Everyone seems to be courting the big hitters missing out on the comfortable client.
Don Drummond recently spoke with WP about his business career in the public and private sectors as well as his thoughts on various subjects important to our readers.
When it comes to the state of wealth management the economist is quite blunt:
“I think the investment management business puts too much emphasis on chasing clients with $600,000-plus of investable assets. If investment advisors checked the data on Canadians’ wealth they would realize they are chasing a very small number of people. Somebody should be figuring out a profitable model for better serving investors with $200,000-$600,000 in assets to invest.”
While there might not be an obvious candidate at the moment that can step into the breach, robo-advisors appear poised to make a move. In early January Questrade
CEO Edward Kholodenko weighed in on the nascent industry stating: “An online wealth management service like Portfolio IQ [Questrade’s proprietary service] is filling a gap – what I believe is a very large gap – and offering an opportunity to people who don’t see the advisor model as a viable option for them.”
Now, maybe Drummond isn’t specifically thinking about robo-advisors but rather the advisor community in general, but it sure seems like Kholodenko and the rest of the firms competing in the automated/online advisor arena are thinking along the same lines.
Backing up Drummond’s assertion is a 2014 study by Dalbar, a financial services research firm with offices in Canada and the U.S., that studied 42 mass affluent Newcomers (those in the country for less than two years) interacting with 7 Canadian banks. The study defines mass affluent as those with at least $250,000 in investable assets.
While the study centered on Newcomers, some of the findings apply to the entire Canadian mass affluent market. For instance, Dalbar found, “…that there is a considerable gap between the tailored offer and the actual delivery. The vision is there, but the execution falls short… Service has to catch up to the promotional value and resources put into these campaigns.”
The study suggests banks to some extent are missing the boat when it comes to Newcomers and the mass affluent market. The same can be said for all mass affluents.
Advisors have an opportunity to grab some of this for themselves. Unfortunately, as Drummond suggests, they’re heading down the wrong road.