December 17 2011 
Business | Your Money, Gulfnews

What to expect from your bank's relationship manager. 

By Frederic de Melker, Special To Gulf News Published: 00:00 December 17, 2011


As you attempt to create a strategic financial plan to build and protect your wealth, you are often confronted with an almost endless list of elements. Most banks provide their mass affluent customers with a relationship manager (RM), who can support them in the quest for solutions that fit these sophisticated needs. As a customer, what can you expect from your RM, and what makes him more than a salesman?


Regular, relevant and timely communication


Technology has opened many doors and today, information is rolling in every single second. This doesn't necessarily make our life easier, as one is forced to put the right filters to manage the overdose of data.


A competent relationship manager helps you to gather, sort out and interpret information. He facilitates you by separating the facts and figures from market gossip and hearsay. He is not on his own because a team of sales-independent market analysts support him in his task.




Receiving adequate information has nothing to do with being a good communicator. A person with a story that sounds like music to your ears but without any interest for your needs, is simply a good salesman. A relationship manager, on the other hand, is somebody who listens first and does not create your needs on the spot.


Partnership in an open relationship


If you want to get the best out of your relationship manager, it is important to interact. Interaction is a two-way communication, which helps you and your RM to learn and teach each other who you are and what you stand for.
Developing a relationship is based on commitment from both sides. The more you speak about your needs, the more your RM will understand you and bring you the right information to take correct decisions.
Interaction leads to promises and expectations. You recognise a good relationship manager in the way he communicates with you.
Somebody who positions himself as the best banker with the best products in the best financial institution in the world is not a relationship manager, but again a sales person. He doesn't build trust but simply tries to gain trust.
An RM who cares about a relationship gives you the pros and cons of every option that can fit your needs.



Receive guidance and advice but think for yourself


It is indeed about options, not products. The ultimate product that fits all your needs simply does not exist.
The art of advice is combining products and services to enforce the positive aspects and attempt to neutralise their negative elements.
Your relationship manager shows you the different combinations and facilitates you to make a fair judgment on what suits you best.
A salesman, on the other hand, is not going to wait for your decision. He will not give you time to think. He has already decided for you long before the conversation even started.
Remember, the decision should be yours. A good idea would be to take notes during each meeting as these will help you make more informed decisions.


Changing relationship managers


It is often difficult to accept a new person, who replaces your previous relationship manager. Keep in mind, however, that he represents the organisation you decided to bank with.
This means he is representing a team of hundreds of bank officials from product developers to fund managers to market specialists, who work together to serve your needs.
Nevertheless, it is important to keep record of the discussions and the needs you have already defined with your previous RM. Only then, can you pick up fast with your new representative.


Frederic de Melker 

Cash should be managed

http://gulfnews.com/business/opinion/have-you-done-your-stress-test-1.933108

Personal Planner Column

by Frederic de Melker

Did you do your stress test?

Prudent investments that offer steady returns are every investor’s dream, and affluent individuals focus on investing their savings efficiently. With current market uncertainty impacting confidence levels, it is important for investors to adequately gauge long-term investment risk. And one of the ways we do this is by evaluating the level of short-term cash reserves.

Setting aside enough cash to cope with market turmoil is a necessity that is often overlooked by investors: if markets are down and one needs to de-invest capital to pay the bills, one has no choice but to take the loss. And that unmovable fact should determine longer-term investment strategy.

Can you stand a stress test?

What is the amount of cash you should accumulate before you consider investing? The first place to begin would be your expenses. Estimate the amount you need to pay your creditors, and you know how long you can survive during difficult times. This inventory will also make you aware of the impact of your spending behavior - a positive side-effect of your stress test.

Expenses can be categorised as monthly or annual. Monthly expenses include mortgage or rent, any form of personal loan, food & beverages, utilities & communication, and hobbies & sports. Annual expenses include insurance, holidays, school fees and replacement & maintenance costs. Your personal expense list for both categories can be built using your bank statement or invoice binder.

Having estimated your average monthly spend, you can determine how many months of expenses you should set aside. The general consensus is six months. However, it is advisable to assess your personal situation: Is your job in a sector that is vulnerable to the impact of the financial crisis? Is your income diversified enough? What part of your income comes from returns on investment? What impact would a market downturn have on your total income? Are you currently on probation? Are your long-term investments liquid enough? Answers to these will determine the savings total you need to set aside: Perhaps a full year of cash reserves?

So here’s the test. Multiply your total monthly expense by the number of months you estimated. If your current cash position is lower than your calculated outcome, you didn’t pass your stress test!

What to do? 

Cardsare not a cash reserve.  Using credit cards as a monthly facility to enjoy cash-back benefits or air-miles schemes is fine as long as the entire bill is paid at the end of each month. Smart use of Credit and Debit Cards can benefit customers to optimize their cash flow. Revolving, however, can make your cash reserves virtual and trap you when you are cut from income.

Put a standing order of at least 15 per cent from your current to your savings account, to put money aside without calculating it in your monthly budget. A balance sweep function at the end of the month helps you to make your savings efforts tangible.

Consult your financial advisor to choose the best rate. As with credit cards, there are more types of saving accounts than there are banks, and a well-informed individual will get you the best rate. Keep in mind, too, that online savings accounts usually provide better returns.

Start maintaining your own books. It is astonishing how much you save without noticing. A wide range of spreadsheets are available on the Internet and many of these templates are free.

Final thoughts

Often, fancy-looking short-term banking products appear very attractive. Beware that associated direct and indirect costs can erode your returns. Try to focus on inflation to keep the value of your money, and be practical with your assets. Remember: you are not just investing but building a buffer that will reduce future stress.

Mass affluent Banking in a six pillar concept. by Frederic de Melker

Over the past 30 years, the mass affluent segment took off significantly.  In its ongoing growth, more and more households get access to better life conditions which allow them to build wealth.  This new situation forces individuals to drive their own future and to manage their assets accordingly.  In general, banks already recognized this evolution during the early days and understood that this segment had to be treated differently.  The need of these customers could not be fulfilled by one-off product sales, but in a coherent framework of financial solutions.  Thus, the function of ‘relationship manager’ was born…

Now, three decades later, financial institutions still seem to struggle.  Market studies show us that there is still a big gap between what customers are expecting and what banks are offering.   A lack of execution of a conceptual approach contributes to the service gap that banks currently face.

A conceptual approach can be translated in six pillars of needs:

First of all, there is cash to be managed.  Managing your cash goes beyond having a fixed deposit or current and saving account.  An individual has to protect himself from unexpected events that prevent him from paying monthly fixed expenses.  This is why he should hold a healthy cash position that covers at least 6 months to 1 year of expenses.  A solid cash management helps to build optimize and maintain this reserve.    

Wealth means that your cash pool exceeds the 1 year needs.  This money is managed in the longer term taking into account future plans and cash flows, be it positive or negative.  A portfolio exists of a combination of investment vehicles, based on the philosophy of open architecture in line with a personalized customer profile.  A lot of banks put extra emphasis on this pillar, because it is associated with the need of managing the wealth that customer in the mass affluent segment build.

Nevertheless, to finance larger projects like a car or a house, this segment has a particular need for loans.  Discounting future revenues to realize dreams is a common behavior.  The third pillar provides the customer with a flexible framework of loan offerings.  Flexibility means that pre-approval of eligible loan amounts can facilitate the customer to make the right decisions and to oversee his maximum capacity.

Once dreams are made tangible, it is important for the individual to protect what he achieved.  There are two major elements to it.  Firstly, there is the importance of protecting your life, which means protecting your income when you retire and protecting the income of your family when you decease. Solutions should be transparent and in line with the customer’s interest. A second priority is safe guarding your belongings.  The customer should have access to insurance programs that protect their assets and third party liability.

The fifth pillar contains the facilities a mass affluent customer receives to support banking transactions.  For instance, transparent segment related pricing mechanisms provide the customer with benefits on their banking transactions or an international banking network gives them international flexibility when needed.

Till now we only spoke about fulfilling customer satisfaction.  To have a sustainable long term relationship with the customer, the financial institution should build trust.  The relationship pillar is the last aspect of the model.  The bank’s focus should be on gathering, analyzing and synthesizing information to ultimately share it with the customer supporting his decision-making.  The fiduciary responsibility of the financial institution is to provide information which is un-biased and not influenced by any commercial interests.  Only correct and adequate information streams build trust.

From this perspective, a relationship manager should not be seen as part of the value proposition.  He is a guide for successful decision-making and he is inspired by the customer’s success.

Frederic de Melker