br />

Source: Solution Providers


implementing functionalities for several<br />

units. The aligned processes and small<br />

number of redundantly maintained<br />

modules considerably reduced both the<br />

development and maintenance costs.<br />

At the same time, the complexity of the<br />

code increased dramatically. Changes to<br />

the system no longer only changed the<br />

way a business unit functioned; they carried<br />

the risk of having undesirable side<br />

effects for other locations. With structured<br />

and continual testing and regression<br />

testing on the basis of a simple but<br />

uniform set of test cases, such risks were<br />

reduced as much as possible in collaboration<br />

with experienced testing teams.<br />

The role of methodology<br />

Using a methodological approach, the<br />

complexity of such a major project can be<br />

broken down into manageable and<br />

digestible steps. The project has shown<br />

that the agile approach, which was applied<br />

to the specification and implementation,<br />

was perfect to implement a highly<br />

complex and comprehensive platform<br />

successfully and to accompany and support<br />

change management with the necessary<br />

measures.<br />

The business requirements which were<br />

collated at the beginning of the project<br />

with the help of use cases were continually<br />

refined. Functionalities in the form<br />

of a prototype were made available quickly.<br />

With the continually increasing<br />

Avaloq know-how of testers and business<br />

representatives it was possible to<br />

precisely detail the final system requirements<br />

in the course of intense and<br />

repeated test phases, and so supply the<br />

functionalities end users required.<br />

The new platform as added value<br />

The platform that is now available allows<br />

Coutts not only to use synergies between<br />

the various locations and to remove costly<br />

peripheral systems, it also enables<br />

a reduction of time and cost due to the<br />

reduction in medium breaks and greater<br />

automation and straight-through processing.<br />

Case Study<br />

«The project has shown that the agile approach,<br />

which was applied to the specification and<br />

implementation, was perfect to implement a highly<br />

complex and comprehensive platform successfully<br />

and to accompany and support change<br />

management with the necessary measures.»<br />

In addition to the bank’s customers who<br />

perceive the technological advance primarily<br />

through the new e-banking system<br />

and more modern client statements,<br />

the new platform is also a huge step forward<br />

for the British private banker. Now<br />

the latter has all the necessary information<br />

within a very short time and available<br />

in one place. Together with the new,<br />

consolidated reporting method, the system<br />

enables the banker to advise and cultivate<br />

clients more proactively, more<br />

quickly and more precisely. This increases<br />

the profitability of the bank on the one<br />

hand, and on the other ensures that the<br />

sophisticated British customer can also<br />

be offered a unique service with the<br />

brand Coutts in the future.<br />

With the Avaloq going live in April 2012, the Wealth Management Division of the<br />

Royal Bank of Scotland laid the foundation for their growth strategy. The exclusive<br />

brand and excellent reputation, which the bank has in Great Britain because<br />

of its outstanding customer services was underpinned by a modern, flexible,<br />

Avaloq-based IT platform following a three-year project.<br />

New optimization potential opened to the bank through the standardization<br />

of the software solution throughout the Wealth Division. In addition to the<br />

standardization of the product range, there are plenty of new opportunities both<br />

from a technological and an organizational point of view: an international hub<br />

structure was set up in connection with a reorganization, with the aim of transacting<br />

business as efficiently as possible for the now multinational business in Great Britain,<br />

Switzerland and Asia.<br />

SolutionS 25


Trend<br />

How financial services providers can profit from the cognitive<br />

process of cost-benefit perception<br />

From classical pricing<br />

theory to behavioural pricing<br />

26 SolutionS<br />

Languages


Classical pricing theory assumes that<br />

customers behave rationally and have<br />

access to complete information regarding<br />

cost-benefit ratio. Within this theoretical<br />

behavioural environment, customers<br />

aspire to optimize their benefit.<br />

With a given income they will demand as<br />

many units of a product until the benefit<br />

of an additional unit is equal to its price.<br />

On today’s markets – in particular for<br />

financial services – complete cost-benefit<br />

transparency certainly does not prevail.<br />

For many products it is almost impossible<br />

for customers to measure benefit in economic<br />

terms. Insurance products with<br />

their typically uncertain occurrence of<br />

benefits are a good example of this. Additionally,<br />

customers seldom act rationally.<br />

1<br />

Facts<br />

Offer<br />

Advice<br />

Information<br />

Cognitive process of handling an offering<br />

Trend<br />

«Financial services providers can significantly improve<br />

results with flexible sales processes in all channels which<br />

consider that customers perceive objective facts<br />

subjectively and react individually.»<br />

Classical pricing theory is therefore missing<br />

an element, namely the cognitive process<br />

of the cost-benefit perception and<br />

evaluation. This is the subject-matter of<br />

behavioural pricing (cf. figure 1).<br />

Behavioural pricing assumes that consumers<br />

receive an objective stimulus,<br />

which leads to a subjective evaluation<br />

(organism), which then provokes individual<br />

behaviour (response).<br />

Approaches for pricing<br />

in the financial industry<br />

How can financial services providers<br />

such as insurance companies and banks<br />

take advantage of behavioural pricing?<br />

We can see numerous approaches, which<br />

cover the entire product spectrum.<br />

Product identification: financial products<br />

are often low-interest products; customers<br />

do not generally analyze the product<br />

in detail. Thus the following conclusion<br />

can be made: the smaller the interest in<br />

the product, the more summarized the<br />

cost-benefit offer can be. This is also<br />

called stimulus simplification. Although<br />

this insight is not new, only a handful of<br />

financial services providers package their<br />

products so that they are suitable both for<br />

low-interest customers and for those interested<br />

in the product. Depending on the<br />

customer type, which can quickly be<br />

assessed with a few entry questions, customers<br />

should receive differently packaged<br />

offerings, such as an all-in-one<br />

proposal, a proposal with few options or<br />

an offering with complete freedom. With<br />

Stimulus Organism Response<br />

Consciousness<br />

Attitude<br />

Memory<br />

Perception<br />

Absorption<br />

Evaluation<br />

Interpretation<br />

Attribution<br />

Integration of other<br />

information<br />

Behaviour<br />

Purchase<br />

Non-purchase<br />

Postponement<br />

Source: Solution Providers, following Martin Wricke<br />

SolutionS 27


Trend<br />

2<br />

the various approaches for «productizing»,<br />

it is possible to work with varying<br />

margins. Conclusion: you have at hand<br />

simple standard packages for low-interest<br />

customers. If your distribution channel is<br />

strong in advisory services, you should<br />

also offer sophisticated configuration<br />

options for interested customers.<br />

Reference point: each customer, independent<br />

of whether he or she knows the<br />

product or not, has a reference price<br />

28 SolutionS<br />

Concept<br />

Reference data/know-how<br />

Analysis Scenarios Simulation Evaluation Implementation<br />

Tools<br />

Design<br />

Behavioural pricing introduction method<br />

which is used to evaluate a new offer.<br />

This reference price can be assessed in<br />

the sales process if, before tendering an<br />

offer, the customer is systematically<br />

asked which information he or she has<br />

already obtained. This allows an offer to<br />

be adjusted to the reference point whereby<br />

a tolerance of ±15% is typically acceptable.<br />

Conclusion: make sure your first<br />

offer is adjusted according to the reference<br />

point of your customer. You get a<br />

buy-in and then you can begin upselling.<br />

«Consider whether the aspect price or service<br />

should be emphasized for each distribution<br />

channel and select the top-down or bottom-up<br />

sales approach accordingly.»<br />

Source: Solution Providers<br />

Discount policy: if a client has to decide<br />

on every single component, each decision<br />

corresponds to a loss of opportunity.<br />

This can be compensated by giving a discount<br />

on each component. Compared to<br />

a large discount on the whole package,<br />

individual discounts are seen as individual<br />

negotiation achievements; the perceived<br />

price or in this case discount is<br />

valued more than an overall discount.<br />

Conclusion: if you have to give discounts,<br />

divide the offering into parts, give a discount<br />

on each part and ensure that the<br />

customer perceives this positively.<br />

Price sensitivity: price sensitivity increases<br />

with standardized and comparable<br />

products. To influence perception<br />

of a cost-benefit structure, two strategies<br />

can be applied. To emphasize<br />

benefit a top-down approach should be<br />

chosen, whereby a comprehensive package<br />

should first be offered. Certain<br />

options can then be dropped to do justice<br />

to price expectations; perception of<br />

the services offered remains good. If,<br />

on the other hand, the low price of the<br />

offer should be emphasized, the bottom-up<br />

approach is applied. Here a lowprice<br />

cost-benefit package is offered<br />

and then further options added. The<br />

customer still tends to perceive the offer<br />

as favourable. A practical example of implementation<br />

is the offer «Name Your<br />

Price®» from Progressive. Here the<br />

customer is asked to first name the<br />

price he or she would be willing to pay<br />

for insurance cover. Appropriate offers<br />

are only made afterwards. These also<br />

include offers, which are above the price<br />

limit in order to make additional service<br />

options appealing. Conclusion: consider<br />

whether the aspect price or service<br />

should be emphasized for each distribution<br />

channel and select the top-down or<br />

bottom-up sales approach accordingly.<br />

Stimulus threshold: customers have a price<br />

stimulus threshold independent of the actual<br />

offer. For example, if the price is slightly<br />

over the threshold (e. g. CHF 1,001) it is<br />

perceived as being significantly more expensive<br />

than if it were slightly under the<br />

threshold (e. g. CHF 999). This effect of<br />

price rounding has been applied to consumer<br />

goods for a long time. However, it<br />

receives little attention in the financial services<br />

industry. The effect can be increased<br />

if offers are divided into units. To stay with<br />

the example given earlier: a monthly premium<br />

of CHF 84.95 is perceived as more<br />

attractive than a yearly premium of<br />

CHF 999, even though the total is higher.


This is because many consumers multiply<br />

and compare with the factor ten because it<br />

is simpler. Conclusion: even if it is unusual<br />

for certain industries and products, take<br />

monthly payments into consideration.<br />

Method<br />

Solution Providers has developed a proprietary<br />

method specifically for the implementation<br />

of behavioural pricing in<br />

the insurance and banking industries (cf.<br />

figure 2). The method is based on five sequential<br />

steps, which run through the<br />

concept, design and realization phases.<br />

Appropriate tools and reference data can<br />

support the method where necessary.<br />

Step 1: in a first analytical step the pricing<br />

strategy must be analyzed and defined.<br />

Based on internal skills (resource-based<br />

view) and the external development of<br />

the market and competition (marketbased<br />

view) questions concerning positioning<br />

are answered. On this basis, implementation<br />

measures such as those<br />

discussed above are defined.<br />

Step 2: the measures developed in the first<br />

step are now outlined and substantiated<br />

in different scenarios by using model customers.<br />

The aim of these outlines is to<br />

find combinations which produce an increase<br />

in benefit with simultaneous price<br />

fairness in the customer’s perception.<br />

Step 3: once the scenarios have been<br />

made plausible, they are simulated. The<br />

aim of the simulation is to gauge the<br />

expected changes in the earnings<br />

situation. Model customers are used in<br />

the concept phase. In the design phase,<br />

the simulation can be carried out with<br />

the appropriate tools for the entire customer<br />

base. This allows reliable calculation<br />

and a substantiated statement on<br />

the aspects of the suggested product<br />

modification.<br />

Step 4: the simulation results are evaluated<br />

again in terms of whether they<br />

match the strategic alignment of the<br />

Trend<br />

«Even if it is unusual for certain<br />

industries and products, take monthly<br />

payments as a stimulus<br />

threshold into consideration.»<br />

company and the chosen direction of<br />

growth. If there is a change in the product<br />

offering, accompanying measures<br />

could be necessary.<br />

Step 5: the last step is only carried out in<br />

the design and implementation phase.<br />

With pricing and distribution processes<br />

adjusted where applicable, the agreed<br />

product modifications are implemented.<br />

Often an accompanying communications<br />

initiative is launched.<br />

Behavioural pricing analyzes how consumers gather and process cost-benefit<br />

information. This allows the cognitive processes, which play an important role<br />

in reality and deviate from classical price theory with its utility-optimizing homo<br />

oeconomicus, to be observed. Knowledge on the perception process – from<br />

consciousness and perception to evaluation – can be useful to financial services<br />

providers in many aspects of optimizing their cost-benefit ratio. A methodological<br />

approach in five steps is recommended.<br />

SolutionS 29


Trend<br />

New communication technologies are changing consumer<br />

behaviour – opportunities and risks for insurance companies<br />

What insurance companies<br />

can learn from Apple<br />

30 SolutionS 1/2011


Saturday morning shortly after 8 a.m.<br />

temperature –7 degrees, rush hour at the<br />

Kaiserwetter ski lift. Dirk (26 years old),<br />

armed with board and helmet, queues at<br />

the ticket office and pushes towards the<br />

fresh-fallen snow. Peter nudges him and<br />

says: «Hey, did you get around to taking<br />

out mountain rescue insurance?» Dirk<br />

casually reaches into the inner pocket of<br />

his jacket and digs out a device dangling<br />

from white ear buds. With a confident<br />

smile and a few gestures on the screen<br />

he insures himself for the day. This protects<br />

him from rescue costs in the event<br />

of a fall, extends his accident insurance<br />

for necessary risk premiums and activates<br />

GPS tracking so that Peter and his<br />

other friends can find him on the mountain<br />

at any time. The whole thing is easy,<br />

paperless, requires no signature and is<br />

stress-free.<br />

Online whenever, wherever<br />

What is the attraction of iPhone (or increasingly<br />

Blackberry or Android phone)<br />

applications (apps)? It is the option of<br />

carrying out secondary activities when<br />

you would have time for them. In the<br />

tram, waiting for a train, in the queue at<br />

the ticket office, in the three minutes it<br />

takes to walk between the kebab stand<br />

and the cinema. This recent phenomenon<br />

is a logical development of changing<br />

communication and also increasingly<br />

consumer behaviour. What started<br />

1<br />

New consumer<br />

behaviour<br />

Traditional behaviour<br />

with new technologies<br />

Social networks<br />

Games apps<br />

Claims app<br />

Online policies without<br />

back-end integration<br />

Low degree of<br />

added value<br />

in the nineties as text messages has<br />

grown into a booming industry, which<br />

represents a powerful market place.<br />

This change in buying behaviour to<br />

a here-and-now trend also has an impact<br />

on price expectations. In view of the<br />

Mobile web technologies between consumer behaviour and added value<br />

Trend<br />

«Which insurers venture into the area of<br />

mobile applications? It is not only those who try<br />

to address young customers early and<br />

bind them to their brand. The majority<br />

of insurance companies have an intrinsic interest<br />

to create a competitive advantage in the widely<br />

saturated insurance market in Western Europe.»<br />

Low ticket<br />

products<br />

Coverage for<br />

social web and<br />

games<br />

Mobile health<br />

services<br />

Online policies with<br />

back-end integration<br />

High degree of<br />

added value<br />

Source: Solution Providers<br />

whole season, Dirk in the above-mentioned<br />

– fictional but absolutely possible<br />

– scenario would probably be better<br />

off with a traditional annual insurance.<br />

But he is after flexibility, only wants<br />

to commit to a small time horizon and<br />

a single ticket.<br />

SolutionS 31


Trend<br />

Immediate claims notification<br />

Insurance companies are increasingly<br />

trying to make use of both trends. UNIQA<br />

Versicherungen AG, Austria, has a mobile<br />

app, which, in addition to the possibility of<br />

submitting a claim online via a smartphone,<br />

allows motor vehicle liability and<br />

comprehensive insurance for electrically<br />

powered vehicles, which do not require<br />

Solutions: What prompted UNIQA<br />

to be the first insurance company in<br />

Austria to develop apps for smartphones?<br />

Andreas Kössl: UNIQA is the innovation<br />

leader in Austria with almost<br />

40,000 SafeLine policies, 400,000<br />

customers, 35,000 driver protection<br />

contracts, VitalCoaches and<br />

Vitalbilanz. Already at the end<br />

of 2008 we realized that a major<br />

smartphone boom was approaching.<br />

We made allowances for the<br />

ever-growing trend towards smartphone<br />

use and upheld our claim<br />

of being «the insurance company<br />

for a new generation» with an innovation.<br />

UNIQA was the first insurer on<br />

the Austrian market to provide its<br />

customers with a high-quality<br />

app. We wanted to get closer to<br />

customers with a claims app and<br />

be able to help them to submit<br />

a claim as quickly and efficiently<br />

as possible.<br />

As Chairman for insurance technology,<br />

I see a special advantage for in<br />

32 SolutionS<br />

regulatory approval (e-Bike, Segway, etc.)<br />

to be taken out in a simple and unbureaucratic<br />

way (cf. textbox).<br />

Also in Switzerland insurance companies<br />

have taken the first steps and now<br />

offer, for example, take-home insurance<br />

for a new television, a new watch or even<br />

for a wedding – products which are not<br />

surers with claims notification and<br />

processing via a smartphone app.<br />

Being at the beginning of the process<br />

chain allows us to influence the subsequent<br />

process – through control<br />

and automation. This gains even<br />

more importance as the costs in the<br />

repair industry are continually rising.<br />

Solutions: What experience has<br />

UNIQA gained with smartphone<br />

claims applications? Have these<br />

been welcomed?<br />

Kössl: Customer feedback has been<br />

excellent. We have received many<br />

e-mails from our customers saying<br />

how happy they are with this option<br />

of submitting a claim. Our app<br />

«UNIQA Mobile Services» has so<br />

far been downloaded 18,000 times<br />

(iPhone and Blackberry) and to date<br />

more than 100 claims have been<br />

submitted via smartphones.<br />

Solutions: What experiences has<br />

UNIQA had with the smartphone<br />

e-bikes applications? Have these<br />

been welcomed?<br />

Kössl: The e-Bike app has been well<br />

received by customers and also by<br />

comparable with traditional liability insurance.<br />

Which insurers are venturing into these<br />

new realms? Not only those who are trying<br />

to address young customers early to<br />

bind them to their brand. The majority of<br />

insurers have an intrinsic interest to create<br />

a competitive advantage in the widely<br />

«We want to get close to our customers with a claims app»<br />

Mag. Andreas Kößl, current CEO of UNIQA poistovna, a.s., Bratislava, at the time of the interview Chairman of UNIQA<br />

Sachversicherung AG and in-house trendsetter since 2008, on the smartphone boom and apps for car drivers, bikers and<br />

other insurants.<br />

our distribution partners. We have<br />

so far closed on a few dozen policies<br />

via this channel. The e-bike app is<br />

currently a pure «request app»,<br />

but we will add useful features for<br />

cyclists, not only e-bike, in the<br />

future.<br />

Solutions: Following e-bike<br />

insurance, can you imagine<br />

other convenience products<br />

being insured using smartphone<br />

apps?<br />

Kössl: Yes, this is conceivable and<br />

development has already begun.<br />

But I can’t give out more details<br />

at the moment.<br />

Solutions: Can you imagine that<br />

in addition to apps, online versions<br />

of optimized portal solutions<br />

could be implemented for smartphone<br />

users?<br />

Kössl: Already in 2010 UNIQA<br />

developed a mobile strategy which,<br />

in addition to further app development,<br />

included optimized<br />

portal solutions for smartphone<br />

users. These will be implemented<br />

in the near future.


saturated insurance market in Western<br />

Europe. If one wants to take the Apple<br />

analogy further: an entirely new need<br />

must be created. If this is to be achieved<br />

with a mobile platform, then it is impossible<br />

to avoid a check-up.<br />

Hurdles for insurance companies<br />

The trends will certainly bring various<br />

hurdles for insurance companies. This<br />

starts with the different design and calculation<br />

of products. Old price structures<br />

can no longer be applied, risk must be<br />

calculated differently and distribution<br />

can no longer be used to the same extent.<br />

Insurance for a 24-hour risk brings with<br />

it a high concentration of claims frequency<br />

for each insured period.<br />

Furthermore, the management of a greater<br />

volume of such «low ticket» insurance<br />

coverage requires the system landscape<br />

and processes to be perfectly coordinated.<br />

The step «draw up written offer» is obsolete<br />

and turnaround time takes on new<br />

meaning as it is no longer a question of<br />

days but seconds. Access to a mobile<br />

infrastructure must be discovered and<br />

the link to existing systems made available.<br />

In contrast to a claim where claims<br />

data, and in the event of an accident the<br />

position and pictures of the accident, is<br />

directly fed from the app into the claims<br />

system, the sales process should also be<br />

possible and the focus must be on the<br />

Trend<br />

«In contrast to a claim where claims<br />

data, and in the event of an accident the<br />

position and pictures of the accident,<br />

is directly fed from the app into<br />

the claims system, the sales process<br />

should also be possible and the focus<br />

must be on the customer.»<br />

customer. Only in this way can Dirk change<br />

his status from «uninsured» to «insured»<br />

with a few gestures on his mobile.<br />

Ultimately sales via mobile channels<br />

which did not exist before should be differentiated,<br />

be it an app, a point-of-sales<br />

product piggybacking on theatre tickets<br />

or as part of a mobile health solution<br />

(cf. figure 1). In this regard, it is necessary<br />

to ensure a clear delimitation to traditional<br />

products and distribution channels.<br />

Having just survived online policies<br />

purchasing, the dominant agency network<br />

now has a new threat to withstand,<br />

which must be cleverly resolved in-house.<br />

In line with technical innovations (Web 2.0, Mobile Web) a change in customer<br />

behaviour can be observed. New customer intentions are developing based on<br />

younger customers. The young generation, or rather the generation of digital natives,<br />

are the triggers and the rest follow. In addition to the tendency of price-sensitive<br />

comparison, clear trends towards a «here-and-now» attitude can be observed.<br />

Younger consumer groups and their behaviour form the basis for growth potential<br />

for insurance companies. Consideration of the needs of these potential customers<br />

brings opportunities but also challenges for the insurance industry, for example<br />

in the areas of product policy and design, customer address, sales channels as well<br />

as adjusting processes in the distribution.<br />

SolutionS 33


Trend<br />

Reinsurance distribution in transition<br />

«Hunters» and «Farmers» in<br />

customer marketing and care<br />

34 SolutionS<br />

Success<br />

Consult and coach


Insurance companies buy reinsurance to<br />

free up risk capital and to balance the existing<br />

portfolio. Such financial management<br />

is usually conducted via a broker.<br />

Change in the traditional<br />

reinsurance business<br />

Brokers have always been considered<br />

the main distribution channel for small<br />

and medium-sized reinsurance companies<br />

in particular. In addition to this important<br />

channel, market leaders also<br />

cultivate direct customer contact. The<br />

purchasing motivation of a cedent correlates<br />

in both cases directly with claims<br />

arising from events in the primary<br />

insurance industry and regulatory<br />

requirements. If new insurance cover is<br />

purchased via one of the channels, the<br />

underwriters at the reinsurer perform<br />

a double role: they calculate the technical<br />

insurance risk and act as sales representatives.<br />

The technical skills of an underwriter<br />

play a central role in negotiations<br />

with customers and brokers. The consequence<br />

is that modern sales and marketing<br />

methods have found limited use in<br />

the reinsurance industry up until now.<br />

1<br />

Powerful and transparent<br />

sales processes<br />

Strong leadership personalities<br />

to drive the process<br />

Creating sales opportunities<br />

Sales cockpit: transparency<br />

and success<br />

Transformation and segmentation of new customers<br />

Newest trends in the reinsurance market<br />

have shown that price sensitivity and<br />

competitive pressure are not the only<br />

issues for primary insurance companies.<br />

Today reinsurance companies are up<br />

against low prices, new competitors and<br />

a persistent soft market. Switzerland in<br />

particular is experiencing a sharp rise in<br />

Trend<br />

«Newest trends in the reinsurance market<br />

have shown that price sensitivity and<br />

competitive pressure are not only issues for<br />

primary insurance companies. Today<br />

reinsurance companies are up against low<br />

prices, new competitors and a persistent<br />

soft market.»<br />

Strategic planning of<br />

accounts with targets<br />

and handling guidelines<br />

Team selling with key<br />

account managers as<br />

orchestrators<br />

Learning from lost<br />

deals<br />

Developing customers<br />

into partners<br />

the number of reinsurers. Many of the<br />

new competitors are subsidiaries of holding<br />

companies headquartered in Bermuda<br />

and are motivated to get a foothold in<br />

the Central European market. There is no<br />

significant difference in market positioning<br />

between the new and the established<br />

companies. The former apply the same<br />

1<br />

Hunters<br />

3<br />

Farmers<br />

«Hunters» target new business<br />

«Farmers» generate long-term customer relationships with high levels<br />

with new customers<br />

of trust. Farmers aim at growth through cross-selling and outstanding<br />

service offerings.<br />

Base yearly sales<br />

planning on creating<br />

sales opportunities<br />

2 Segment A<br />

Changing new<br />

customers into<br />

partners<br />

Be competitive and<br />

offer the customer<br />

more than expected<br />

Analysis and<br />

understanding of<br />

buying centres<br />

Set up above-average<br />

service competences<br />

Segment B<br />

Segment C<br />

Intensification and profitability<br />

Number of customers<br />

Source: Solution Providers<br />

SolutionS 35


Trend<br />

primary sales arguments of price, capacity<br />

and security. The question for such<br />

companies is how to differentiate themselves<br />

from the long-established businesses.<br />

Simply having the capacity and<br />

being willing to underwrite any risk is<br />

not enough to sustainably position themselves<br />

opposite the competition. To complicate<br />

matters, the persistent soft market<br />

for reinsurers, in industrialized<br />

markets in particular, has become a significant<br />

challenge. The old price cycle in<br />

reinsurance appears to be broken, prices<br />

are not returning to positive as was<br />

expected, despite the record number of<br />

claims last year. From this a consequence<br />

can be derived: previously event-driven<br />

sales must realign to be able to generate<br />

the expected growth figures and earnings<br />

in future.<br />

Strengthening market position<br />

with modern sales strategies<br />

Reinsurers are not entering completely<br />

new territory in the area of sales. The<br />

financial industry has been working with<br />

new sales models for years. However,<br />

their implementation at reinsurance companies<br />

has so far been limited. Modern<br />

sales strategies prescribe a service<br />

offering aligned with the customer segment,<br />

an organizational structure with<br />

2<br />

1<br />

36 SolutionS<br />

Definition and sales<br />

strategy decision<br />

� Define change<br />

� Set-up measurable goals<br />

� Send management message<br />

Modular approach to modification of sales organization<br />

a strategic customer focus and continual<br />

monitoring of the sales philosophy using<br />

modern management tools.<br />

Larger companies have already begun to<br />

analyze customers according to various<br />

criteria and to restructure the customer<br />

portfolio with the goal of maximizing<br />

the potential of existing customers. As<br />

this must always stand in relation to the<br />

expected «share of wallet», it is necessary<br />

to service each customer segment<br />

individually. With an increasingly long<br />

business relationship, so-called «A» customers<br />

require a customer relationship<br />

manager/customer partnership which is<br />

built on trust to be developed using maximum<br />

involvement. This ensures that<br />

the relationship can be maintained and<br />

developed through cross-selling. Other<br />

customers cannot be served using the<br />

same concept and are thus offered fewer<br />

services. Clearer profitability ratios are<br />

the focus with these customers and drive<br />

decision processes.<br />

Strengthening distribution channels<br />

and respecting customer needs<br />

Insights from customer segmentation<br />

call for organizational changes in reinsurance.<br />

Acquisition of new customers and<br />

new business with existing customers is<br />

Implementation of sales measures<br />

2 3<br />

Quick wins Long-term improvements<br />

� Ensure frequent customer<br />

interaction<br />

� Every account manager<br />

must visit each customer<br />

five times a year<br />

� Publications generate sales<br />

opportunities when they are<br />

addressed directly<br />

� Enforce sales management<br />

� Introduce regular monthly<br />

sales reports and reviews<br />

� Open discussion of «hunter»<br />

performance in team<br />

� Celebrate sales successes<br />

in team<br />

� Identification and training of<br />

«Hunters» and «Farmers»<br />

� Implement global sales<br />

process KPIs<br />

� Implement lead generation<br />

� Strengthen sales culture.<br />

Increase sales motivation<br />

through full performance-<br />

based compensation<br />

� Sales cockpit to visualize<br />

successes<br />

achieved with sales employees with<br />

hunter profiles. «Hunters» work closely<br />

with sales processes and recognize new<br />

sales opportunities. Such personalities<br />

should work with smaller customers to<br />

a greater degree or should work as a part<br />

of a global sales team. Reinsurance underwriters<br />

generally have a technical profile<br />

allowing them to discuss contractual<br />

content with customers. This profile can<br />

be described as one which is aligned<br />

to customer care, so-called farmers.<br />

«Farmers» aim for cross- and upselling<br />

and are used as key account managers<br />

for profitable existing customers. They<br />

cultivate existing large accounts and<br />

plan long-term sales activities according<br />

to customer needs. Generally speaking,<br />

«farmers» do not see the customer as an<br />

acquisition target but as a partner for<br />

a long-term business relationship.<br />

In the overall sales picture both hunter<br />

and farmer profiles, which cooperate in<br />

various teams, are necessary. «Hunters»<br />

attract new customers who are then<br />

taken over by «farmers» who make<br />

them into partners to promote longterm<br />

customer loyalty. Depending on<br />

the area of application, teams can be put<br />

together in a way which optimally suits<br />

the needs of customers.<br />

4<br />

Modifcation of<br />

other functions<br />

� Derive changes for other<br />

divisions (recruiting,<br />

underwriting, product<br />

development etc.)<br />

Source: Solution Providers


Intensifying management and<br />

setting up controlling<br />

Today, in addition to risk management,<br />

sales and marketing enjoy considerable<br />

attention in reinsurance companies. It is<br />

a well-known fact that selling products<br />

and services requires considerable effort<br />

and commitment and thus demands<br />

strong leadership. The same applies in reinsurance<br />

companies. New topics, products<br />

and models require the support of<br />

top management, particularly when the<br />

implementation impacts the organization.<br />

However, management includes<br />

controlling and the ability to create transparency<br />

as regards success and failure.<br />

Successful sales teams are characterized<br />

by a great willingness to continually learn,<br />

striving for the maximum, and should be<br />

rewarded accordingly. Transparent sales<br />

controlling is vital if a customer-aligned<br />

organization is to be achieved.<br />

Also necessary when dealing with brokers<br />

are measures in the three areas<br />

organization, service offering and<br />

management tools. Brokers are important<br />

players in reinsurance and direct<br />

insurance industries. Depending on the<br />

size of the company, up to 100% of business<br />

is executed via the broker channel.<br />

Every organization which works with<br />

intermediaries or brokers must thus learn<br />

that, from the point of view of the company,<br />

the broker is the customer and not<br />

a competitor, which holds back important<br />

business. Every sales organization<br />

can learn exemplary practices for dealing<br />

with customers from brokers and<br />

their sales methods; and brokers also<br />

expect to be treated with sales expertise.<br />

Trend<br />

«In the overall sales picture both hunter and<br />

farmer profiles which cooperate in various<br />

teams are necessary. ‹Hunters› attract new<br />

customers who are then taken over by<br />

‹farmers› who make them into partners to<br />

promote long-term customer loyalty.»<br />

Taking appropriate measures<br />

What are the options available to reinsurance<br />

companies to, for example, be competitive<br />

on the continental European market?<br />

Customers and brokers must first be<br />

classified in segments. Independent of<br />

the segment, sales representatives are set<br />

up as «hunters» and/or «farmers» depending<br />

on their skills. The result is a top segment<br />

of a few customers who are cultivated<br />

by teams with a distinctive farmer<br />

culture. In the other segments teams with<br />

almost exclusively hunter personalities<br />

are responsible. To efficiently organize<br />

the acquisition of new customers and new<br />

business by «hunters», an efficient and<br />

transparent sales process must be implemented.<br />

This process focuses on the identification<br />

of new sales opportunities in<br />

particular, as well as their qualification<br />

and treatment (opportunity management).<br />

With transparency the success of<br />

«hunters» is measurable and controllable.<br />

A different approach is necessary to<br />

implement farmer activities. Here active<br />

management of selected customer<br />

accounts is achieved by means of planned<br />

activities. With top customers in particular,<br />

a strategic sales and service plan per<br />

account is necessary which is set up<br />

according to customer needs and company<br />

strategy. To implement this high-level<br />

overall planning, it is vital to have the<br />

involvement of responsible account<br />

managers who monitor and control the<br />

composition of sales activities in their<br />

accounts.<br />

The aim is to intensify the sales culture.<br />

An increase in customer interaction<br />

through sales representatives alone leads<br />

to more managed customers per employee.<br />

In this way earnings and savings<br />

potential can be maximized.<br />

In a stagnating market with increasing price sensitivity, reinsurance companies<br />

are faced with sales challenges. If continual growth is to be achieved in a saturated<br />

market, new sales models must be established. In addition to the traditional but<br />

highly competitive broker channel, reinsurance companies must intensify modern<br />

sales concepts and organizational forms in direct sales with customers. Such models<br />

allow closer contact with customers and their problems, thus allowing a more active<br />

role to be taken in defining business with customers.<br />

SolutionS 37


Case Study<br />

Portfolio segment profitability maps support decisions<br />

on the possible courses of action<br />

Optimizing portfolio<br />

profitability in life insurance<br />

38 SolutionS<br />

Process Unification<br />

Languages<br />

Industrialization<br />

cultural Integration<br />

Strategy


A large portion of corporate risk for insurance<br />

companies can be found in the<br />

area of portfolio profitability. Achieving<br />

planned or originally forecast profits is<br />

largely dependent on the evolved structure<br />

of the portfolio. Thus portfolio<br />

structures and their profitability have<br />

become a significant aspect of risk<br />

management. Process optimization and<br />

product development have undergone<br />

various improvements and in the meantime<br />

potential has largely been increased.<br />

However, in the area of risk<br />

management in portfolio controlling, in<br />

the evaluation of portfolio profitability<br />

and in active portfolio management as<br />

regards added value, there is still considerable<br />

room for manoeuvre. This applies<br />

both to retrospective examination<br />

of portfolio profitability and revised<br />

transition probabilities, as well as measures<br />

on contract portfolios.<br />

Furthermore, the increasingly rapid succession<br />

of new insurance products and<br />

their growing complexity, as well as<br />

growing regulatory requirements tie up<br />

company resources which are needed to<br />

examine the current situation of existing<br />

insurance portfolios and the associated<br />

implementation of measures. In addition<br />

to competitive and cost pressures, modi-<br />

EUR<br />

200<br />

1<br />

150<br />

100<br />

50<br />

0<br />

-50<br />

1995 1999 2003 2007 2011<br />

Company-specific portfolio profitability map<br />

fied guaranteed interest rates and expectations<br />

of surplus funds declarations demand<br />

global goals. In addition, triggers<br />

such as Solvency II and risk management<br />

� PPD = 5<br />

� PPD = CD-10<br />

� PPD = CD-5<br />

� PPD = CD<br />

PPD Premium payment duration<br />

CD Contract duration<br />

Case Study<br />

«Measures to optimize portfolios are<br />

often not carried out in great detail.<br />

It is not unusual that this results in<br />

losses of millions of euros in<br />

portfolio profitability for insurance<br />

companies every year.»<br />

Source: Solution Providers<br />

call for more careful examination. To<br />

this can be added growing requirements<br />

in internal and external transparency in<br />

order to reach conclusions on future<br />

product design and be able to initiate<br />

measures within the portfolio.<br />

Often the composition of life insurance<br />

portfolios develops differently to the<br />

forecast made at the product’s introduction.<br />

For example, they often have smaller<br />

quantities, or a different composition<br />

of insurance premiums due to the particular<br />

characteristics of the distribution<br />

channels, or require a greater degree of<br />

attention than planned. Therefore, many<br />

portfolio positions do not contribute to<br />

the overall result as expected. Against<br />

this background there are two elementary<br />

questions: (1) how can loss-making<br />

areas be distinguished from profitable<br />

ones and (2) which measures can be derived<br />

from this?<br />

Example of a profitability map<br />

Figure 1 illustrates the distribution of<br />

profitability in a sample portfolio based<br />

on a current sample tariff. On the basis<br />

of the contract inception year, the duration<br />

of premium payments is varied<br />

against the period of insurance. In<br />

a portfolio of 300,000 policies with<br />

a current p. a. premium volume of<br />

EUR 600 m, an increase of more than<br />

EUR 15 m on the basis of the «present<br />

value of future profits» can be seen.<br />

SolutionS 39


Case Study<br />

2<br />

Approach<br />

Solution Providers offers the analysis of<br />

the tariff landscape and portfolio structure<br />

including key data and units and<br />

determination of the level of quality.<br />

A project such as this provides the<br />

following central results:<br />

� Identification of profitable parts of<br />

portfolios, separation from nonprofitable<br />

areas. The qualitative and<br />

quantitative minimum size for each<br />

part is defined and future market<br />

trends, customer behaviour and regulatory<br />

changes considered.<br />

3<br />

Phase 1<br />

Project<br />

organization<br />

Portfolio distribution according to premium payment duration<br />

40 SolutionS<br />

Phase 2<br />

Portfolio<br />

clustering<br />

Approach for measuring portfolio profitability<br />

First year<br />

Phase 3<br />

Selection<br />

Phase 4<br />

Analysis and<br />

evaluation<br />

� Definition of appropriate measures for<br />

individual parts. This includes opportunities<br />

for the development and expansion<br />

of shares, stabilization of portfolio<br />

parts in their life-cycle and the treatment<br />

of those which are not profitable.<br />

Know-how<br />

There is currently a strong focus on profitability<br />

simulation in connection with<br />

asset liability modelling in insurance<br />

companies. Regular examination of the<br />

underlying model assumptions generally<br />

finds its way into further product de-<br />

Phase 5<br />

Measures<br />

velopment. However, measures to optimize<br />

portfolios are often not carried out<br />

in great detail. It is not unusual that this<br />

results in losses of millions of euros in<br />

portfolio profitability for insurance companies<br />

every year. Depending on portfolio<br />

structure, measures to optimize portfolio<br />

profitability can be:<br />

� Insights for future product development<br />

without impacting the current<br />

portfolio<br />

� Managing distribution to give preferential<br />

treatment to a certain tariff<br />

constellation<br />

PPD class Value 1995 1999 2003 2007 2011 Total<br />

PPD = 5 PVFP EUR –177,624 EUR –2,174,159 EUR –7,874,600 EUR –5,931,436 EUR –2,377,392 EUR –18,535,211<br />

QTY 4,522 8,709 18,207 9,116 4,461 45,015 15.0%<br />

PPD = CD PVFP EUR 49,782,868 EUR 97,987,523 EUR 185,690,992 EUR 97,138,174 EUR 49,597,338 EUR 480,196,895<br />

QTY 12,061 23,227 48,512 24,302 11,901 120,003 40.0%<br />

PPD = CD-5 PVFP EUR 25,375,004 EUR 51,456,837 EUR 97,884,813 EUR 51,556,664 EUR 26,650,183 EUR 252,923,501<br />

QTY 9,036 17,404 36,387 18,242 8,930 89,999 30.0%<br />

PPD = CD-10 PVFP EUR 7,595,580 EUR 16,178,881 EUR 31,239,141 EUR 16,499,532 EUR 8,709,434 EUR 80,222,568<br />

QTY 4,522 8,709 18,207 9,116 4,461 45,015 15.0%<br />

Overall: PVFP EUR 82,575,828 EUR 163,449,082 EUR 306,940,346 EUR 159,262,934 EUR 82,579,563 EUR 794,807,753<br />

Overall: QTY 30,141 58,049 121,313 60,776 29,753 300,032<br />

10.0% 19.3% 40.4% 20.3% 9.9%<br />

PPD Premium payment duration CD Contract duration PVFP Present value of future profits QTY Quantity<br />

Phase 6<br />

Observation<br />

Source: Solution Providers<br />

Source: Solution Providers


� Modifying the portfolio for defined<br />

contract and tariff constellations such as<br />

� Offers to waiver payment<br />

exemptions<br />

� Offers for contractual<br />

modification<br />

� Consolidation of products<br />

and tariffs<br />

� Adaptation for step-by-step adjustment<br />

of profit participation<br />

� Removal of parts of portfolios in rare<br />

cases<br />

In addition to tools and analysis techniques,<br />

Solution Providers, with its<br />

P/S/Pmethod, has the right methods and<br />

necessary experience to gain the «correct»<br />

insights from the complexity of<br />

the dimensions and multilayer criteria.<br />

For example, measures begin with simple<br />

consideration of premium waiver<br />

versus surrender, with and without cancellation<br />

discount, and reach to complex<br />

portfolio activities such as portfolio reshuffling<br />

or reductions.<br />

Solution Providers supports insurance<br />

companies with the relevant procedural,<br />

methodological, technical and actuarial<br />

know-how, with a focus on the following<br />

services in particular:<br />

� Methods for clustering portfolios<br />

� Specification of portfolio deductions<br />

� Preparation of results<br />

� P/S/Pmethod for the analysis and evaluation<br />

of profitability of portfolios (parts)<br />

� Compilation of a catalogue of measures<br />

to support the implementation<br />

in the portfolio, for example portfolio<br />

reshuffling and consolidation, staggering<br />

profit participation, product<br />

adjustment and distribution management<br />

indicators<br />

� Methodological skills in initialization<br />

and implementation<br />

Cross methods with the P/S/Pmethod<br />

show the potential of the current portfolio<br />

and provide optimization approaches:<br />

method and experience rapidly distinguish<br />

the relevant scope and «correct»<br />

insights from the complexity of dimensions<br />

and the multilayer criteria.<br />

Contract duration vs. premium<br />

payment duration<br />

Figure 2 shows Solution Providers’ simulation<br />

portfolio: the portfolio exhibits overall<br />

positive profitability. However, contracts<br />

with very short premium payment durations<br />

are unprofitable. Based on the abovementioned<br />

sample portfolio, this means<br />

a loss in profitability of ca EUR 18.5 m.<br />

Possible drivers for the profitability of<br />

a portfolio are contracts with premium<br />

Case Study<br />

payment durations (PPD), which are (almost)<br />

identical to the contract duration (CD).<br />

If just 30% of contracts with a PPD = 5<br />

could reach a different state using suitable<br />

measures (e. g. adjustment of the PPD,<br />

change of tariff etc.), the result would be<br />

EUR 5.5 m in additional earnings. A reinforcement<br />

of contracts with positive earnings<br />

should be carried out in parallel<br />

through portfolio preservation measures.<br />

Advantages<br />

With a consistent development of knowhow<br />

in handling profitability-optimizing<br />

measures and with the combined<br />

application of the SPEEDmethod® und<br />

P/S/Pmethod as reference models for<br />

project methodology, process and profit<br />

optimization, Solution Providers contributes<br />

the necessary knowledge and<br />

experience to be able to<br />

� support insurance companies to increase<br />

existing profitability and thus<br />

to control the application of these<br />

financial resources<br />

� create portfolio segment profitability<br />

maps and support decisions for<br />

measures<br />

� accompany the gradual stabilization<br />

in profitable and strategic areas<br />

� undertake the integration of analyses<br />

into regular business processes<br />

A large portion of corporate risk for insurance companies can be found in the<br />

area of portfolio profitability. Portfolio structures and their profitability have<br />

become a significant aspect of risk management. As regards added value, there<br />

is still considerable room for manoeuvre.<br />

The composition of life insurance portfolios often develops differently to the forecast<br />

made at product introduction. Thus many portfolios positions do not contribute<br />

to the overall result as expected. It is not unusual for millions of euros in portfolio<br />

profitability to be lost every year.<br />

Solution Providers supports insurance companies in increasing existing profitability.<br />

Analysis of the tariff landscape and portfolio structure is carried out and measures<br />

to optimize portfolio profitability in the various portfolio positions and in future<br />

product design are determined.<br />

SolutionS 41


Case Study<br />

CRM implementation at Swiss Re<br />

Efficient focus on the customer<br />

As the second largest reinsurance company<br />

worldwide, Swiss Re has grown continuously<br />

over the last decades and, after<br />

initial turbulence, has weathered the financial<br />

crisis well. This is mainly thanks<br />

to its loyal clientele, which has been built<br />

up and tended over the past 149 years. Reinsurance<br />

has always been a «people business».<br />

However, the structured, intense<br />

customer relationship information coupled<br />

with an overall customer view is not<br />

to be taken for granted in a business<br />

which is quickly dominated by technical<br />

discussions. Years ago Swiss Re increased<br />

the organization’s alignment with its customers<br />

by creating the organizational<br />

unit «Client Markets» and thus set-up<br />

a more customer-oriented distribution<br />

structure. This decision proved to be<br />

trend-setting and the changing market<br />

confirms the structure. The aim of the<br />

recent decision for a CRM implementation<br />

was to replace the regionally developed<br />

solutions with a central platform on<br />

the one hand, and on the other to design<br />

the distribution support more efficiently<br />

and effectively to be able to meet the<br />

requirements of the market climate.<br />

42 SolutionS<br />

Penetration potential<br />

for classic CRM tools<br />

Whereas retail distribution customer<br />

relationship management (CRM) is<br />

familiar with managing the customer<br />

relationship as a campaign tool and as<br />

a process optimization tool and the typically<br />

sold item is a clearly defined product<br />

or service with a small margin,<br />

which is multiplied by volume, suppliers<br />

in corporate business have other value<br />

propositions. These are much stronger<br />

and long-term customer relationships,<br />

an international customer view and, last<br />

but not least, much larger individual<br />

volumes. It is not so much individuals<br />

but entire sales teams, which shape the<br />

customer relationship. Although in a<br />

leading reinsurance company such as<br />

Swiss Re the «products» are pre-structured,<br />

they are still negotiated, parameterized<br />

and aligned with customer<br />

needs in a direct exchange with customers,<br />

competitors and brokers. Here<br />

the concept of a product goes much further<br />

and thus also the CRM focus: it includes<br />

not only the customer-specific<br />

advisory services provided beforehand,<br />

«The fundamental challenge of any CRM<br />

implementation is always the creation of<br />

a ‹CRM culture›, which is independent<br />

of existing structures and cultures.»<br />

but also the integrated processing of an<br />

often multi-decade contract which goes<br />

much well beyond the last noted claim.<br />

Amongst others, Swiss Re pursued the<br />

following goals with the implementation<br />

on the new platform:<br />

1. Reduction of costs through consolidation<br />

of various island solutions to<br />

an integrated platform<br />

2. Increase in sales efficiency through<br />

improved information preparation<br />

3. Increase in organizational efficiency<br />

through «ease of use» of distribution<br />

applications<br />

4. Increase in transparency around the<br />

customer and customer relationship<br />

within the company<br />

The sequence of these goals is not random.<br />

To generate and be able to use good<br />

data a solid master data basis must be<br />

available. Thus central questions such as<br />

architecture, integration and core processes<br />

in master data management were<br />

treated as priorities. Due to complex regulations<br />

directing business in various<br />

countries and territories, partner administration<br />

requirements arose which<br />

directly influenced the project approach.<br />

Thus the project had to secure the correctness,<br />

an aspect of fundamental legal<br />

importance, of the partner master data<br />

by integrating an automated central data<br />

control point in the workflow.<br />

In a second step in addition to pure partner<br />

data administration, and based on<br />

a successfully converted data landscape,<br />

the essential aspects of customer relationship<br />

management were on the agenda:<br />

Strategic account planning, customer<br />

training tracking, sales appointments,<br />

customer invitations, contract meeting<br />

notes and, of course, a sales pipeline. To<br />

meet the high standards of data quality,<br />

in addition to manual data administration<br />

an automated source of data validation<br />

was applied. For example, the internal<br />

employee entry and exit process, or<br />

the change of task or responsibility within<br />

the company was used from the HR<br />

system. This creates an additional, efficient<br />

increase in data quality.


With the step-by-step approach applied,<br />

initial successes could be seen early on.<br />

These could be built on actively, thus serving<br />

to support the acceptance of the new<br />

platform and gradually developing transparency<br />

in the customer relationship.<br />

Change management<br />

as a central project function<br />

The fundamental challenge of any CRM<br />

implementation is always the creation of<br />

a «CRM culture», which is independent<br />

of existing structures and cultures. The<br />

introduction of a global CRM solution is<br />

without doubt closely linked to the creation<br />

of «transparency» and therefore<br />

also to the fear of measurability and control<br />

via severe, rigid management-byobjective<br />

specifications. Relationship<br />

managers are also hesitant to share contacts,<br />

as these represent their sales success.<br />

What would be their motivation to<br />

manage contacts in a concern-wide system<br />

and even allow detailed insight into<br />

activities with customers? Such side effects<br />

of laying information open can lead<br />

to unwanted rivalry or at least discount,<br />

if they threaten to undermine the culture<br />

of the company.<br />

Swiss Re with its B2B business has built<br />

up a global open sales culture over the<br />

years from which the project team can<br />

profit directly as regards transparency.<br />

Additionally, the project was able to show<br />

early on that it followed a generally beneficial<br />

goal: «offering the customer better<br />

service». Consistent support from<br />

corporate management is also essential<br />

for a successful CRM implementation,<br />

amongst other things with clear, guiding<br />

communication for the project and its<br />

Case Study<br />

«To deepen the customer relationship with<br />

a solid information status is essential for<br />

corporate management and thus one of the<br />

main starting points for CRM.»<br />

impact. As simple as these aspects appear,<br />

they are of critical importance to<br />

the success of the project, regardless of<br />

the phase it is in. In this respect Swiss Re<br />

can proudly claim to have successfully<br />

made the first steps from a need-<br />

to-know to a need-to-protect culture.<br />

Consequent alignment<br />

with the customer<br />

Deepening the customer relationship with<br />

a solid information status is essential for<br />

corporate management and thus one of<br />

the main starting points for CRM at Swiss<br />

Re. «Information status» in the context of<br />

CRM tools not only implies financial figures<br />

but also denotes «structured data»<br />

used, for example, to illustrate customer<br />

interaction and help to maintain crossteam<br />

and global customer relationships.<br />

Information, such as the organization of<br />

customer events, which previously had to<br />

be deposited in various formats in various<br />

places, can now be realized centrally and<br />

be evaluated in numerous ways. Thus advantages<br />

are not only generated on a corporate<br />

management level but also for the<br />

departments themselves.<br />

System landscape questions dominate<br />

Linking existing systems is a significant<br />

challenge, not only from a technical<br />

point of view. CRM is the central<br />

portal of partner data administration.<br />

Swiss Re took the unique step of underpinning<br />

the distribution of partner data as<br />

well as other reference and metadata with<br />

an MDM strategy: the MDM (Master<br />

Data Management) acts as distributor, as<br />

the centre of a network, in which central<br />

data is distributed in a controlled and<br />

standardized way. This posed one of the<br />

challenges, which Swiss Re successfully<br />

mastered: systems can be linked gradually.<br />

Quo vadis? The road ahead<br />

The subject of CRM is not yet closed for<br />

Swiss Re but rather the pillars have been<br />

built on which any further development<br />

can be supported. With the successful implementation<br />

strategy, a powerful system<br />

has been put in place with reserves, which<br />

have been far from exhausted. CRM is<br />

finding its way slowly and step-by-step and<br />

is mixing with the long-established company,<br />

enabling it to achieve its central goal:<br />

to focus its activities on its customers.<br />

With the implementation of a CRM solution, Swiss Re has driven home a further<br />

pillar on which to support its long-term strategy. Although Swiss Re moves exclusively<br />

within classic corporate business, the project has shown that many success factors<br />

of CRM implementation, such as intensive change management and integration,<br />

are valid as much for retail as B2B business. This is because reinsurance companies<br />

such as Swiss Re already have a strong customer focus and maintain very long-term<br />

customer relationships.<br />

SolutionS 43


info@mailsp.com<br />

www.solutionproviders.com<br />

Solution Providers Schweiz AG<br />

Management Consulting<br />

Neugutstrasse 89<br />

CH-8600 Dübendorf/Zürich<br />

Phone +41 44 802 2000<br />

Solution Providers Deutschland GmbH<br />

Management Consulting<br />

Arndtstrasse 23<br />

D-22085 Hamburg<br />

Phone +49 40 226 229 560<br />

Solution Providers Österreich GmbH<br />

Management Consulting<br />

Schottengasse 3<br />

A-1010 Wien<br />

Phone +43 1 533 84 04<br />

Solution Providers Singapore Pte. Ltd.<br />

Management Consulting<br />

67 A Boat Quay<br />

Singapore 049855<br />

Phone +65 6229 5770

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