Asian Banker Research Building a sustainable sales process bases on the seamless integration of back and middle office for improved due diligence and customer profiling

Agenda Sales architecture and current weaknesses Client suitability profiling complemented with middle and back office verifications reinforces existing selling processes Product screening and stress testing and customer due diligence assure customer protection

Building sustainable sales capability requires reconfiguration of the selling process at the front, middle and back office Wealth Management Architecture Client Services Risk Management Back Office Middle Office Frontline Staff & Products Client Risk Profiling Client Interaction Sales Management Front Liners Trust& Legal Unit Business/Product Controller Unit Compliance Unit Lending, Deposits,cards, remittances/ fund transfer & Custodial Services Investment& Insurance Trading Trade Services Accounting& Financial Reporting Business Continuity Testing Straight-Through-Processing Enterprise Resource Planning New generation of Shared Services-”Process Utilities Middle& Back Office Interfaces Multitude of failure points within an organisation – but focus on front line The increasing polarization of the industry into producers and distributors and the use of open product architecture forces the banks into developing superior approaches to client service GATE KEEPING MECHANISMS WORKFLOW * Weak areas in selling process Source: Asian Banker Research

Basic Suitability Data Robust client suitability profiling complemented with middle and back office verifications will reinforce existing selling processes Demographics Financial Situation Income Allocation Risk Capital Investment Experience Product type Length of experience Portfolio Investment Objective & Risk Profile Investor Profile Risk Tolerance Basic Suitability Data Additional Best Practice Criteria Source of funds for investment Fixed payment schedules (e.g. mortgage, insurance etc) Financial obligations / Other intended uses of funds Gearing Strategy / Financed by Credit Investment style (e.g. frequency, proactiveness ) Level of knowledge (expand to include more qualitative assessors) Investment interests Investor profile (expand to include more qualitative assessors) Risk tolerance (expand to include more qualitative assessors) Life stage planning & Aspirations Mapping Specific purpose of investment We believe that rather then develop exhaustive suitability assessment documents, players can improve screening by improving on the quality of questions that are asked Seen documents which are very formally phrased and hardly descriptive enough to understand the full thrust of the question. Often very quantitative in terms of basic demographics Ambitions of clients in making investments and the true investment behaviour can widely differ Take investment objective and risk profiling banks could further elaborate along the lines of specific product lines and the number of years Instead of asking are you experienced and x years of exposure to investment Instead of asking are you moderately aggressive, aggressive or conservative – players could institute real life exposure questions Staff is not able to do qualitative profiling interviews Source: Asian Banker Research

Product Development / Sourcing Building robust sales capabilities must also extend to improving product development and sourcing capabilities Stakeholders Top Management Product Development / Sourcing Best practices include: Develop systematic product screening procedures that incorporate client suitability and prevailing/expected market conditions (and not only financial parameters) Stress-test complex products to understand performance under different market conditions Include specific risk warnings and disclosures in reader-friendly formats Marketing Create consistent and simple propositions for ease of sales staff and customer understanding Develop marketing messages that reflect expectations and needs of targeted segments Collaborate with compliance and legal departments in collateral approval process Sales Staff Conduct risk assessment for each new product recommended / sold Highlight risk warnings to customers during product walk-through and before sale Define an acceptable range of products to develop / source Assess ability of sales staff to comply with internal rules for defined range of products The increasing polarization of the industry into producers and distributors and the use of open product architecture forces the banks into developing superior approaches to client service Develop systematic product screening procedures that incorporate client suitability and prevailing/expected market conditions (and not only financial parameters) Currently, there is hardly a systematic and consistent way to assess and subsequently rate the risk levels attached to financial products Due diligence responsibility of the product screening team should not stop once a product has been approved for distribution In marketing promotional gifts often distract from the key facts and fundamental investment features

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