Even when serving an affluent market segment, many essential products and services become commodities.
The way to differentiate can depend on what comes with the commodity. For Venu Krishnamurthy, president of Citigold Wealth Management, that differentiation hinges on people. And that is also part of his answer to fintech players out to disrupt the personal wealth management space.
Krishnamurthy, whose operation has over $100 billion in client balances, sees technology and humans working side-by-side going forward.
People who serve people
“The human connection makes a real difference,” explains Krishnamurthy—an interesting viewpoint from someone who came into banking from an engineering background. He says that the affluent customers who Citigold serves are looking for an advisor that they can trust.
Citigold customers actually have two advisors. One is the Citigold relationship manager, who handles the client’s banking needs, and the other is the Citigold personal wealth management financial advisor, who handles investment strategy advice. The pair represent a team, but also serve as the entrée between the Citigold customer and the entire Citi organization. If a Citigold client needs a home loan, for example, the relationship managers guide the customer to the appropriate product specialist.
About half of his team comes from within the Citi organization and the company recruits the other half from other financial services organizations. But a common filter for recruitment is willingness to coordinate with others in the organization. Technical financial skills count, but so does proven ability to make connections with customers as people.
Building and keeping trust
Establishing a trusted relationship with a Citigold client has several facets. Krishnamurthy believes that one key element is having the ability to demonstrate that the advisor and the bank are centered on the client’s interests, and do so consistently.
One way that is accomplished, and demonstrated, he says, is through the bank’s fee and compensation arrangements. For example, Krishnamurthy says there is no difference in the weighting given for selling one product over another.
“Once you become product agnostic, you’ll work in the clients’ best interests,” he explains. This attitude also avoids churning, and the extra and often unwarranted trading charges that result.
For Citigold, the higher the AUM (assets under management), the more the bank makes, explains Krishnamurthy. This tends to align bank and client interests. Individual managers are evaluated on the basis of overall customer profitability as well as net promoter scores. (The latter is a ratings scale that reflects how likely a customer would be to recommend a provider to another potential customer.)
Another element of building trust is engaging with the client on their terms. At Citigold, this has entailed blending technology with human expertise, because the organization’s customers want a blend of both kinds of service.
“For them, technology is a surrogate for simplicity and convenience,” says Krishnamurthy, “but they also want to sit down with their advisor.”
Millennials and wealth management
For some years, some bankers have scoffed about seeking the business of millennials because “they have no money,” but with every passing year, this attitude becomes less connected to reality.
Krishnamurthy says that millennial customers don’t dominate the wealth management area, but that their demographic gravity is pulling Citigold further along the technology path.
But this group isn’t merely influencing technology. Krishnamurthy says that their preferences differ from those of older customers.
Millennials tend to think differently about the future, right now, he explains. They do their financial planning on shorter time horizons, looking at other life events that will come before retirement. Advice is more important to them at this stage, he says, than merely finding a place that will set them up with the products they need.
“And they don’t necessarily define wealth as accumulation,” explains Krishnamurthy. “They want financial control and freedom—and the ability to make changes.”
Being an advisory organization that can become a trusted source of such aid can gain their business.
“There’s a thirst for personalized context,” as well, says Krishnamurthy.
What about disruptors?
The threshold for entering the wealth management function’s territory has been falling over time, Krishnamurthy notes. He says that 15 years ago customers had to have $1 million or more in assets to get onto wealth management’s radar. Citigold customers must have a minimum of $200,000 in combined banking and investment assets.
One of the fintech responses to consumers’ desire for wealth management has been the “roboadvisor,” an automated way of setting up, maintaining, and adjusting a portfolio of investments in a way that proves cheaper than running the customer’s affairs with a human manager. Price has an appeal, as does the perception that the “robot” has no personal interests to protect. Some mainstream financial organizations have joined fintech providers to offer such services. (In a recent conference presentation, Charles Schwab’s CEO noted that the only thing different about roboadvisor services is that a machine can now do what used to be done by a human manager.)
Krishnamurthy says that Citigold can grab technology from any source—both internally and from financial services and tech partners. So availability of technology isn’t an issue for Citigold. “We have truly open architecture and we are beholden to nobody but the client,” he explains.
Where roboadvisor services come up short, in spite of impressive technology, is what Krishnamurthy believes is an inability to scale. They can only take a client so far, he thinks, before the client will outgrow what they can do. Borrowing from aeronautics, the former engineer says most roboadvisors can’t achieve “escape velocity,” which in rocketry refers to the speed necessary to escape the gravitational pull of Earth.
“They pick off parts of the value chain,” says Krishnamurthy, “but they can’t bring a full suite of solutions to the client.”
For Krishnamurthy, that integrated set of solutions and established human trust, set Citigold apart from competitors.