Do you trust your relationship manager ? (August 11, 2016)

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if you are a high net worth customer ( HNIs), many financial service companies will be happy to assign a relationship manager/ wealth manager to take care of you, because you have lots of money to spend.  This can give you a kick , because a relationship manager provides you with VIP service. He makes you feel important , and is supposed to be your one point contact, so in case you have a problem, you don’t have to go through layers of bureaucracy – he will solve it for you.

From the customer’s point of view , he adds value by reducing friction in your dealings with the bank. The bank is happy to give fat salaries to these people, because they use them in order to up-sell and cross-sell their expensive  services. Relationship managers do a good job because they try to pamper their clients and make them feel special .

However, lots of HNI’s don’t have much trust or respect for their relationship managers. For one thing,  they’ve become a dime a dozen. They all seem very interchangeable , and there’s very little to differentiate between one or another. Most of them don’t have much domain expertise as far as managing your wealth goes, though they call themselves wealth managers. What they’re very good at is spouting a lot of financial jargon which can be very impressive. When you are hooked, they hand you off to the expert in the bank , so they can move on to their next relationship, which means they no longer have any hands-on involvement in handling your portfolio.

Another big problem is that none of these relationship managers have any loyalty to their employer either. They’re happy to switch careers, and most relationship managers don’t seem to stick with any bank for more than two or three years. When they switch to a new employer , they will often take their customers along with them. If they’re not willing to be loyal to their own employer, why would they have any loyalty to their customer?

The problem is that relationship managers are incentivized based on metrics which the bank lays down for them. These metrics include how much business the relationship manager can get from his customers – how much can he get them to spend ( the word he uses is invests !). This means that he has targets to meet, which are vitally important for him , because this is what determines not only his salary and his bonus, but also his chances of promotion. Sadly, instead of putting his customers first, he will naturally tend to put his targets first , and this is why he’ll often milk the relationship for his personal gain.

Like every other human being, a relationship manager is homo economicus, which means he will put his own interests first. The way the financial service companies incentivize their relationship managers, means that often their interests are diametrically opposite to those of their customers. The more they can get their customers to buy and sell ( “churn”), the greater the fees their bank can charge, which increases their slice of the pie.  This is tragic , but they’ve been able to get away with this for many years.

The good news is that customers are wising up , and are realising that these relationship managers are just glorified salesmen. They have now started looking for alternative solutions – a professional who has a fiduciary responsibility to them, and will put their interests first .

These are my personal views and I’d like your opinion.

Do you trust your relationship manager ?

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