SOLUTIONS International

Management know-how for practical use
SolutionS
Social Media
Retail banks take
their first steps
Page 4
Professor Harry Korine
Why companies choose
impracticable strategies
Page 8
Asian Private Banking
Client focus as a key
distinguishing feature
Page 16
Reinsurance distribution
Of «Hunters» and «Farmers»
in client marketing and care
Page 34

Editorial
«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.»
2 SolutionS
Michael Gerber
Managing Partner & CEO
Solution Providers Switzerland
I’ve 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.
I 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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Editorial
Social media strategies of financial services providers are still at an experimental stage
Retail banks take their first steps with Facebook and Twitter
Professor Harry Korine shares his observations on why companies choose impracticable strategies, the increasing use
of generic language in senior management communication, and the utility of realistic strategies
«The top management of companies whose strategies fail often includes people who lack inside knowledge»
Communication, transparency, speed, and integration as trump cards for interacting with discerning clients
Investment advisory services à la carte – fit for the future
FATCA – regulatory imperialism or general trend towards absolute fiscal transparency
US public authorities set high regulation hurdles
The importance of efficient customer communication as the foundation of an outstanding client relationship
Satisfied clients in Asia thanks to a focus on interaction
Client focus as a key distinguishing feature in Asian private banking
Kaizen process management in Asia
Wealth Division of the Royal Bank of Scotland implements Avaloq
A huge step for Coutts and British private banking
How financial services providers can profit from the cognitive process of cost-benefit perception
From classical pricing theory to behavioural pricing
New communication technologies are changing consumer behaviour – opportunities and risks for insurance companies
What insurance companies can learn from Apple
Reinsurance distribution in transition
«Hunters» and «Farmers» in customer marketing and care
Portfolio segment profitability maps support decisions on the possible courses of action
Optimizing portfolio profitability in life insurance
CRM implementation at Swiss Re
Efficient focus on the customer
Content
Publishing details
Articles can be accessed via www.solutionproviders.com.
Published by: Solution Providers Schweiz AG, Dübendorf/Zürich, Switzerland, www.solutionproviders.com / Editor: Ballhaus Wording, Zurich,
Switzerland / Realization: Andy Braun Gestaltung, Zurich, Switzerland / Visual Concept: Maximalism GmbH, Auslikon, Switzerland /
Printer: Neidhart + Schön AG, Zurich, Switzerland, using FSC-certified paper. Feedback and inquiries to: Solution Providers Schweiz AG,
Neugutstrasse 89, CH-8600 Dübendorf/Zürich, Switzerland, phone +41 44 802 2000, fax +41 44 802 2001, solutions@mailsp.com
Copyright: The reproduction of articles is permitted with the agreement of the publisher if the source is acknowledged. Articles by guest
authors do not necessarily represent the opinion of the publisher.
Photos: p. 1, 4, 11, 17, 22, 26, 30, 34, 38 iStockphoto; p. 8 Harry Korine.
SolutionS 3

Strategy
Social media strategies of financial services providers
are still at an experimental stage
Retail banks take their first steps
with Facebook and Twitter
4 SolutionS
Transparency
cultural Integration
Entering new markets

Social media are omnipresent in the
press and are also on the agenda 2012+ of
many banks and financial services providers.
For several years, Gartner Technology
Research has positioned the various
business applications of «social
technologies» on a hype cycle. However,
as expected most technologies have been
placed in the segments «technology trigger»
and «peak of inflated expectations».
Closer inspection shows that financial
services providers in particular are finding
it difficult to position their core business
or brand on the new channels and
with the new technologies.
In the last quarter of 2011, Solution
Providers supported a survey on the current
position of Swiss retail banks in the
area of social media. The survey was carried
out at 12 retail banks as part of
a Master’s thesis at the Department of
Informatics, University of Zurich. The
primary focus was on the current use of
external social media channels, the potential
that the institutes saw in the
future and which models and approaches
the banks followed to reach, interest and
even to bind their target groups via
these channels. In the survey, eleven of
the 12 largest suppliers of retail banking
services (measured by balance-sheet
total) and one of the smaller regional
bank group companies were questioned.
Keyword social media
The term social media was coined in 2005
and is difficult to define. The term social
web, which represents part of Web 2.0 and
focuses on those areas, which include the
support of social structures and interaction
over the network is used in a similar
way. A social media application usually
consists of three components: firstly
a (Web-based) application which enables
people to communicate and therefore exchange
information to develop and cultivate
relationships and cooperate in social
and community life, and secondly the
data generated by users in the application
(user generated content). The third component
is the relationship between the
people (e. g. friends, «like» and other ratings,
«follower», places, etc.). What makes
it so special is that the application uses the
relationship structure and can utilize it in
many ways. Thus various forms of application
are summarized under the generic
term «social media» which covers
numerous subareas of interpersonal
communication via electronic channels.
These include «media sharing» (e. g. You-
Tube, Flickr), «social bookmarking» (e. g.
Mister Wong, Delicious), web blogs,
micro blogs (e. g. Twitter), wikis, rating
platforms (e. g. dooyoo.com, holidaycheck.
com), interactive sales consulting via the
web and, of course, social networks (e. g.
Facebook, Google+).
Where do Swiss banks stand today?
Results regarding the current use of social
media channels show the following picture:
nine of the twelve banks have a Facebook
presence. As can be expected, the
content on offer differs greatly: most of the
banks (seven of nine) focus on non-bank
subjects such as competitions, prize draws
and announcing sponsoring events. It is
therefore hardly surprising that only three
of the banks surveyed concentrate on
financial issues. It appears that a recipe for
the successful combination of basic retail
services and social media has yet to be
found. Swiss banks are also hardly leaders
as regards activity and interaction in their
presence. Daily entries by the banks on
Facebook are rather seldom in Switzerland.
However, eight of nine banks with a Facebook
presence make regular postings (last
posting less than two weeks old). At least
three banks support customer services via
social media to some extent; interestingly
Strategy
«Even if one only considers personal credits
(social lending) or joint investment decisions
(social investment), social media have the potential
to fundamentally change banking. It is not yet
clear just how long existing technical and
regulatory barriers will continue to protect the
traditional business model of banks.
Many Swiss banks are therefore experimenting
with social media, but the traditional business
model is not being questioned. Are social media
really only a question of channel management?»
Prof. Dr Gerhard Schwabe,
Chair for Information Management, University of Zurich
two of these banks are those which have
financial content. User comments can be
found in half of the banks and five banks
respond to these relatively promptly. However,
only one of the banks which offer
financial subjects answered user comments
on a page. There is a long way to go
to achieve active communication and a
dialogue between banks and users, and a
dialogue between users on events, subjects
or questions has (so far) not developed.
A glance across the border shows a picture
with certain parallels as regards positioning,
but with a significantly wider distribution.
In the report of the British market
research and industry service VRL on the
top 150 banks on Facebook, the leading
positions are taken by institutes which
have also built their presence around
non-financial subjects. The subject for JP
Morgan Chase bank, surveyed at first
place, is the charitable activity of its
«Chase Community Giving». Capital One
focuses its Facebook page on college sport
and virtual Facebook games, and Barclays
deals with the football Premier League,
which it sponsors. American Express is
the only mixed platform. It offers dis-
SolutionS 5

Strategy
counts and competitions in connection
with using its card, which is at least a business-related
positioning. These banks
have between one and three million
«likes» on their pages – which represents
a community of considerable size. However,
it is necessary to mention that the
number of «likers» is not a major rating
parameter for a social media presence.
These «likes» cannot be equated to active
participants. Following Jakob Nielsen’s
90-9-1 principle, of 100 participants 90
are observers only (or inactive), nine participants
are sometimes and only one participant
is really actively involved. The
number of Facebook likers in Swiss retail
banks seems rather modest in international
comparison. Only one Swiss bank has
more than 38,000 likers and would thus
rank around 40th in the top 150 banks,
four banks have 1,000 to 10,000 (rank
100+) and the rest disappear into the social
media fog with less than 1,000 likers.
Five banks have a channel on Twitter, the
most important micro-blogging service
in Switzerland. Two focus on customer
service and two on providing information
on bank and non-bank-related subjects.
Only one bank covers various areas
in its communication. Twitter is only
used by one bank for competitions and
prize draws. With all «twittering» banks
the most recent information is less than
two weeks old. It is questionable whether
this is sufficient in our fast-paced times.
A rather modest picture can also be observed
as regards coverage: only one
Swiss bank has more than 5,000 followers,
three others have at least a small group
6 SolutionS
of between 100 and 999 followers. In
international comparison only one bank
can compete and just manages a position
within the top 30.
50% of banks surveyed have their own
YouTube channel but only four of these
banks regularly update. If one considers
that YouTube is currently the second
largest search engine after Google, the
positioning of Swiss banks is hardly
outstanding.
However, seven of the Swiss retail banks
surveyed have a reference on their
homepage, sometimes small and almost
hidden, sometimes very prominent, to
their social media presence. It appears
that financial institutes rely on new
media with varying degrees of confidence
or at least rate their potential differently.
Experience and plans
In addition to the survey of current positioning,
a structured interview with the
responsible banking representative was
carried out. Experiences gained with social
media are as diverse as the number of
interview participants. The fast pace and
the associated opportunities and risks
were mentioned most frequently. However,
interviewees also frequently named
the aspect of careful navigation through
the various existing directives, restrictions
and limitations. Technical issues
were generally seen as resolvable. During
the interviews, bank representatives
often talked of the difficulty of finding
the right or relevant content for the presence
or the communication. Surprisingly,
«The growing wish of customers to have
a coordinated deployment of online media
poses great challenges for the banks involved –
and not only in the selection and supply of relevant
content. It is also necessary to rethink the entire
concept of customer address and service.»
the majority of the banks surveyed have
yet to define the target group for social
media activities. However, three banks
have aligned their activities and offers to
young people. The basic idea of the surveyed
banks is to build up a social media
presence and then to see who responds to
it. In principle, the early but reserved entry
into social media is beneficial; ensuring
that the company’s presence on these
channels is not created by third parties
who could damage the company’s image
through unauthorized content. This happened
to the Bank of America with a
«brand jacked» presence on Google+.
The effort for channel maintenance (excluding
creation of content) currently
varies from «along the way» to a FTE
for the banks surveyed. However, most
banks stated that they plan to dedicate
additional effort to the subject in the
next years. The interview participants
see the greatest benefits in positive image
and branding. But four interviewees
have yet to observe an advantage from
their social media presence. Eight banks
state that they carry out statistical social
media monitoring. Eight banks also
check and evaluate content, although
only three of these said that they react
to critical content. Here it can again be
seen that the interaction bank–customer
has yet to gain a foothold.
When asked about plans and approaches
for the future, half of the banks said
they intended to develop their channel
portfolio and to establish it professionally.
Another target often mentioned
was the further integration of the
channels, either in the company homepage
or in another social media application.
The companies also want to focus
on the challenges of content, finding
relevant information and subjects,
setting up better monitoring and
strengthening customer dialogue. There
is still widespread uncertainty as to
whether this can be achieved with bankspecific
subjects.
Quo vadis?
It is widely recognized that the spread of
the Internet in general and social media
in particular will change communication
and cooperation with customers. Today
interested customers are better informed
than ever before as a great amount of information
is available on the Internet at
any time and products and services can
be compared and commented upon. The
growing wish of customers to have a coordinated
deployment of online media

poses great challenges for the banks involved
– and not only in the selection and
supply of relevant content. It is also necessary
to rethink the entire concept of
customer address and service. A coordinated
advisory process via numerous
channels could become the backbone of
new bank business in the future, if financial
services providers are prepared to
closely scrutinize the traditional processes
and patterns, which have been
cultivated over the years.
Strategy
«Most banks have recognized social media as an additional
channel by which to communicate with customers and have taken
first steps in this direction. A major challenge is the formulation
of the business-related utility of social media strategies and the
link between open-hearted social media and the traditional rather
reserved and also statutorily regulated communication culture
surrounding banking products.»
Robinson Aschoff, Head of Research Unit «Social Media in Organizations»
at Prof. Dr Gerhard Schwabe’s Chair for Information Management, University of Zurich
In addition to marketing and distribution
tasks, banks will possibly face other challenges:
new services and forms of cooperation
are developing on social media
platforms in the financial area. A few keywords
are «social lending», «crowd
funding/financing», «social investing»
and «personal finance management».
They all describe services around the subject
of money which exploit the advantages
of social networks and their recommendation
structure and no longer need
to be obtained from a bank. To what extend
these new forms of cooperation will
develop into serious competition for
established financial services providers
remains to be seen. Meanwhile during
the interviews, the impact it would have if
a company the size and character of
Google or Facebook decided to open some
form of bank was often reflected upon. It
is possible that the bank of the future is
being actively discussed by a number of
institutes behind closed doors.
In the last quarter of 2011, Solution Providers supported a survey on the current
positioning of Swiss retail banks in the area of social media as part of a Master’s
thesis at the Department of Informatics, University of Zurich. Of the 12 largest
retail banks, 75% have discovered new media for themselves and have a presence
on Facebook or a Twitter account. However, currently it is non-bank subjects which
are generally available on the new channels with only isolated instances of financial
and product information or even customer interaction to be found. In general,
at this point Swiss banks have reserved channels to ensure a presence but it is at
an experimental stage. The opportunities and challenges which result from new
media for banks are noteworthy – be it in the new definition of customer
communication or in the development of new forms of financial services.
SolutionS 7

From Outside In
Professor Harry Korine shares his observations on why companies choose
generic language in senior management communication, and the utility
«The top management of companies
often includes people who lack inside
Harry Korine is an Adjunct Professor of Strategy at INSEAD. He combines
expertise in strategy and governance to offer a unique perspective on business.
As an educator, consultant, and public speaker, he engages with executives, board
members, and owners to address questions of strategy development and longterm
value generation, especially in a multinational context. His research has
resulted in several books and numerous articles, including «The Leap to
Globalization» (Jossey-Bass, 2002), «Entrepreneurs and Democracy»,
(Cambridge University Press, 2008) and «When You Shouldn’t Go Global»,
(Harvard Business Review, 2008). His newest book, «Firm Ownership,
Management, and Strategy», is scheduled for publication next year (Cambridge
University Press, 2013). In bridging the worlds of research and practice, he is able
to help companies turn leading edge ideas into concrete business actions. Further
information can be found at www.harrykorine.com.
8 SolutionS
Solutions: Harry Korine, what unusual
developments in strategy terms have you
noticed recently?
Harry Korine: Companies basically
want to grow, and to do that they need
a good story. But often their strategy
comes to grief after two or three years.
So for me, the fundamental question is:
why do companies persist in adopting
strategies that are impracticable or
extremely difficult to implement?
Solutions: And what conclusion have you
reached?
Korine: It’s noticeable that the top
management of companies whose
strategies fail often includes people
who lack inside knowledge – individuals
who’ve been parachuted in from
outside or haven’t been in their jobs for
long, and so don’t have an in-depth
understanding of the company. Moreover,
they’ve often moved rapidly up the
career ladder, mainly in staff rather
than line functions.
Solutions: What does that mean for
those companies’ strategies?
Korine: When strategic decisions are
taken in that kind of environment, it’s
hardly surprising if they prove impossible
to follow through. In the past, unrealistic
strategies that failed the test
when it came to actual feasibility were
normally the province of management
consultants and the board of directors;
now, though, the phenomenon can increasingly
be seen at top management
level. There’s also an absence of – or
not enough – internal communication
on matters of strategy.
Solutions: How do the shortcomings in
communication manifest themselves?
Korine: Often, managers and staff are no
longer talking the same language. More
and more managers deploy buzzwords

impracticable strategies, the increasing use of
of realistic strategies
whose strategies fail
knowledge»
«What you have is a senior management that
is increasingly divorced from reality agreeing with
the portfolio investors on a strategy that is difficult
to implement, because its members do not have
a good enough grasp of what is actually feasible
within the company.»
such as challenge, change and transformation
without being able to explain to
their staff what they actually mean. I believe
this is a worrying development, because
it is difficult for employees to buy
into their company’s strategy if they
don’t understand it. The ability to speak
the employees’ language is rarely a criterion
when it comes to recruiting
senior managers; and where it is, not
much weight is given to it. That can
mean that promotion to senior management
goes not to the in-house candidate
with many years of practical experience
in production who talks the company’s
language, but to the outsider who communicates
in management speak but
doesn’t have the inside knowledge.
Solutions: What do you believe are the
causes of this development?
Korine: With listed companies, the focus
is very much on communicating with
the financial markets: shareholders,
analysts and journalists. So as time goes
on, the company’s own language is progressively
replaced by the language of
external stakeholders. In practice, that
means that internal communication is
geared to an outside audience, or external
communication is used internally. If
you look at the shareholder structure,
you essentially have portfolio investors
on the one hand, and owners with a
long-term horizon on the other. Until
recently a company’s strategic course
was mostly set by its owners, with the
portfolio investors having little say.
Nowadays, though, the portfolio investors
are often in the majority or they
simply exert more influence, and they
place management under intense pressure
to deliver a good growth story. They
entice the board of directors and management
into risky strategies intended to
bring rapid results. Such strategies are
risky because they are often difficult or
even impossible to implement.
From Outside In
Solutions: And where is this development
heading?
Korine: What you have is a senior
management that is increasingly
divorced from reality agreeing with
the portfolio investors on a strategy
that is difficult to implement, because
its members do not have a good
enough grasp of what is actually
feasible within the company. This
trend is becoming increasingly pronounced
as more and more independent
outside members are appointed to
boards of directors, and larger numbers
of top managers without an adequate
knowledge of the company are
brought in from outside. They may be
good at assessing the opportunities
and risks for the company from the external
perspective, but they inevitably
fall short when it comes to gauging the
company’s strengths and weaknesses.
Solutions: What needs to be done to
ensure that the strategies chosen are
ones that can be implemented?
Korine: One solution is to look at the
approach of family companies. It’s
much less common for their strategies
to fail because they are impracticable.
What’s different about family companies
is that the people running them
are closer to their day-to-day business
and have been in their jobs for con-
siderably longer. I believe the key to
success is having a good mix in top
management and the board of directors.
That also means involving the
board more closely in corporate projects.
One good example is Hilti, a privately
held firm in Liechtenstein that
is one of the world’s leading manufacturers
of equipment for the construction
industry. It requires its external
board members to commit between 20
and 40 days of their time and follow
important projects on an ad hoc basis.
SolutionS 9

Strategy
Communication, transparency, speed and integration
as trump cards for interacting with discerning clients
Investment advisory services
à la carte – fit for the future
The private banking market is currently
characterized by various changes: uncertain
development on the financial
markets; emancipation of customers on
various levels; and growing legal and
regulatory barriers, which govern the
definition of services. All these factors
herald a change in services provided to
discerning private banking clients. In
particular, offerings in the area of investment
advisory services must be further
developed to ensure that these remain
an important pillar in the competition
for market shares and revenues. With
these changes, the orchestrated use of
modern tools in investment advisory
services is the central aspect for the differentiation
of a bank as the premium
service partner in this area.
In particular, defending the premium
claim requires a constantly high level of
quality in advisory services, which is
only possible to ensure with a standardized
advisory process. However, as
a consequence of a strategic decision to
provide services internationally or across
10 SolutionS
borders, special attention must be given
to the subject of investment advisory services
to ensure that their cross-border
provision is efficient and conforms to
domestic law.
Tools and success factors
in investment advisory services
Currently, the central tools and success factors
in investment advisory services are
� an integrated advisory process
� customer-oriented products
� timely and consistent advisory
content
� flexible and agile services and
� holistic integration, coordination
and IT support
An integrated advisory process guides
clients through each step of customer
services, from onboarding, profiling
and investment advice to the end of the
business relationship. This ensures the
quality of services, particularly the consulting
service, supports compliance in
various legal and regulatory require-
«The advisory process ensures not only
the quality of advisory services, through
intelligent design it also supports compliance
and has a significant influence on the
customer experience.»
ments with its intelligent design, and
greatly influences the customer experience
– also a significant factor for differentiation.
In addition to standard client profiling,
matching the assessed customer needs
and investment objectives to a bank’s
product offering are becoming increasingly
important. With careful adjustment
of products to customer needs,
a bank demonstrates its solution skills
even before contract closure, ensuring
added value to the customer with a service
delivery tailored to his or her needs.
Here the eagerly but also suspiciously
awaited distribution rules by the Swiss
Financial Market Supervisory Authority
FINMA will provide further regulation,
be it in the area of risk disclosure or in
the implementation of such aspects as
suitability and appropriateness.
Making products understood
The former «one size fits all» investment
advisory mandate no longer applies.
Today advisory services must be tiered,
thereby clearly addressing individual
customer needs and demonstrating
added value. A clear market strategy
which defines the targeted segments
and thus identifies combines and
delimits clients’ needs is a prerequisite
for consistent alignment of products
with identified customer needs.
Today, in addition to classic segmenting
criteria such as assets, willingness to
delegate, or knowledge and experience,
it is necessary to consider the customer
life-cycle in the development of a product
portfolio. This should ensure that
customers receive optimal service before,
during and after (demand-characterizing)
events such as career advancement,
starting a family, purchasing
property or coming into inheritance.

High demands
For some time banks have also been trying
to align their investment policies
and risk governance to the new financial
market rules. Current market research
reports on initiatives to adapt the rigid
structures of asset allocation with a risk
budgeting approach. Other approaches
go in another direction: instead of asset
allocation, the customer is provided
with a selection of investment building
blocks from which he or she can assemble
a «product» according to individual
needs. A number of these modular investment
blocks could then be efficiently
managed centrally. The investment
building blocks concept would also allow
mixed forms of discretionary and nondiscretionary
elements. For example,
the customer could purchase actively
managed hedging solutions without
having to delegate the management of
the entire portfolio.
As regards defining costs and fees for
advisory products, the trend is towards
clarity and simplicity. Customers have
realized that in the past few years, banks
have attempted to camouflage real costs
with obscure price models. More transparency
is now being demanded. However,
differentiated product offers with
clearly defined services provide banks
with an impressive tool to clarify both
their investment advisory services and
their fee structure.
Advisory content as the central commodity
of investment advisory services
An increasingly important aspect for
differentiation is above-average advisory
content – the fundamental driver for
customer portfolio performance. In
addition to the consistency of such
advisory content, a high level of relevance
is a key element.
Strategy
Within the broad field of advisory content,
contradictory recommendations
from different organizational levels
(chief investment officer, investment
advisory services, relationship manager)
must be avoided. To minimize this
risk, the level of freedom as regards asset
allocation, applying research and selection
of securities should not only be
restricted at the front. Wide application
of research requires target market and
target group appropriate preparation.
In the future this could bring smaller
«Above-average advisory content, in which
not only content consistency but also relevance
is becoming increasingly important, is evolving
to a significant differentiation characteristic
on the market.»
SolutionS 11

Strategy
«Integration of tools requires integrated and
reliable IT systems. They enable cross-silo
integration for the processes and information flows
relevant for the services. Integration increases the
quality of services, ensures the reproducibility and
also enables a new structuring of services.»
financial services providers in particular
to their capacity limit. A way out
could be provided by the integration of
external research services. The inclusion
of such services from third-party
banks or external brokers could also be
complementary, to enlarge the investment
universe. However, this must be carefully
drafted and constantly monitored.
Segment-specific alignment
Segment-specific alignment of advisory
content is a further trend. A differentiation
can be made as regards time horizon
of the recommendation, frequency
of publication or the form and channel.
It would also make sense to take into account
basic types of available content in
the product definition.
The most difficult challenge for private
banks is the consistent alignment of information
acquisition and processing,
opinion-building and taking (invest-
12 SolutionS
ment) decisions with customer objectives
and needs. Whether alternative
models work such as outsourcing advisory
content remains to be seen.
Differentiation through integration
An important success factor is the
orchestration and integration of tools.
So far the latter have often been optimized
in isolation and not been used in
an orchestrated way. Symptoms are
investment recommendations that are
produced in an ad hoc way and various
suppliers and sources, which are taken
into consideration. The result is that
advisory content does not fit customer
needs, is no longer relevant, or that services
do not match up seamlessly, as
should be expected from an interface
between financial planning and investment
advisory services.
Tool integration requires integrated and
reliable IT systems. Only in this way are
the integration of relevant processes and
information flows for providing services
possible. Integration increases the quality
of services, ensures reproducibility
and also enables the provision of services
to be restructured. An example of pooling
value-adding activities is the development
and production of investment
recommendations. This process usually
requires countless inquiries with the
various contributors for investment
advisory services solutions, which have
not been integrated. In contrast, the integration
of investment architecture,
content, customer information and output
functionalities enables the relationship
manager to efficiently create investment
recommendations himself or herself.
Eliminating inquiries with suppliers not
only reduces effort and production time,
it also increases the quality of services.
Tools unfold all their potential only
when integrated and orchestrated. The
integration of tools through information
technology allows an expansion of
investment advisory services into new
channels. Complementary partial services,
for example, could be made available
online or customers could be received
in interactive meeting rooms.
Integration of tools
creates sustainability
The quality of advice and the customer
experience can only be sustainably
shaped and increased through the integration
of the required tools. Isolated
optimization can resolve issues shortterm.
This should, however, be carried
out in a strategically specified scope to
ensure that they lead to a consistent and
functioning overall solution.
The difficult market environment and the strategic importance of investment
advisory services imply that it is no longer sufficient to optimize the individual
elements of investment advisory services. To improve the client experience and
customer value long-term, all investment advisory service tools must be coordinated
and consistently aligned with strategic objectives and customer segments.
Successful and sustainable implementation is made possible by the integrated
support of services by IT systems.

FATCA – regulatory imperialism or general trend
towards absolute fiscal transparency
Trend
US public authorities set
high regulation hurdles
FATCA stands for the Foreign Account
Tax Compliance Act, a new regulation
from the US authorities (Internal Revenue
Service, IRS). Its aim is to make tax
evasion impossible for Americans. Today
virtually every type of foreign financial
institution is affected by FATCA. Avoidance
of the new regulation has drastic
consequences and effectively eliminates
foreign financial institutions (FFI) from
the US market. On the other hand, correct
implementation of FATCA is complex
and requires huge effort as it differs
fundamentally from the previous withholding
tax.
FATCA versus USQI
Today, foreign tax agreements with
Switzerland are based on withholding
tax. Switzerland has agreed to levy a tax
on income generated with foreign assets
on Swiss soil. In return countries
have agreed to dispense with the disclosure
of names and account details of the
respective individuals. The system is
simple, can be applied at little cost, protects
the interests of customers and
guarantees countries constant tax revenues.
Currently such a tax agreement is
in place with the US, the US Qualified
Intermediary (USQI).
With FATCA the US is turning the system
of withholding tax (USQI) upside
down (cf. figure 1) as it requires the
automatic transfer of account and personal
data but dispenses with the payment
of US withholding tax. Consequently
with FATCA banking secrecy and the
privacy of American customers worldwide
will become a thing of the past.
FATCA utilizes withholding tax in a completely
new way, namely to apply pressure
for the disclosure of US customer
and account data. Thus financial institutions
outside the US (e. g. banks, life
insurance companies, asset managers,
etc.) will have a 30% tax forced on them
on all income from US sources. To avoid
this penalty tax, FFIs must agree to a
so-called disclosure agreement with the
IRS. With this agreement the institution
commits itself to full implementation of
the FATCA regulation requirements and
achieves the status Participating FFI
(PFFI). US customers of PFFIs who do
Customer
opening
Customer
dossier
check
Withholding
tax
Reporting
1
US Qualified Intermediary (USQI) vs. FATCA
not agree to the data exchange with the
IRS are subject to a 30% withholding tax
on income from US sources. It is the PFFI
itself, which is responsible for the complete
identification of its customer and
the correct retention of withholding taxes.
In addition to customer requirements,
the PFFI is also obliged to apply
withholding tax on all payments from US
sources which are transferred to a nonconforming
institution (Non-Participating
FFI, NPFFI).
USQI FATCA
Based on the KYC process, customer documented as either US or non US Yes Yes
US information check: address, green card, standing instructions, family... – Yes
Waiver for permission of data transfer to IRS – Yes
New category: «recalcitrant» customer – Yes
Annual check via «Know Your Customer» process Yes Yes
Document-based check: passport, domicile... Yes Yes
US information check: address, green card, standing instructions, family... – Yes
Waiver for permission of data transfer to IRS – Yes
Withholding tax (30%) imposed on US accounts Yes No
Withholding tax (30%) for «recalcitrant» customers or NPFFI No Yes
Withholding tax imposed on all revenues Yes No
Withholding tax only imposed on revenues from US sources according to PPP No Yes
Reporting of name and account details to IRS No Yes
Reporting on US withholding tax Yes Yes
Reporting on the overall position of «recalcitrant» customers – Yes
The central aspect of FATCA is the disclosure of customer data and not the payment of anonymous
withholding taxes as with the USQI.
Source: Solution Providers
SolutionS 13

Trend
FATCA requirements
of financial institutions
In addition to the far-reaching requirements,
the IRS is introducing a passthrough-payment
percentage (PPP). In
future, a company with assets in the US
(e.g. shares in American companies,
business units or factories in the US)
must report the US percentage of its assets
as a PPP. If a company pays interest,
dividends, salaries or other incomerelevant
revenues, then the PPP of the
company will be applied. This means
that the FATCA withholding tax will be
deducted from the US percentage for all
NPFFIs or for customers of PFFIs, which
do not disclose their data.
PPP also has complex implications for
companies which manage assets such as
investment funds. The PPP of a fund is
calculated, for example, from the PPPs
of all securities within the portfolio.
Particularly in the case of funds of
funds, this can lead to extremely complex
calculations. There are still many
questions open in the area of PPP, and
the IRS has yet to publish a conclusive
version of the regulation in detail.
From a technical point of view, the
FATCA regulations require extensive
changes in monetary transactions, in
the processing of corporate actions and
securities transactions. Master data for
customers, correspondence banks and
securities must be expanded to include
various new fields such as the PPP, the
FATCA status and US-relevant infor-
14 SolutionS
mation. Concrete initial estimates of
effort show that the modification of
processes and systems will incur massive
costs due to the complexity, which
is a major strain on smaller financial
institutions in particular.
However, most effort will be generated
by the re-examination of existing customers.
Current customer assessments
(Know Your Customer, KYC) are not sufficient
for the IRS. The PFFIs must clarify
and document with absolute certainty
«Concrete initial estimates of effort show
that the modification of processes and systems
will incur massive costs due to the complexity,
which is a major strain on smaller financial
institutions in particular.»
2
Auswirkungen Impacts of FATCA von FATCA
Tax
Processes
Existing
customers
Reporting
Addition of
master data
Implementing
new withholding
tax
Customer
opening
Customer
identification
US customers
Customer
data
Dismantling
old withholding
tax
Customer care
(KYC)
Company
identification
US account
data
Account/
custody
account data
FATCA impacts the entire value chain
Payment
transactions
Identification
of funds,
trusts, ...
«Recalcitrant»
customers
Securities data
(PPP)
Securities
transactions
Identification
of FFIs
Payment
data
FATCA impacts almost all financial institution processes and master data and is therefore
significantly more complex than previous tax laws.
Corporate
actions
Financial
institutions
(PFFI, NPFFI)
Source: Solution Providers
whether a customer is liable to pay US
tax or not. Specific information must be
checked and the effort for such «diligence
reviews» is massive for even
a small institution and will occupy the
entire financial system in the future.
The impact of FATCA
on the finance industry and markets
According to estimates of the current
FATCA regulations there is little chance
for FFIs to avoid FATCA. Even if a financial
institution does not have a single US
customer it is not FATCA compliant until
it has checked and documented every
customer in detail. Also an NPFFI is at
a considerable disadvantage when competing
with a PFFI as the former is
effectively excluded from the US market.
It can no longer offer its customers lucrative
US investments because of withholding
tax. After the introduction of
PPP it will become almost impossible to
find investments without a US interest.
Investments will then be restricted to
local offerings.
In summary, FATCA will have a serious
impact on FFIs, their customers and
their systems. Every PFFI will face enormous
implementation costs and small
institutions in particular will hardly be
able to cope with this effort. With the
PPP, the US is encroaching on the tax
authority of every nation, a fact that will
certainly not be accepted everywhere.
Certain countries such as China and Japan
have already refused to implement

FATCA. Withholding tax already makes
US investments less attractive in general.
American customers will have difficulty
finding a bank in another country
in the future. The worldwide
administrative effort will likely be significantly
higher than the income from
tax revenue.
With the most recent opposition to withholding
tax from Germany but for the
disclosure of customer data, it is unfortunately
likely that FATCA will become
the standard for other tax authorities.
The trend is clearly towards disclosure of
customer data to foreign tax authorities.
A financial institution can therefore
make sustainable cost savings, if it
already today keeps the solution developed
for FATCA open for other countries. In
particular aspects such as reporting and
automatic scanning of customer dossiers
for information should be reusable for
future tax-related requirements. A financial
institution, which acts early can
already today develop reusable solutions
and thereby save costs by preparing itself
for future tax activities. Thus FATCA
should also be seen as a chance to make
a financial institution fit for future tax
treaties and thus differentiate itself from
its competitors by low implementation
costs.
Insights from current projects
Solution Providers currently supports
various financial institutions in Switzerland,
Germany, Austria and Asia on
the subject of FATCA and we are con-
Trend
«The trend is clearly towards disclosure
of customer data to foreign tax authorities.
A financial institution can therefore
make sustainable cost savings, if it already
today keeps the solution developed for FATCA
open for other countries.»
tinually faced with the same questions
and challenges. The needs of our customers
focus on the following:
� Transparent evaluation of costs with
a business/cost case
� Interpretation of the IRS notices and
evaluation of impacts on processes
and systems
� Reduction of costs with appropriate
measures, in particular as regards
customer dossier examination (diligence
review)
� Dealing with uncertainties caused
by the current incomplete regulations
� Customer communication
� Guidelines for handling US customers
in the future
Financial institutions are concerned that
the current regulations are neither com-
plete nor correct. The areas of «pass
through payments» and trusts are particularly
patchy at the moment. There is
also a considerable amount of lobbying
by financial institutions to get the IRS to
change a number of points. All these uncertainties
are tempting many customers
away from actively analyzing FATCA.
However, this approach can interfere
with the timely implementation, as the
costs of reviewing customer dossiers can
be significantly reduced if started early.
It can also be assumed that the IRS will
not significantly simplify or weaken
FATCA; indeed an increase in complexity
can also be the result. Our customers are
currently following FATCA with small
teams of experienced employees who are
preparing the foundations for the later
implementation and can quickly react to
any changes in the regulations.
The USA is forcing financial institutions around the world to join them in the fight
against tax evasion by American citizens. Those who refuse will effectively be excluded
from investments on the American financial market. FATCA compliance is therefore
an absolute must for financial institutions and can lead to significant competitive
advantages for those who implement early.
SolutionS 15

Trend
The importance of efficient customer communication
as the foundation of an outstanding client relationship
Satisfied clients in Asia
thanks to a focus on interaction
Wealthy individuals often have more
than one banking relationship; in Asia
they frequently have more than ten. On
the one hand, different providers appear
to have different strengths and clients
try to get the best for a particular
investment need wherever they can. On
the other hand, the cause can be
a change in client advisor. The client
wants to continue with the advisor he or
she is used to and at the same time save
the face of the advisor who has taken
over the account at the old bank.
Within these multi-relationships each
private banker aspires to achieve the
status of so-called «first call banker» –
to be the first person contacted by a customer
who encounters a problem. The
CEO of a Swiss private bank in Singapore
once said that in light of the
constant change in advisors, he now
16 SolutionS
focused on the happiness of his clients
rather than that of his advisors. After
all, an advisor would carefully consider
a change if his or her client were happy
with the current bank. This so-called
«client experience» has a strong position
in marketing communications.
However, it is seldom implemented in
the organization.
Client satisfaction
in the various phases of care
There is a wide range of literature on the
subject of customer satisfaction. In addition
to the definition itself, the degree of
its implementation is even more relevant
if sustainable business success is to be
achieved. An important approach is the
focus on all direct interaction with the
client, from marketing, account opening,
advice and implementation to a possible
end of the customer relationship.
«For most banks the so-called ‹client
experience› has a strong position in marketing
communications. However, it is seldom
implemented in the organization.»
Generally speaking most banks are very
good at new customer marketing, where
impressive events and glossy brochures
promise above-average customer services.
The first real experience the client has
is during account opening. Some wealth
managers have already recognized the
importance of this «first impression» (cf.
SOLUTIONS 3/2010 «Improving current
Client Onboarding Processes»).
No doubt the central element of customer
care remains the traditional investment
advice where the client advisor,
in Asia often an investment
specialist, dispenses investment recommendations
based on the client analysis.
It might sound rather elementary,
but it appears to be difficult to ensure
sustainable and above-average customer
satisfaction in this area.
Last year more than one quarter of wealthy
clients reduced capital or ended a relationship
due to lack of trust. A different
survey documents that 48% of clients
where disappointed in advisors during
the financial crisis, as they were not contacted
enough and received insufficient
information. A further study shows that
29% of all clients today are not really
happy with their advisor’s service.
Efficient system support
remains central
The reasons for this obvious lack of customer
satisfaction are various, but in the
majority of cases they can be traced back
to the advisor. Either the latter lacks expertise,
or because, despite expertise, the
advisor wants to close on a product quickly
rather than get caught-up in a tedious
analysis of needs. Often the client is the
reason, preferring to remain on the product
level to allow a direct comparison of
the prices and product characteristics of
various providers and playing them off
against one another. However, new

egulations in Asia are forcing more
thorough customer analysis and recommendations
according to risk profile. The
financial centres in Singapore and Hong
Kong have already implemented measures,
which should uniformly and sustainably
increase the expertise of advisors.
However, it is rather one-sided to focus
exclusively on the expertise of advisors.
The average workplace of an advisor in
Asia is often anything but efficient: in
their daily work they have to use various
systems, one for customer information,
one or more for trading and various
portals for economic and product information.
Additionally, various internal
departments, such as compliance, product
specialists, account opening and
credit, submit their information in
a continuous flood of e-mails. In addition
there are the requests from clients.
Within this diversity of information the
client advisor has the demanding tasks of
filtering out the relevant data for a particular
client, setting and implementing priorities.
Proactive client counselling is then
often more an aspiration than a reality.
Only with efficient system support providing
timely and relevant information and
analyses can an advisor help a client in the
investment process. To this end the re-
nowned research company Gartner issued
the following statement: «The nature of
wealth management means that client
communications must move beyond basic
deliverables and the limitations of legacy
systems to provide value-added information
and insight to clients.»
Trend
People
Asia
Content is just as important
as communication channels
New communication channels such as
the iPad and iPhone seem to be the
focus of attention at the moment.
Approaches to providing relevant content
for client advisors and customers
«New regulations in Asia are forcing more
thorough customer analysis and
recommendations according to risk profile.
The financial centres in Singapore and
Hong Kong have already implemented
measures, which should uniformly and
sustainably increase the expertise of advisors.»
1/2011 SolutionS 17

Trend
«Advisors should have access to
a platform where the entire advisor cycle
can be processed, where information
on a customer relationship is available
at a glance.»
and displaying it in a meaningful way
do not yet seem to be very popular.
Years ago, a number of wealth management
companies began to invest in efficient
client advisor user interfaces.
The CEO of a globally active private
bank once said that although his system
landscape wasn’t the best, his institution
had the leading advisor workplace
in the industry, creating a clear
competitive advantage.
18 SolutionS
Advisors should have access to a platform
where the entire advisor cycle can
be processed, where information on
a customer relationship is available at
a glance. This is a huge challenge as it far
exceeds the usual presentation of a client
portfolio. It should show the relevant
economic and production information,
the management of the specific customer
relationship as well as give notice of
outstanding documents and other
compliance activities. In short, it should
aggregate the flood of information received
by e-mail or other channels
directly in the relevant client portfolio.
An advisor with such an infrastructure
at his or her fingertips can service
clients effectively and efficiently. Banks
could boost customer satisfaction considerably
thanks to better advisory services.
In Asia customers are much more
involved in the investment decision.
However, this does not mean that the
work of the advisor is less important. On
the contrary, customers frequently want
to base their decisions on available information
and then verify them with
the advisor.
The better the relevant information is
tailored to customers, the easier decisions
can be made and customer satisfaction
can be sustainably increased.
A number of banks have already taken
the first steps towards preparing certain
information for the clients via Internet
portals. In addition to the attractiveness
of new communication media, improvement
of information content should be
worked on intensively. This will increase
the quality of advisory services and thus
also customer satisfaction. Ultimately
the client advisor who, with the support
of a good system user interface, achieves
lasting relevance for his or her clients is
more likely to stay with the institution.
With the increasing attractiveness of Asia as a growth market for the wealth
management industry, a growing number of providers are setting up or extending
their platforms in Singapore and Hong Kong. In addition to Asian investment
behaviour and increasing regulation effort in both Asian hubs, lasting high-quality
advisory services are indispensable. Defining standards of competence and market
behaviour is insufficient. In the face of demanding and dynamic clientele, customer
advisors often have to cope with inefficient system landscapes and a flood of
information. Thus the advisor has to increasingly deal with information preparation
rather than being able to use the information proactively for the client. Efficient
advisor and client information user interfaces increase the quality of advisory services,
customer satisfaction, and with it, customer relevance.

Trend
Client focus as a key distinguishing feature in Asian private banking
Kaizen process management
in Asia
The private banking industry is in a state
of change – saturated markets in Europe
and frequent new regulations are complicating
the banks’ ability to grow their
business. A further challenge to the business
models of private banks are the
attacks against banking confidentiality
as well as risks arising from the current
sovereign debt crisis.
In Asia – Hong Kong and Singapore in
particular – private banks face fierce
competition between local and foreign
players. The local banks are rapidly closing
the gap in the areas of client-oriented
processing and robust banking platforms,
thus establishing sustainable
client relationships.
Clients have learned from the 2008 financial
crisis and have started to diversify
their banking relationships across
multiple banks. The fight for clients is
Aspect Top-down Bottom-up
Approach Managed, also using parameters from
a reference model
Participants Management, department heads,
process owners
Type of process
changes
Implementation
time
Large changes, system adjustments,
big-bang implementations
often won by banks which have optimized
their processes towards a positive
client experience. A client account
opening process that takes three days
results in a considerably better client
experience than one that lasts 30 days.
According to the PWC Wealth Report
2011, the future focus of private banks lies
in client orientation and a reduction in
cost through increased efficiency. 72% of
the institutes questioned indicated a cost/
income ratio of over 60%. Sophisticated
and customer-oriented process management
built on solid methodology can
address the above challenges.
Process management:
top-down vs. bottom-up approach
Process methodologies have the goal of
improving operations by eliminating
inefficiencies. Differences in the various
methods manifest themselves pre-
Interactive, result and type of solution
diverse and dynamic
Employee along the process value
chain, no hierarchy selection
Quick wins. Small improvements in
the sequence of operations, no system
adjustments
Six months to a year Three to four weeks
Acceptance Greater risk that changes are not
understood and thus short-term
1
Process model: top-down and bottom-up
High acceptance. Employees personally
involved in developing the solution
Source: Solution Providers
dominantly in the areas tools, reference
models and measurement techniques.
Modern methodologies also include
a plan-do-check-act approach (PDCA in
Kaizen, Define Measure Analysis Improve
Control in Six Sigma) in which
continuous monitoring and improvement
of processes prevail.
Independent of the chosen methodology,
there are two procedural models,
which anchor process management in
the organization: top-down and bottom-up
(cf. figure 1).
Top-down (re-engineering): using information
from interviews and workshops,
cross-functional process experts optimize
business processes. An existing
reference model (e. g. BANKINABOX®
from Solution Providers for core banking
system development) can also serve as
a starting point.
Bottom-up (Kaizen): employees are the
focus of the process event; the process
experts facilitate the discussion as
moderators only. Key users from the
departments involved model processes
independently using interactive methods.
The focus is on simple, pragmatic
improvements, which the department
can push forward and resolve independently.
All solutions are developed
within the team.
Process management approach: cultural
differences between Europe and Asia
In Asia, a bottom-up approach like Kaizen
has proven more successful for implementing
sustainable changes. There are
a number of cultural reasons for this:
� Asian organizations tend to be more
hierarchical than their western
counterparts. The decision-making
processes are always led by the higher
ranks. Even simple process-related
changes are not usually decided
directly in workshops. Instead, subsequent
consultation processes are
SolutionS 19

Trend
«Kaizen has proven itself successful
as a bottom-up approach particularly
in process projects, where, in addition
to inefficiencies, the focus lies on
the client experience.»
required, whereby the higher-ranking
individuals (typically C-level)
will have to provide their approval.
� End-to-end process knowledge is
seldom available due to highly fragmented
and separated functional
organizations. A process champion
with an overview of the process is
often not at hand. Instead a picture
of divided responsibility emerges
which often reaches only to the borders
of the department.
� Group consensus as opposed to individual
decision-making prevails in
Asia. To gain acceptance for a change,
20 SolutionS
2
a broad consultation process through
several departments is expected, while
individual decisions are reserved
strictly for the upper management.
What is Kaizen?
Kaizen is a process methodology developed
and pioneered around 1950 by Toyota
in Japan. «Kai-Zen» can be loosely translated
as «continuous improvement» and
covers improvements in the areas of quality,
technology, processes, corporate culture
and leadership. The central idea is
that Kaizen becomes a part of the company
DNA. Each employee can and should
continually suggest improvements to the
production processes.
Example of customer account opening process, Kaizen-optimized
Key is the focus on improvements that
can be implemented quickly and costeffectively.
This is in contrast to topdown
approaches where major changes
are introduced in the form of a «big
bang». Kaizen methods help to define
solutions to locate and eliminate inefficiencies.
Additionally, they provide
metrics, which allow inefficiencies to
be quantified and improvements to
become visible.
The form of Kaizen implementation can
either be «daily/continuous» or «eventbased».
In a project context, the emphasis
is almost always on the latter, whereby
a so-called «focused» Kaizen or
one-week Kaizen event on a particular
functional topic is conducted.
Optimizing customer processes in
banks using Kaizen methodology
Kaizen has proven itself successful as
a bottom-up approach particularly in
process projects, where, in addition to inefficiencies,
the focus lies on the client
experience. All identified changes must
be implemented within a period of three
to four weeks.
A typical process is organized as a fourday
Kaizen event and has the following
goals:
Day 1
� Analysis of the current process within
the group followed by a «waste
walk» during which a process ticket
Process metrics Current process Kaizen result (future)
Number of process steps 80 59% reduction 33
Number of hand-offs 38 87% reduction 5
Number of systems 36 72% reduction 10
Total cycle time 30 days 68% reduction 9.5 days
Total processing time 20 hours 33% reduction 13.5 hours
Number of value-adding steps 5.5 Improved client experience 6
Average first pass quality 0% Less rework 50%
Travelling distance of documents 8 km 160x reduced way 50 metres
Total working hours 6,000 hours/year Total savings > 1FTE 4,029 hours/year
Source: Solution Providers

is registered for all relevant data in
each process step (cf. figure 3).
� Calculation of the current process
metrics, development of a «handoff»
map, visualization of routes and
transport paths.
Day 2
� Modelling of a target process via simulation
of a «perfect» world, regardless
of regulations/directives, department
and system hurdles.
� Gradual approximation to reality with
a constant focus on client experience
and questioning of efficiency.
� Calculation of target process metrics.
Day 3
Decision day: the team condenses all suggestions
for improvements from the first
two days and presents them to the management
for decision. This requires all
necessary decision makers to be present.
Day 4
The decisions reached on the third day
must be transferred to an implementation
plan for each department. This plan also
serves as a basis for further, weekly monitoring
of the degree of achievement.
All process areas in which inefficiencies
are assumed and/or where the focus of
the client experience should be checked
are ideally suited as Kaizen events. A
process project carried out by Solution
Providers for a private bank in Hong
Kong on the subject of client account
3
Process step description
Trigger
What initiates this step? What makes you
start this part of the process?
Completion
What ends this step? How do you know this
part is completed?
Cycle time
Total time for this step, start to end?
Processing time
Time spent on actual processing
Systems and tools
Number and kind of systems and tools
used for this step
Walking and transport distance
Distance covered for this step
First pass quality (FPQ) and paper used
Work correct after first attempt
Work waiting (WW) and interruptions
Average quantitity of jobs waiting
and stops
Waste and other remarks
Current Process
opening shows the optimization potential
of the Kaizen method: numerous
small changes not only improved the
processing time and thus the client experience,
but also freed up the equivalent
of a full-time process resource. An interesting
aspect was that the solution was
developed and implemented by the bank’s
employees themselves, simply by illumi-
Process Ticket
Trend
nating inefficiencies and reorganizing
the departments involved (cf. figure 2).
In Asia both margin pressure and customer
demands are on the rise. By strict
application of the Kaizen methodology
a bank can create a strategic advantage
by reducing costs and improving the
client experience.
The Kaizen process optimization methodology enables companies to search their
process landscape for inefficiencies and helps firmly anchor improvements using
interactive methods. Kaizen focuses on incremental, small changes, which can be
implemented within a period of three to four weeks. As a bottom-up approach, which
places employees at the centre, the methodology is particularly successful in Asia.
Private banks in Europe and Asia are currently struggling for a greater share of
the market in an environment of shrinking margins. With consistent application
of process management à la Kaizen, process inefficiencies and a deficient client
experience can be identified, thus improving capabilities to build and retain a new,
larger client base.
No.
Actor
days/hours/minutes
days/hours/minutes
Walk m Transport m
FPQ % Paper Sheets
WW Interruptions/steps
The process ticket allows the observation of optimization opportunities.
The Solution Providers process ticket
Source: Solution Providers
SolutionS 21

Case Study
Wealth Division of the Royal Bank of Scotland
implements Avaloq
A huge step for Coutts
and British private banking
22 SolutionS

Since April 2, 2012 the entire Wealth Division
of the Royal Bank of Scotland has
been using Avaloq as its uniform core
banking system (cf. figure 1). From the
initial preparation of the first business
cases, establishment and documentation
of business requirements in connection
with a gap analysis, the development and
communication of a completely new
organizational structure to the implementation
at Adam and Coutts, it took just
three years. Now synergies can be realized
which, despite the fact that the organization
was already a division, could
not be before due to the different and
fragmented system landscapes.
The implementation at the private bank
Adam & Company at the beginning of
2011, which was also part of the overall
project, was a historic moment for all parties
involved and for British banking. For
the first time in history, a bank in an English-speaking
country executed its transactions
using the Swiss software solution
Avaloq. However, the road was long and
rocky as with each new market entry numerous
modules need to be adapted to the
special statutory requirements and the
market-specific conditions of the country
in question (cf. text box for examples).
Shorter project duration
by using a reference bank
Already at the beginning of 2008 Coutts
International (Switzerland and Asia) successfully
implemented Avaloq. Based on
Additional SOLUTIONS articles
the time-limited project plan in Great
Britain and particularly the goal of realizing
synergies between the various RBS
Group entities, it was decided to use the
Coutts Switzerland Avaloq system as the
reference for Great Britain, to build on it
consistently and wherever possible to adhere
to existing functionalities.
Articles (in German only) are available for download on www.solutionproviders.com
Case Study
«The going live of the Wealth Management
platform programme was a key stepping stone for
Coutts as this will allow us to operate as a global
organization on a single IT platform transforming
the way we serve our clients. This is the largest
investment the bank has ever made and the new
infrastructure will strengthen our competitive edge
and ensure we can continue to provide exceptional
private banking and wealth management in
the future. Solution Providers played a significant
role in achieving this milestone.»
Dr Jürgen Pulm, Chief Operating Officer, Coutts & Co Ltd
The advantages of such an approach were
numerous. In addition to a restriction of
development to necessities, it allowed
British users to come into early contact
with a functioning and real-life implementation
which was in operation. At the
same time a psychological basis was created
which allowed the unification of
UK banking series (2010–2011)
Regulatory requirements ask for a new specification of the reporting solution (SOLUTIONS 1/2011)
Standards in Switzerland as regards regulatory reporting cannot be easily internationalized. Comparison of requirements in
Switzerland and Great Britain and identification of challenges and approaches in the specification of the solution.
Comparison of tax-optimized pension solutions (SOLUTIONS 3/2010)
Structured comparison of the Swiss 3a Pillar solution with the British product «Individual Savings Account» (ISA) with a focus
on flexibility and security in pension provision.
The international trend for trusts (SOLUTIONS 2/2010)
Why trusts are also gaining importance outside English-speaking countries and a discussion of market potential.
Avaloq implementation at RBS Coutts (2008)
International implementation of Avaloq (SOLUTIONS 2/2008)
The greatest challenges and highlights from the first simultaneous «going live» at various locations around the world.
SolutionS 23

Case Study
processes at the various locations (Great
Britain, Asia and Switzerland) as a result
of the project wherever possible.
Replacement of a core banking system
as an opportunity
The replacement of an ageing system
landscape offers organizations a good
opportunity to rethink the existing value
chain and the fundamental business
processes.
A central project task was to break down
the existing value chain, to simplify
processes and to review the organizational
structure. To strengthen and use
the synergies between the various entities
(Great Britain, Switzerland and
Asia), a new operating model was developed
which was based on the entry into
service of various new business hubs.
Each hub would be assigned specific,
cross-location functions.
An example of this is the role of the
Swiss entity, which gained importance
within the Wealth Division through the
hub structure. The back office executed
1
Uniform IT platform for RBS Wealth Division
24 SolutionS
Project start
July 2009
Gap analysis
Coutts & Adam
Analysis and
design Adam
Implementation
and testing Adam
January 2011
Go live Adam
Analysis and
design Coutts
Implementation
and testing Coutts
April 2012
Go live Coutts
Starting
position
RBS Wealth Division
Today
RBS Wealth Division
transactions for the British business as
well as for domestic and Asian business.
Corporate actions, maintenance of
securities master data and fund transactions
are examples of services, which
the Swiss location now provides for the
entire Wealth Division.
Another example is IT: since the implementation
of the Avaloq-based platform
in Great Britain, the Swiss IT department
has taken over the responsibility for
maintenance and further development
of functionalities for the entire division.
Highly integrated teams
as the key to success
The challenge of international project setup
was met by fully integrated project
teams. Project streams united business
specialists from Great Britain, internal IT
and in part business experts from the
Swiss branch Coutts & Co, as well as additional
Avaloq and project specialists.
Project members were spread over the
various locations in Great Britain
(London, Edinburgh, Bristol, Guernsey,
etc.) and Zurich.
Adam & Company
Edinburgh, Guernsey
Proprietary
legacy system
Adam & Company
The degree of intensity and location of
face-to-face collaboration was adapted
to each project phase. The initial gap
analysis was mainly carried out in Zurich.
On the one hand this was to ensure
close proximity to the reference bank
and on the other to enable an exchange
between specialists already familiar
with Avaloq. During the actual development
cycles the teams mainly worked in
separate locations. In the acceptance
testing phase that followed, and in particular
during all cutover-related activities,
the personnel focus of the project
was then consistently shifted to Great
Britain to guarantee shorter lines of
communication and distances.
Advantages and disadvantages
of the MESI principle
The multi-client capability of Avaloq was
an important prerequisite for a strategy,
which utilized synergies between the
different locations. An advantage of
using the MESI principle (Multi Entity
Single Instance: running numerous
entities on a single technical instance)
becomes clear when developing and
RBS Group platform
RBS
Coutts & Co Ltd
London
Fragmented legacy
application landscape
RBS Group platform
RBS
Coutts & Co Ltd
Wealth IT platform
Coutts International
Switzerland, Singapore
Hong Kong, Isle of Man
Avaloq
(since 2008)
Coutts International
Source: Solution Providers

implementing functionalities for several
units. The aligned processes and small
number of redundantly maintained
modules considerably reduced both the
development and maintenance costs.
At the same time, the complexity of the
code increased dramatically. Changes to
the system no longer only changed the
way a business unit functioned; they carried
the risk of having undesirable side
effects for other locations. With structured
and continual testing and regression
testing on the basis of a simple but
uniform set of test cases, such risks were
reduced as much as possible in collaboration
with experienced testing teams.
The role of methodology
Using a methodological approach, the
complexity of such a major project can be
broken down into manageable and
digestible steps. The project has shown
that the agile approach, which was applied
to the specification and implementation,
was perfect to implement a highly
complex and comprehensive platform
successfully and to accompany and support
change management with the necessary
measures.
The business requirements which were
collated at the beginning of the project
with the help of use cases were continually
refined. Functionalities in the form
of a prototype were made available quickly.
With the continually increasing
Avaloq know-how of testers and business
representatives it was possible to
precisely detail the final system requirements
in the course of intense and
repeated test phases, and so supply the
functionalities end users required.
The new platform as added value
The platform that is now available allows
Coutts not only to use synergies between
the various locations and to remove costly
peripheral systems, it also enables
a reduction of time and cost due to the
reduction in medium breaks and greater
automation and straight-through processing.
Case Study
«The project has shown that the agile approach,
which was applied to the specification and
implementation, was perfect to implement a highly
complex and comprehensive platform successfully
and to accompany and support change
management with the necessary measures.»
In addition to the bank’s customers who
perceive the technological advance primarily
through the new e-banking system
and more modern client statements,
the new platform is also a huge step forward
for the British private banker. Now
the latter has all the necessary information
within a very short time and available
in one place. Together with the new,
consolidated reporting method, the system
enables the banker to advise and cultivate
clients more proactively, more
quickly and more precisely. This increases
the profitability of the bank on the one
hand, and on the other ensures that the
sophisticated British customer can also
be offered a unique service with the
brand Coutts in the future.
With the Avaloq going live in April 2012, the Wealth Management Division of the
Royal Bank of Scotland laid the foundation for their growth strategy. The exclusive
brand and excellent reputation, which the bank has in Great Britain because
of its outstanding customer services was underpinned by a modern, flexible,
Avaloq-based IT platform following a three-year project.
New optimization potential opened to the bank through the standardization
of the software solution throughout the Wealth Division. In addition to the
standardization of the product range, there are plenty of new opportunities both
from a technological and an organizational point of view: an international hub
structure was set up in connection with a reorganization, with the aim of transacting
business as efficiently as possible for the now multinational business in Great Britain,
Switzerland and Asia.
SolutionS 25

Trend
How financial services providers can profit from the cognitive
process of cost-benefit perception
From classical pricing
theory to behavioural pricing
26 SolutionS
Languages

Classical pricing theory assumes that
customers behave rationally and have
access to complete information regarding
cost-benefit ratio. Within this theoretical
behavioural environment, customers
aspire to optimize their benefit.
With a given income they will demand as
many units of a product until the benefit
of an additional unit is equal to its price.
On today’s markets – in particular for
financial services – complete cost-benefit
transparency certainly does not prevail.
For many products it is almost impossible
for customers to measure benefit in economic
terms. Insurance products with
their typically uncertain occurrence of
benefits are a good example of this. Additionally,
customers seldom act rationally.
1
Facts
Offer
Advice
Information
Cognitive process of handling an offering
Trend
«Financial services providers can significantly improve
results with flexible sales processes in all channels which
consider that customers perceive objective facts
subjectively and react individually.»
Classical pricing theory is therefore missing
an element, namely the cognitive process
of the cost-benefit perception and
evaluation. This is the subject-matter of
behavioural pricing (cf. figure 1).
Behavioural pricing assumes that consumers
receive an objective stimulus,
which leads to a subjective evaluation
(organism), which then provokes individual
behaviour (response).
Approaches for pricing
in the financial industry
How can financial services providers
such as insurance companies and banks
take advantage of behavioural pricing?
We can see numerous approaches, which
cover the entire product spectrum.
Product identification: financial products
are often low-interest products; customers
do not generally analyze the product
in detail. Thus the following conclusion
can be made: the smaller the interest in
the product, the more summarized the
cost-benefit offer can be. This is also
called stimulus simplification. Although
this insight is not new, only a handful of
financial services providers package their
products so that they are suitable both for
low-interest customers and for those interested
in the product. Depending on the
customer type, which can quickly be
assessed with a few entry questions, customers
should receive differently packaged
offerings, such as an all-in-one
proposal, a proposal with few options or
an offering with complete freedom. With
Stimulus Organism Response
Consciousness
Attitude
Memory
Perception
Absorption
Evaluation
Interpretation
Attribution
Integration of other
information
Behaviour
Purchase
Non-purchase
Postponement
Source: Solution Providers, following Martin Wricke
SolutionS 27

Trend
2
the various approaches for «productizing»,
it is possible to work with varying
margins. Conclusion: you have at hand
simple standard packages for low-interest
customers. If your distribution channel is
strong in advisory services, you should
also offer sophisticated configuration
options for interested customers.
Reference point: each customer, independent
of whether he or she knows the
product or not, has a reference price
28 SolutionS
Concept
Reference data/know-how
Analysis Scenarios Simulation Evaluation Implementation
Tools
Design
Behavioural pricing introduction method
which is used to evaluate a new offer.
This reference price can be assessed in
the sales process if, before tendering an
offer, the customer is systematically
asked which information he or she has
already obtained. This allows an offer to
be adjusted to the reference point whereby
a tolerance of ±15% is typically acceptable.
Conclusion: make sure your first
offer is adjusted according to the reference
point of your customer. You get a
buy-in and then you can begin upselling.
«Consider whether the aspect price or service
should be emphasized for each distribution
channel and select the top-down or bottom-up
sales approach accordingly.»
Source: Solution Providers
Discount policy: if a client has to decide
on every single component, each decision
corresponds to a loss of opportunity.
This can be compensated by giving a discount
on each component. Compared to
a large discount on the whole package,
individual discounts are seen as individual
negotiation achievements; the perceived
price or in this case discount is
valued more than an overall discount.
Conclusion: if you have to give discounts,
divide the offering into parts, give a discount
on each part and ensure that the
customer perceives this positively.
Price sensitivity: price sensitivity increases
with standardized and comparable
products. To influence perception
of a cost-benefit structure, two strategies
can be applied. To emphasize
benefit a top-down approach should be
chosen, whereby a comprehensive package
should first be offered. Certain
options can then be dropped to do justice
to price expectations; perception of
the services offered remains good. If,
on the other hand, the low price of the
offer should be emphasized, the bottom-up
approach is applied. Here a lowprice
cost-benefit package is offered
and then further options added. The
customer still tends to perceive the offer
as favourable. A practical example of implementation
is the offer «Name Your
Price®» from Progressive. Here the
customer is asked to first name the
price he or she would be willing to pay
for insurance cover. Appropriate offers
are only made afterwards. These also
include offers, which are above the price
limit in order to make additional service
options appealing. Conclusion: consider
whether the aspect price or service
should be emphasized for each distribution
channel and select the top-down or
bottom-up sales approach accordingly.
Stimulus threshold: customers have a price
stimulus threshold independent of the actual
offer. For example, if the price is slightly
over the threshold (e. g. CHF 1,001) it is
perceived as being significantly more expensive
than if it were slightly under the
threshold (e. g. CHF 999). This effect of
price rounding has been applied to consumer
goods for a long time. However, it
receives little attention in the financial services
industry. The effect can be increased
if offers are divided into units. To stay with
the example given earlier: a monthly premium
of CHF 84.95 is perceived as more
attractive than a yearly premium of
CHF 999, even though the total is higher.

This is because many consumers multiply
and compare with the factor ten because it
is simpler. Conclusion: even if it is unusual
for certain industries and products, take
monthly payments into consideration.
Method
Solution Providers has developed a proprietary
method specifically for the implementation
of behavioural pricing in
the insurance and banking industries (cf.
figure 2). The method is based on five sequential
steps, which run through the
concept, design and realization phases.
Appropriate tools and reference data can
support the method where necessary.
Step 1: in a first analytical step the pricing
strategy must be analyzed and defined.
Based on internal skills (resource-based
view) and the external development of
the market and competition (marketbased
view) questions concerning positioning
are answered. On this basis, implementation
measures such as those
discussed above are defined.
Step 2: the measures developed in the first
step are now outlined and substantiated
in different scenarios by using model customers.
The aim of these outlines is to
find combinations which produce an increase
in benefit with simultaneous price
fairness in the customer’s perception.
Step 3: once the scenarios have been
made plausible, they are simulated. The
aim of the simulation is to gauge the
expected changes in the earnings
situation. Model customers are used in
the concept phase. In the design phase,
the simulation can be carried out with
the appropriate tools for the entire customer
base. This allows reliable calculation
and a substantiated statement on
the aspects of the suggested product
modification.
Step 4: the simulation results are evaluated
again in terms of whether they
match the strategic alignment of the
Trend
«Even if it is unusual for certain
industries and products, take monthly
payments as a stimulus
threshold into consideration.»
company and the chosen direction of
growth. If there is a change in the product
offering, accompanying measures
could be necessary.
Step 5: the last step is only carried out in
the design and implementation phase.
With pricing and distribution processes
adjusted where applicable, the agreed
product modifications are implemented.
Often an accompanying communications
initiative is launched.
Behavioural pricing analyzes how consumers gather and process cost-benefit
information. This allows the cognitive processes, which play an important role
in reality and deviate from classical price theory with its utility-optimizing homo
oeconomicus, to be observed. Knowledge on the perception process – from
consciousness and perception to evaluation – can be useful to financial services
providers in many aspects of optimizing their cost-benefit ratio. A methodological
approach in five steps is recommended.
SolutionS 29

Trend
New communication technologies are changing consumer
behaviour – opportunities and risks for insurance companies
What insurance companies
can learn from Apple
30 SolutionS 1/2011

Saturday morning shortly after 8 a.m.
temperature –7 degrees, rush hour at the
Kaiserwetter ski lift. Dirk (26 years old),
armed with board and helmet, queues at
the ticket office and pushes towards the
fresh-fallen snow. Peter nudges him and
says: «Hey, did you get around to taking
out mountain rescue insurance?» Dirk
casually reaches into the inner pocket of
his jacket and digs out a device dangling
from white ear buds. With a confident
smile and a few gestures on the screen
he insures himself for the day. This protects
him from rescue costs in the event
of a fall, extends his accident insurance
for necessary risk premiums and activates
GPS tracking so that Peter and his
other friends can find him on the mountain
at any time. The whole thing is easy,
paperless, requires no signature and is
stress-free.
Online whenever, wherever
What is the attraction of iPhone (or increasingly
Blackberry or Android phone)
applications (apps)? It is the option of
carrying out secondary activities when
you would have time for them. In the
tram, waiting for a train, in the queue at
the ticket office, in the three minutes it
takes to walk between the kebab stand
and the cinema. This recent phenomenon
is a logical development of changing
communication and also increasingly
consumer behaviour. What started
1
New consumer
behaviour
Traditional behaviour
with new technologies
Social networks
Games apps
Claims app
Online policies without
back-end integration
Low degree of
added value
in the nineties as text messages has
grown into a booming industry, which
represents a powerful market place.
This change in buying behaviour to
a here-and-now trend also has an impact
on price expectations. In view of the
Mobile web technologies between consumer behaviour and added value
Trend
«Which insurers venture into the area of
mobile applications? It is not only those who try
to address young customers early and
bind them to their brand. The majority
of insurance companies have an intrinsic interest
to create a competitive advantage in the widely
saturated insurance market in Western Europe.»
Low ticket
products
Coverage for
social web and
games
Mobile health
services
Online policies with
back-end integration
High degree of
added value
Source: Solution Providers
whole season, Dirk in the above-mentioned
– fictional but absolutely possible
– scenario would probably be better
off with a traditional annual insurance.
But he is after flexibility, only wants
to commit to a small time horizon and
a single ticket.
SolutionS 31

Trend
Immediate claims notification
Insurance companies are increasingly
trying to make use of both trends. UNIQA
Versicherungen AG, Austria, has a mobile
app, which, in addition to the possibility of
submitting a claim online via a smartphone,
allows motor vehicle liability and
comprehensive insurance for electrically
powered vehicles, which do not require
Solutions: What prompted UNIQA
to be the first insurance company in
Austria to develop apps for smartphones?
Andreas Kössl: UNIQA is the innovation
leader in Austria with almost
40,000 SafeLine policies, 400,000
customers, 35,000 driver protection
contracts, VitalCoaches and
Vitalbilanz. Already at the end
of 2008 we realized that a major
smartphone boom was approaching.
We made allowances for the
ever-growing trend towards smartphone
use and upheld our claim
of being «the insurance company
for a new generation» with an innovation.
UNIQA was the first insurer on
the Austrian market to provide its
customers with a high-quality
app. We wanted to get closer to
customers with a claims app and
be able to help them to submit
a claim as quickly and efficiently
as possible.
As Chairman for insurance technology,
I see a special advantage for in
32 SolutionS
regulatory approval (e-Bike, Segway, etc.)
to be taken out in a simple and unbureaucratic
way (cf. textbox).
Also in Switzerland insurance companies
have taken the first steps and now
offer, for example, take-home insurance
for a new television, a new watch or even
for a wedding – products which are not
surers with claims notification and
processing via a smartphone app.
Being at the beginning of the process
chain allows us to influence the subsequent
process – through control
and automation. This gains even
more importance as the costs in the
repair industry are continually rising.
Solutions: What experience has
UNIQA gained with smartphone
claims applications? Have these
been welcomed?
Kössl: Customer feedback has been
excellent. We have received many
e-mails from our customers saying
how happy they are with this option
of submitting a claim. Our app
«UNIQA Mobile Services» has so
far been downloaded 18,000 times
(iPhone and Blackberry) and to date
more than 100 claims have been
submitted via smartphones.
Solutions: What experiences has
UNIQA had with the smartphone
e-bikes applications? Have these
been welcomed?
Kössl: The e-Bike app has been well
received by customers and also by
comparable with traditional liability insurance.
Which insurers are venturing into these
new realms? Not only those who are trying
to address young customers early to
bind them to their brand. The majority of
insurers have an intrinsic interest to create
a competitive advantage in the widely
«We want to get close to our customers with a claims app»
Mag. Andreas Kößl, current CEO of UNIQA poistovna, a.s., Bratislava, at the time of the interview Chairman of UNIQA
Sachversicherung AG and in-house trendsetter since 2008, on the smartphone boom and apps for car drivers, bikers and
other insurants.
our distribution partners. We have
so far closed on a few dozen policies
via this channel. The e-bike app is
currently a pure «request app»,
but we will add useful features for
cyclists, not only e-bike, in the
future.
Solutions: Following e-bike
insurance, can you imagine
other convenience products
being insured using smartphone
apps?
Kössl: Yes, this is conceivable and
development has already begun.
But I can’t give out more details
at the moment.
Solutions: Can you imagine that
in addition to apps, online versions
of optimized portal solutions
could be implemented for smartphone
users?
Kössl: Already in 2010 UNIQA
developed a mobile strategy which,
in addition to further app development,
included optimized
portal solutions for smartphone
users. These will be implemented
in the near future.

saturated insurance market in Western
Europe. If one wants to take the Apple
analogy further: an entirely new need
must be created. If this is to be achieved
with a mobile platform, then it is impossible
to avoid a check-up.
Hurdles for insurance companies
The trends will certainly bring various
hurdles for insurance companies. This
starts with the different design and calculation
of products. Old price structures
can no longer be applied, risk must be
calculated differently and distribution
can no longer be used to the same extent.
Insurance for a 24-hour risk brings with
it a high concentration of claims frequency
for each insured period.
Furthermore, the management of a greater
volume of such «low ticket» insurance
coverage requires the system landscape
and processes to be perfectly coordinated.
The step «draw up written offer» is obsolete
and turnaround time takes on new
meaning as it is no longer a question of
days but seconds. Access to a mobile
infrastructure must be discovered and
the link to existing systems made available.
In contrast to a claim where claims
data, and in the event of an accident the
position and pictures of the accident, is
directly fed from the app into the claims
system, the sales process should also be
possible and the focus must be on the
Trend
«In contrast to a claim where claims
data, and in the event of an accident the
position and pictures of the accident,
is directly fed from the app into
the claims system, the sales process
should also be possible and the focus
must be on the customer.»
customer. Only in this way can Dirk change
his status from «uninsured» to «insured»
with a few gestures on his mobile.
Ultimately sales via mobile channels
which did not exist before should be differentiated,
be it an app, a point-of-sales
product piggybacking on theatre tickets
or as part of a mobile health solution
(cf. figure 1). In this regard, it is necessary
to ensure a clear delimitation to traditional
products and distribution channels.
Having just survived online policies
purchasing, the dominant agency network
now has a new threat to withstand,
which must be cleverly resolved in-house.
In line with technical innovations (Web 2.0, Mobile Web) a change in customer
behaviour can be observed. New customer intentions are developing based on
younger customers. The young generation, or rather the generation of digital natives,
are the triggers and the rest follow. In addition to the tendency of price-sensitive
comparison, clear trends towards a «here-and-now» attitude can be observed.
Younger consumer groups and their behaviour form the basis for growth potential
for insurance companies. Consideration of the needs of these potential customers
brings opportunities but also challenges for the insurance industry, for example
in the areas of product policy and design, customer address, sales channels as well
as adjusting processes in the distribution.
SolutionS 33

Trend
Reinsurance distribution in transition
«Hunters» and «Farmers» in
customer marketing and care
34 SolutionS
Success
Consult and coach

Insurance companies buy reinsurance to
free up risk capital and to balance the existing
portfolio. Such financial management
is usually conducted via a broker.
Change in the traditional
reinsurance business
Brokers have always been considered
the main distribution channel for small
and medium-sized reinsurance companies
in particular. In addition to this important
channel, market leaders also
cultivate direct customer contact. The
purchasing motivation of a cedent correlates
in both cases directly with claims
arising from events in the primary
insurance industry and regulatory
requirements. If new insurance cover is
purchased via one of the channels, the
underwriters at the reinsurer perform
a double role: they calculate the technical
insurance risk and act as sales representatives.
The technical skills of an underwriter
play a central role in negotiations
with customers and brokers. The consequence
is that modern sales and marketing
methods have found limited use in
the reinsurance industry up until now.
1
Powerful and transparent
sales processes
Strong leadership personalities
to drive the process
Creating sales opportunities
Sales cockpit: transparency
and success
Transformation and segmentation of new customers
Newest trends in the reinsurance market
have shown that price sensitivity and
competitive pressure are not the only
issues for primary insurance companies.
Today reinsurance companies are up
against low prices, new competitors and
a persistent soft market. Switzerland in
particular is experiencing a sharp rise in
Trend
«Newest trends in the reinsurance market
have shown that price sensitivity and
competitive pressure are not only issues for
primary insurance companies. Today
reinsurance companies are up against low
prices, new competitors and a persistent
soft market.»
Strategic planning of
accounts with targets
and handling guidelines
Team selling with key
account managers as
orchestrators
Learning from lost
deals
Developing customers
into partners
the number of reinsurers. Many of the
new competitors are subsidiaries of holding
companies headquartered in Bermuda
and are motivated to get a foothold in
the Central European market. There is no
significant difference in market positioning
between the new and the established
companies. The former apply the same
1
Hunters
3
Farmers
«Hunters» target new business
«Farmers» generate long-term customer relationships with high levels
with new customers
of trust. Farmers aim at growth through cross-selling and outstanding
service offerings.
Base yearly sales
planning on creating
sales opportunities
2 Segment A
Changing new
customers into
partners
Be competitive and
offer the customer
more than expected
Analysis and
understanding of
buying centres
Set up above-average
service competences
Segment B
Segment C
Intensification and profitability
Number of customers
Source: Solution Providers
SolutionS 35

Trend
primary sales arguments of price, capacity
and security. The question for such
companies is how to differentiate themselves
from the long-established businesses.
Simply having the capacity and
being willing to underwrite any risk is
not enough to sustainably position themselves
opposite the competition. To complicate
matters, the persistent soft market
for reinsurers, in industrialized
markets in particular, has become a significant
challenge. The old price cycle in
reinsurance appears to be broken, prices
are not returning to positive as was
expected, despite the record number of
claims last year. From this a consequence
can be derived: previously event-driven
sales must realign to be able to generate
the expected growth figures and earnings
in future.
Strengthening market position
with modern sales strategies
Reinsurers are not entering completely
new territory in the area of sales. The
financial industry has been working with
new sales models for years. However,
their implementation at reinsurance companies
has so far been limited. Modern
sales strategies prescribe a service
offering aligned with the customer segment,
an organizational structure with
2
1
36 SolutionS
Definition and sales
strategy decision
� Define change
� Set-up measurable goals
� Send management message
Modular approach to modification of sales organization
a strategic customer focus and continual
monitoring of the sales philosophy using
modern management tools.
Larger companies have already begun to
analyze customers according to various
criteria and to restructure the customer
portfolio with the goal of maximizing
the potential of existing customers. As
this must always stand in relation to the
expected «share of wallet», it is necessary
to service each customer segment
individually. With an increasingly long
business relationship, so-called «A» customers
require a customer relationship
manager/customer partnership which is
built on trust to be developed using maximum
involvement. This ensures that
the relationship can be maintained and
developed through cross-selling. Other
customers cannot be served using the
same concept and are thus offered fewer
services. Clearer profitability ratios are
the focus with these customers and drive
decision processes.
Strengthening distribution channels
and respecting customer needs
Insights from customer segmentation
call for organizational changes in reinsurance.
Acquisition of new customers and
new business with existing customers is
Implementation of sales measures
2 3
Quick wins Long-term improvements
� Ensure frequent customer
interaction
� Every account manager
must visit each customer
five times a year
� Publications generate sales
opportunities when they are
addressed directly
� Enforce sales management
� Introduce regular monthly
sales reports and reviews
� Open discussion of «hunter»
performance in team
� Celebrate sales successes
in team
� Identification and training of
«Hunters» and «Farmers»
� Implement global sales
process KPIs
� Implement lead generation
� Strengthen sales culture.
Increase sales motivation
through full performance-
based compensation
� Sales cockpit to visualize
successes
achieved with sales employees with
hunter profiles. «Hunters» work closely
with sales processes and recognize new
sales opportunities. Such personalities
should work with smaller customers to
a greater degree or should work as a part
of a global sales team. Reinsurance underwriters
generally have a technical profile
allowing them to discuss contractual
content with customers. This profile can
be described as one which is aligned
to customer care, so-called farmers.
«Farmers» aim for cross- and upselling
and are used as key account managers
for profitable existing customers. They
cultivate existing large accounts and
plan long-term sales activities according
to customer needs. Generally speaking,
«farmers» do not see the customer as an
acquisition target but as a partner for
a long-term business relationship.
In the overall sales picture both hunter
and farmer profiles, which cooperate in
various teams, are necessary. «Hunters»
attract new customers who are then
taken over by «farmers» who make
them into partners to promote longterm
customer loyalty. Depending on
the area of application, teams can be put
together in a way which optimally suits
the needs of customers.
4
Modifcation of
other functions
� Derive changes for other
divisions (recruiting,
underwriting, product
development etc.)
Source: Solution Providers

Intensifying management and
setting up controlling
Today, in addition to risk management,
sales and marketing enjoy considerable
attention in reinsurance companies. It is
a well-known fact that selling products
and services requires considerable effort
and commitment and thus demands
strong leadership. The same applies in reinsurance
companies. New topics, products
and models require the support of
top management, particularly when the
implementation impacts the organization.
However, management includes
controlling and the ability to create transparency
as regards success and failure.
Successful sales teams are characterized
by a great willingness to continually learn,
striving for the maximum, and should be
rewarded accordingly. Transparent sales
controlling is vital if a customer-aligned
organization is to be achieved.
Also necessary when dealing with brokers
are measures in the three areas
organization, service offering and
management tools. Brokers are important
players in reinsurance and direct
insurance industries. Depending on the
size of the company, up to 100% of business
is executed via the broker channel.
Every organization which works with
intermediaries or brokers must thus learn
that, from the point of view of the company,
the broker is the customer and not
a competitor, which holds back important
business. Every sales organization
can learn exemplary practices for dealing
with customers from brokers and
their sales methods; and brokers also
expect to be treated with sales expertise.
Trend
«In the overall sales picture both hunter and
farmer profiles which cooperate in various
teams are necessary. ‹Hunters› attract new
customers who are then taken over by
‹farmers› who make them into partners to
promote long-term customer loyalty.»
Taking appropriate measures
What are the options available to reinsurance
companies to, for example, be competitive
on the continental European market?
Customers and brokers must first be
classified in segments. Independent of
the segment, sales representatives are set
up as «hunters» and/or «farmers» depending
on their skills. The result is a top segment
of a few customers who are cultivated
by teams with a distinctive farmer
culture. In the other segments teams with
almost exclusively hunter personalities
are responsible. To efficiently organize
the acquisition of new customers and new
business by «hunters», an efficient and
transparent sales process must be implemented.
This process focuses on the identification
of new sales opportunities in
particular, as well as their qualification
and treatment (opportunity management).
With transparency the success of
«hunters» is measurable and controllable.
A different approach is necessary to
implement farmer activities. Here active
management of selected customer
accounts is achieved by means of planned
activities. With top customers in particular,
a strategic sales and service plan per
account is necessary which is set up
according to customer needs and company
strategy. To implement this high-level
overall planning, it is vital to have the
involvement of responsible account
managers who monitor and control the
composition of sales activities in their
accounts.
The aim is to intensify the sales culture.
An increase in customer interaction
through sales representatives alone leads
to more managed customers per employee.
In this way earnings and savings
potential can be maximized.
In a stagnating market with increasing price sensitivity, reinsurance companies
are faced with sales challenges. If continual growth is to be achieved in a saturated
market, new sales models must be established. In addition to the traditional but
highly competitive broker channel, reinsurance companies must intensify modern
sales concepts and organizational forms in direct sales with customers. Such models
allow closer contact with customers and their problems, thus allowing a more active
role to be taken in defining business with customers.
SolutionS 37

Case Study
Portfolio segment profitability maps support decisions
on the possible courses of action
Optimizing portfolio
profitability in life insurance
38 SolutionS
Process Unification
Languages
Industrialization
cultural Integration
Strategy

A large portion of corporate risk for insurance
companies can be found in the
area of portfolio profitability. Achieving
planned or originally forecast profits is
largely dependent on the evolved structure
of the portfolio. Thus portfolio
structures and their profitability have
become a significant aspect of risk
management. Process optimization and
product development have undergone
various improvements and in the meantime
potential has largely been increased.
However, in the area of risk
management in portfolio controlling, in
the evaluation of portfolio profitability
and in active portfolio management as
regards added value, there is still considerable
room for manoeuvre. This applies
both to retrospective examination
of portfolio profitability and revised
transition probabilities, as well as measures
on contract portfolios.
Furthermore, the increasingly rapid succession
of new insurance products and
their growing complexity, as well as
growing regulatory requirements tie up
company resources which are needed to
examine the current situation of existing
insurance portfolios and the associated
implementation of measures. In addition
to competitive and cost pressures, modi-
EUR
200
1
150
100
50
0
-50
1995 1999 2003 2007 2011
Company-specific portfolio profitability map
fied guaranteed interest rates and expectations
of surplus funds declarations demand
global goals. In addition, triggers
such as Solvency II and risk management
� PPD = 5
� PPD = CD-10
� PPD = CD-5
� PPD = CD
PPD Premium payment duration
CD Contract duration
Case Study
«Measures to optimize portfolios are
often not carried out in great detail.
It is not unusual that this results in
losses of millions of euros in
portfolio profitability for insurance
companies every year.»
Source: Solution Providers
call for more careful examination. To
this can be added growing requirements
in internal and external transparency in
order to reach conclusions on future
product design and be able to initiate
measures within the portfolio.
Often the composition of life insurance
portfolios develops differently to the
forecast made at the product’s introduction.
For example, they often have smaller
quantities, or a different composition
of insurance premiums due to the particular
characteristics of the distribution
channels, or require a greater degree of
attention than planned. Therefore, many
portfolio positions do not contribute to
the overall result as expected. Against
this background there are two elementary
questions: (1) how can loss-making
areas be distinguished from profitable
ones and (2) which measures can be derived
from this?
Example of a profitability map
Figure 1 illustrates the distribution of
profitability in a sample portfolio based
on a current sample tariff. On the basis
of the contract inception year, the duration
of premium payments is varied
against the period of insurance. In
a portfolio of 300,000 policies with
a current p. a. premium volume of
EUR 600 m, an increase of more than
EUR 15 m on the basis of the «present
value of future profits» can be seen.
SolutionS 39

Case Study
2
Approach
Solution Providers offers the analysis of
the tariff landscape and portfolio structure
including key data and units and
determination of the level of quality.
A project such as this provides the
following central results:
� Identification of profitable parts of
portfolios, separation from nonprofitable
areas. The qualitative and
quantitative minimum size for each
part is defined and future market
trends, customer behaviour and regulatory
changes considered.
3
Phase 1
Project
organization
Portfolio distribution according to premium payment duration
40 SolutionS
Phase 2
Portfolio
clustering
Approach for measuring portfolio profitability
First year
Phase 3
Selection
Phase 4
Analysis and
evaluation
� Definition of appropriate measures for
individual parts. This includes opportunities
for the development and expansion
of shares, stabilization of portfolio
parts in their life-cycle and the treatment
of those which are not profitable.
Know-how
There is currently a strong focus on profitability
simulation in connection with
asset liability modelling in insurance
companies. Regular examination of the
underlying model assumptions generally
finds its way into further product de-
Phase 5
Measures
velopment. However, measures to optimize
portfolios are often not carried out
in great detail. It is not unusual that this
results in losses of millions of euros in
portfolio profitability for insurance companies
every year. Depending on portfolio
structure, measures to optimize portfolio
profitability can be:
� Insights for future product development
without impacting the current
portfolio
� Managing distribution to give preferential
treatment to a certain tariff
constellation
PPD class Value 1995 1999 2003 2007 2011 Total
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
QTY 4,522 8,709 18,207 9,116 4,461 45,015 15.0%
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
QTY 12,061 23,227 48,512 24,302 11,901 120,003 40.0%
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
QTY 9,036 17,404 36,387 18,242 8,930 89,999 30.0%
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
QTY 4,522 8,709 18,207 9,116 4,461 45,015 15.0%
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
Overall: QTY 30,141 58,049 121,313 60,776 29,753 300,032
10.0% 19.3% 40.4% 20.3% 9.9%
PPD Premium payment duration CD Contract duration PVFP Present value of future profits QTY Quantity
Phase 6
Observation
Source: Solution Providers
Source: Solution Providers

� Modifying the portfolio for defined
contract and tariff constellations such as
� Offers to waiver payment
exemptions
� Offers for contractual
modification
� Consolidation of products
and tariffs
� Adaptation for step-by-step adjustment
of profit participation
� Removal of parts of portfolios in rare
cases
In addition to tools and analysis techniques,
Solution Providers, with its
P/S/Pmethod, has the right methods and
necessary experience to gain the «correct»
insights from the complexity of
the dimensions and multilayer criteria.
For example, measures begin with simple
consideration of premium waiver
versus surrender, with and without cancellation
discount, and reach to complex
portfolio activities such as portfolio reshuffling
or reductions.
Solution Providers supports insurance
companies with the relevant procedural,
methodological, technical and actuarial
know-how, with a focus on the following
services in particular:
� Methods for clustering portfolios
� Specification of portfolio deductions
� Preparation of results
� P/S/Pmethod for the analysis and evaluation
of profitability of portfolios (parts)
� Compilation of a catalogue of measures
to support the implementation
in the portfolio, for example portfolio
reshuffling and consolidation, staggering
profit participation, product
adjustment and distribution management
indicators
� Methodological skills in initialization
and implementation
Cross methods with the P/S/Pmethod
show the potential of the current portfolio
and provide optimization approaches:
method and experience rapidly distinguish
the relevant scope and «correct»
insights from the complexity of dimensions
and the multilayer criteria.
Contract duration vs. premium
payment duration
Figure 2 shows Solution Providers’ simulation
portfolio: the portfolio exhibits overall
positive profitability. However, contracts
with very short premium payment durations
are unprofitable. Based on the abovementioned
sample portfolio, this means
a loss in profitability of ca EUR 18.5 m.
Possible drivers for the profitability of
a portfolio are contracts with premium
Case Study
payment durations (PPD), which are (almost)
identical to the contract duration (CD).
If just 30% of contracts with a PPD = 5
could reach a different state using suitable
measures (e. g. adjustment of the PPD,
change of tariff etc.), the result would be
EUR 5.5 m in additional earnings. A reinforcement
of contracts with positive earnings
should be carried out in parallel
through portfolio preservation measures.
Advantages
With a consistent development of knowhow
in handling profitability-optimizing
measures and with the combined
application of the SPEEDmethod® und
P/S/Pmethod as reference models for
project methodology, process and profit
optimization, Solution Providers contributes
the necessary knowledge and
experience to be able to
� support insurance companies to increase
existing profitability and thus
to control the application of these
financial resources
� create portfolio segment profitability
maps and support decisions for
measures
� accompany the gradual stabilization
in profitable and strategic areas
� undertake the integration of analyses
into regular business processes
A large portion of corporate risk for insurance companies can be found in the
area of portfolio profitability. Portfolio structures and their profitability have
become a significant aspect of risk management. As regards added value, there
is still considerable room for manoeuvre.
The composition of life insurance portfolios often develops differently to the forecast
made at product introduction. Thus many portfolios positions do not contribute
to the overall result as expected. It is not unusual for millions of euros in portfolio
profitability to be lost every year.
Solution Providers supports insurance companies in increasing existing profitability.
Analysis of the tariff landscape and portfolio structure is carried out and measures
to optimize portfolio profitability in the various portfolio positions and in future
product design are determined.
SolutionS 41

Case Study
CRM implementation at Swiss Re
Efficient focus on the customer
As the second largest reinsurance company
worldwide, Swiss Re has grown continuously
over the last decades and, after
initial turbulence, has weathered the financial
crisis well. This is mainly thanks
to its loyal clientele, which has been built
up and tended over the past 149 years. Reinsurance
has always been a «people business».
However, the structured, intense
customer relationship information coupled
with an overall customer view is not
to be taken for granted in a business
which is quickly dominated by technical
discussions. Years ago Swiss Re increased
the organization’s alignment with its customers
by creating the organizational
unit «Client Markets» and thus set-up
a more customer-oriented distribution
structure. This decision proved to be
trend-setting and the changing market
confirms the structure. The aim of the
recent decision for a CRM implementation
was to replace the regionally developed
solutions with a central platform on
the one hand, and on the other to design
the distribution support more efficiently
and effectively to be able to meet the
requirements of the market climate.
42 SolutionS
Penetration potential
for classic CRM tools
Whereas retail distribution customer
relationship management (CRM) is
familiar with managing the customer
relationship as a campaign tool and as
a process optimization tool and the typically
sold item is a clearly defined product
or service with a small margin,
which is multiplied by volume, suppliers
in corporate business have other value
propositions. These are much stronger
and long-term customer relationships,
an international customer view and, last
but not least, much larger individual
volumes. It is not so much individuals
but entire sales teams, which shape the
customer relationship. Although in a
leading reinsurance company such as
Swiss Re the «products» are pre-structured,
they are still negotiated, parameterized
and aligned with customer
needs in a direct exchange with customers,
competitors and brokers. Here
the concept of a product goes much further
and thus also the CRM focus: it includes
not only the customer-specific
advisory services provided beforehand,
«The fundamental challenge of any CRM
implementation is always the creation of
a ‹CRM culture›, which is independent
of existing structures and cultures.»
but also the integrated processing of an
often multi-decade contract which goes
much well beyond the last noted claim.
Amongst others, Swiss Re pursued the
following goals with the implementation
on the new platform:
1. Reduction of costs through consolidation
of various island solutions to
an integrated platform
2. Increase in sales efficiency through
improved information preparation
3. Increase in organizational efficiency
through «ease of use» of distribution
applications
4. Increase in transparency around the
customer and customer relationship
within the company
The sequence of these goals is not random.
To generate and be able to use good
data a solid master data basis must be
available. Thus central questions such as
architecture, integration and core processes
in master data management were
treated as priorities. Due to complex regulations
directing business in various
countries and territories, partner administration
requirements arose which
directly influenced the project approach.
Thus the project had to secure the correctness,
an aspect of fundamental legal
importance, of the partner master data
by integrating an automated central data
control point in the workflow.
In a second step in addition to pure partner
data administration, and based on
a successfully converted data landscape,
the essential aspects of customer relationship
management were on the agenda:
Strategic account planning, customer
training tracking, sales appointments,
customer invitations, contract meeting
notes and, of course, a sales pipeline. To
meet the high standards of data quality,
in addition to manual data administration
an automated source of data validation
was applied. For example, the internal
employee entry and exit process, or
the change of task or responsibility within
the company was used from the HR
system. This creates an additional, efficient
increase in data quality.

With the step-by-step approach applied,
initial successes could be seen early on.
These could be built on actively, thus serving
to support the acceptance of the new
platform and gradually developing transparency
in the customer relationship.
Change management
as a central project function
The fundamental challenge of any CRM
implementation is always the creation of
a «CRM culture», which is independent
of existing structures and cultures. The
introduction of a global CRM solution is
without doubt closely linked to the creation
of «transparency» and therefore
also to the fear of measurability and control
via severe, rigid management-byobjective
specifications. Relationship
managers are also hesitant to share contacts,
as these represent their sales success.
What would be their motivation to
manage contacts in a concern-wide system
and even allow detailed insight into
activities with customers? Such side effects
of laying information open can lead
to unwanted rivalry or at least discount,
if they threaten to undermine the culture
of the company.
Swiss Re with its B2B business has built
up a global open sales culture over the
years from which the project team can
profit directly as regards transparency.
Additionally, the project was able to show
early on that it followed a generally beneficial
goal: «offering the customer better
service». Consistent support from
corporate management is also essential
for a successful CRM implementation,
amongst other things with clear, guiding
communication for the project and its
Case Study
«To deepen the customer relationship with
a solid information status is essential for
corporate management and thus one of the
main starting points for CRM.»
impact. As simple as these aspects appear,
they are of critical importance to
the success of the project, regardless of
the phase it is in. In this respect Swiss Re
can proudly claim to have successfully
made the first steps from a need-
to-know to a need-to-protect culture.
Consequent alignment
with the customer
Deepening the customer relationship with
a solid information status is essential for
corporate management and thus one of
the main starting points for CRM at Swiss
Re. «Information status» in the context of
CRM tools not only implies financial figures
but also denotes «structured data»
used, for example, to illustrate customer
interaction and help to maintain crossteam
and global customer relationships.
Information, such as the organization of
customer events, which previously had to
be deposited in various formats in various
places, can now be realized centrally and
be evaluated in numerous ways. Thus advantages
are not only generated on a corporate
management level but also for the
departments themselves.
System landscape questions dominate
Linking existing systems is a significant
challenge, not only from a technical
point of view. CRM is the central
portal of partner data administration.
Swiss Re took the unique step of underpinning
the distribution of partner data as
well as other reference and metadata with
an MDM strategy: the MDM (Master
Data Management) acts as distributor, as
the centre of a network, in which central
data is distributed in a controlled and
standardized way. This posed one of the
challenges, which Swiss Re successfully
mastered: systems can be linked gradually.
Quo vadis? The road ahead
The subject of CRM is not yet closed for
Swiss Re but rather the pillars have been
built on which any further development
can be supported. With the successful implementation
strategy, a powerful system
has been put in place with reserves, which
have been far from exhausted. CRM is
finding its way slowly and step-by-step and
is mixing with the long-established company,
enabling it to achieve its central goal:
to focus its activities on its customers.
With the implementation of a CRM solution, Swiss Re has driven home a further
pillar on which to support its long-term strategy. Although Swiss Re moves exclusively
within classic corporate business, the project has shown that many success factors
of CRM implementation, such as intensive change management and integration,
are valid as much for retail as B2B business. This is because reinsurance companies
such as Swiss Re already have a strong customer focus and maintain very long-term
customer relationships.
SolutionS 43

info@mailsp.com
www.solutionproviders.com
Solution Providers Schweiz AG
Management Consulting
Neugutstrasse 89
CH-8600 Dübendorf/Zürich
Phone +41 44 802 2000
Solution Providers Deutschland GmbH
Management Consulting
Arndtstrasse 23
D-22085 Hamburg
Phone +49 40 226 229 560
Solution Providers Österreich GmbH
Management Consulting
Schottengasse 3
A-1010 Wien
Phone +43 1 533 84 04
Solution Providers Singapore Pte. Ltd.
Management Consulting
67 A Boat Quay
Singapore 049855
Phone +65 6229 5770