With premium wealth managers and investment boutiques constantly getting undercut by low-cost robo-advisors and self-directed investment platforms, it’s becoming more important to communicate value. New fee and performance reporting required under CRM2 is likely to help clients understand what they pay and what they get. But are dollar-denominated disclosures and reported rates of return enough?
In a speech at the CFA Institute’s annual wealth management conference, John Bowman, the institute’s managing director of the Americas, called for a transformation in the way advisors define their value proposition. “[T]he one characteristic that should define us is our motivation to deliver the most value to our clients,” he said. “How investors are defining that value is rapidly changing today.”
To aid this transformation, he announced a study titled The Value of Premium Wealth Management, which was conducted by CFA Institute and Scorpio partnership. Offering perspectives from wealth professionals and wealthy individuals, the study includes the following findings:
- Communication, integrity, and financial acumen win over investors – Financial advisors and wealthy (mass-affluent and high-net-worth) individuals agree that these are essential for the client-advisor relationship to succeed.
- Twenty-five percent of wealthy individuals are not using advisers – Among 4,000 wealthy individuals, 25% are not working with advisors, citing high costs and a belief that such service providers do not act in their best interests.
- Holistic wealth managers take the lead – Beyond performance, investors showed interest in managers who can handle or advise on matters such as family enterprise management, philanthropic strategy, and specialized investment topics such as hedge funds and sustainable investing.
- Investors are asking for proactive investment advice and risk management – Clients value advisors who can survey the whole landscape for opportunities and threats that could affect their clients’ ability to create wealth.
- Prepare for the march of millennials – Seventy per cent of millennials see the strength and breadth of a wealth manager’s digital offerings as core to their value, while 89% consider integration of robo-advisors as important.
“The future adviser is a champion of client value,” Bowman said. “We must be open to change, and have the courage to pivot and innovate in order to enhance client relationships.”
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