Simplify to Succeed - IBM

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As FIs expand the array of products and services they offer, the management of wealth will become the mantra. Simplify to Succeed—Retail financial institutions in 2005 The vision for product manufacturing and assembly The ability to assemble the right products and services at the right price and satisfy the full financial needs of their customers will separate winning FIs from the rest. As FIs expand the array of products and services they offer, the management of wealth will become the mantra. Wealth management will provide the philosophy that replaces the product-based view of the customer with an all-embracing lifestyle perspective. It has three components: • Wealth creation, which enhances the customer’s wealth capabilities (e.g., checking account, mortgages, short-term investments, short-term debt) • Wealth preservation, which covers the longer term (savings, investment, life and property and casualty (P&C, non-life) insurance, and retirement planning) • Wealth transfer, which looks beyond the individuals’ needs to the needs of those around them (inheritance planning, children’s education, trusts) Wealth management will define the way each customer is addressed. In turn, the customer will want the best value across the full range of services, rather than just product-by-product. FIs adopting this approach will gain an increasing proportion of their revenues from advisory and fee-based services. Although many FIs will target the mass affluent to achieve these goals, there is value to be mined from other market segments, such as mass retail and even the unbanked. “A universal bank… must be able to deliver value to all segments in a profitable manner.” Jose Antonio Fernández Rivero BBVA “The goal is to have a broad vision of the customer… to collect wealth information.” Nicholas Schimel, Commercial Director AGF Vie “Wealth management implies all asset classes and all stages of the wealth cycle—from wealth creation through wealth management, enhancement and distribution. To our selected target clients we aim to deliver against this goal, recognising that each client’s needs are specific and unique.” Investec Private Bank 20
More FIs will build sources of revenue outside their traditional markets Competition in the commoditised financial service market will drive FIs to look for new sources of revenue. By 2005, they will be wrapping a wide range of services around their core products; their customer acquisition and retention strategies will increasingly be based on lifestyle propositions; and they will be expanding relationships with other service providers such as cars, home services and travel. Those FIs which are good at understanding what their customers want will prove the most attractive partners for these service providers. FIs which successfully create new income streams will also be rewarded by the stock market. Some FIs have already begun to expand their revenue streams in this way. For example, motor insurers diversified relatively easily into breakdown recovery. But Direct Line, the UK telephone and Internet insurer, took this a step further and set up jamjar.com to sell cars and motoring accessories on the Internet. The business was established in July 2000. By the end of 2001 it had tens of thousands of customers. 10 Core competencies can be diversified into new market opportunities Countrywide Credit: value in diversification In order to improve its profitability and reduce its exposure to the cyclical mortgage business, Countrywide Credit, a large U.S.-based mortgage lender, transformed itself into a diversified provider of mortgage and home-related financial services. Since 1992, Countrywide has introduced new products and services which build on its core competency in the mortgage market. These have included home loans for the sub-prime market, home equity loans, home-buying services, and a range of insurance products: credit life, homeowner, auto, and life and disability insurance. At the same time, Countrywide has begun to sub-service other players in the market, thereby stabilising its revenue streams. This has led to significant cost improvements, and earned it a reputation as a best-of-breed processor. Countrywide offers some of these services to companies in Europe, and is planning to expand its markets further. In addition, Countrywide has capitalised on its new skills by selling technology and consulting services. As a result of these changes, Countrywide now obtains over 30% of its revenues from outside the core mortgage business, and its results have been rewarded in the capital markets. Goldman Sachs is predicting 46% growth in EPS for 2002, making it a leader in the sector. Source: Countrywide Home Loans Inc., http://www.countrywide.com/, “Specialty Finance: Mortgage Finance,” November 6, 2001 21 By 2005, leading FIs will be achieving 50% of new revenue growth from nontraditional products and services.
Page 1 and 2: IBM Business Consulting Services Si
Page 3 and 4: Retail financial services: ceaseles
Page 5 and 6: Simplify to Succeed 2005: John Cons
Page 7 and 8: Rethinking the business model The r
Page 9 and 10: The vision of a component-based bus
Page 11 and 12: Today’s typical models Customers
Page 13 and 14: Optimising the customer franchise C
Page 15 and 16: Successful FIs will radically redes
Page 17 and 18: “FIs that are successful at deliv
Page 19 and 20: Priority actions for tomorrow’s l
Page 21: Maximising the breadth, depth and f
Page 25 and 26: Priority actions for tomorrow’s l
Page 27 and 28: consolidation still exists in the U
Page 29 and 30: Collaboration with financial instit
Page 31 and 32: have made savings averaging 40% to
Page 33 and 34: Third-party providers can become ma
Page 35 and 36: Take advantage of wage arbitrage op
Page 37 and 38: Moving to a component-based busines
Page 39 and 40: Sources 1 The Abbey National Group,
Page 41 and 42: About IBM Business Consulting Servi
Page 43 and 44: To learn more about our global Fina

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