Wealth Management Today: Client relationships take center stage

Mature man and woman working together

The wealth management industry in North America is undergoing a significant transformation. New options such as robo-advisors, increased scrutiny of fees, and evolving compliance requirements are among the many drivers of this change. Financial advisors and their firms need to manage greater complexity in an increasingly fast-paced environment while containing operational costs. But, with change comes opportunity for firms able to quickly adapt to new realities. The successful advisors will deliver exceptional value to their existing clients and attract prospects, while also increasing operational efficiency. Ultimately, the value of advisor-client relationships will determine market value of the entire firm.

During the 1990’s Bull Market, investors were pleased to have above-average returns on their investments and gave little thought to advisory fees. However, in volatile markets, financial advisors are challenged to demonstrate value beyond investment performance. Client service has become a more important factor when selecting an advisor, as investors realize they must look beyond performance or portfolio strategies. At the same time, investors are trying to understand the value they receive from their advisor compared to today’s low cost, automated investment management solutions.

Moreover, the wealth management business has been caught in a revenue/cost squeeze. Revenue growth can longer be assured by asset growth from performance alone. Operating costs have become a larger concern. With average returns lower and volatility higher, investors are scrutinizing management fees and the services they receive against low cost alternatives, since pricing now has a greater relative impact on net performance.

In addition to the revenue and operating cost pressures, growing regulatory requirements mean advisors have less time for clients as they manage even greater administrative burdens. Meanwhile, clients have access to more market and security information that is free or very low cost. Access to proprietary information through the advisor is no longer seen as a key differentiator by the investor.

For certain clients, personalized high-touch services such as financial planning, enhanced portfolio reporting, and general responsiveness to client requests are viewed as a high-value point of differentiation. Investors with more complex needs will migrate to advisors and firms that can provide the services and responsiveness they expect. In today’s climate, now more than ever, exceptional service helps build client loyalty, differentiate firms, and generate referrals.

To learn more about how to best navigate the changing landscape, download our latest whitepaper: Keeping clients front and center: Essential components of the integrated advisor desktop.

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Posted in Wealth Management and Financial Planning

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