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Wealth Managers, Take Note: Trendy Products And Services Are No Substitute For Holistic Advice

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It’s no secret that many of the major capital markets firms are focused on growing their wealth management businesses to capture its steady and lucrative fees, with the value of wealth assets under management reaching all-time highs in 2020.

Despite the industry’s healthy deposits, it is in danger of losing its moorings. In recent years, many firms have drifted away from their core purpose, which is to provide exceptional investment advice to individuals. Faced with the popularity of new-fangled investments such as cryptocurrencies, or trying to roll out tech-based robo-advisers or hybrid advice offerings, several wealth managers seem to have prioritized product innovation and digital services over advice. 

Don’t get me wrong, product innovation and enhanced services are important to winning and retaining clients, but they’re no substitute for advice, that special blend of perspective and engagement that directly addresses a client’s financial goals. The world’s wealth advisers have talked about being client-led for years. Now they should start walking the walk: It’s time for the industry to put world-class advice front and center of its post-pandemic strategy. There are unique segments of underserved investors seeking personalized advice across a broad set of needs, giving wealth managers an opportunity to expand their advice offerings beyond investments.

There’s some good news on this front, because the formula for advice remains the same as it ever was: a combination of perspective and engagement, which is supercharged by the client relationship. That’s why the world’s best wealth advisers should spend hundreds of hours cultivating their connections; when it comes to advice, the quality of client relationships is the key differentiator.

In fairness, that’s exactly what wealth managers used to do. It is not misty-eyed nostalgia to recall a time when advisers played golf with their clients, asked about their children and spouse, and knew their estate plans word for word. There was no ulterior motive in this regard; regular in-person interaction with clients was, and still is, the only way to properly understand their hopes, expectations and desires, and hence improve their financial outcomes. 

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That is why truly client-centric advisers, who possess a deep knowledge of their clients and their financial goals, could have an edge over peers who have spent the last few years beefing up their product offerings, or pushing clients towards shiny new mobile apps while not prioritizing advice at the same time.

The world’s millions of advice-hungry investors aren’t just a figment of the imagination. In fact, more than one in three wealth management clients in North America say a hyper-personalized experience would make them entrust more assets with their current advisor, according to Accenture research. Almost four in ten (39%) wanted to hear from their advisor more proactively and nearly one-third (29%) are willing to take more meetings.

Some other statistics should give firms pause for thought. Around six in ten respondents to Accenture’s ACN survey expect to inherit a significant amount of money or an estate from their parents, with more than one-quarter (26%) planning to select a new advisor to oversee all of their assets upon inheritance.

Advisers likely will need to overhaul the way they deliver advice to millennials and younger generations. Millennials generally want an integrated, personalized and ‘always on’ experience. Forward-looking firms will use a range of communications channels such as email, web and social media; they will also harness technology such as artificial intelligence (AI) and advanced analytics to identify and engage prospects and drive ‘Next Best Action’ strategies for existing clients. But firms need to tread cautiously on technology, ensuring that their software enhances advice, rather than replaces it. They’ll also need to check that any new technology directly addresses the client’s needs, rather than their own bottom line. 

And for millennials, in particular, the need for good advice has never been higher as previous research has shown that this generation holds upwards of 60% of its assets in cash. One suspects those figures are even higher this year in North America when accounting for stimulus checks provided during the pandemic. Such a heavy tilt towards cash means many of these investors are unlikely to ever reach their financial goals.

Wealth management strategies will vary according to the size, expertise and clientele of firms. But one thing is certain: Product innovation, digital services and new technology should all be secondary issues for the world’s wealth managers. Providing clients with personalized and holistic advice that covers all aspects of their financial portfolios, including tax, risk protection, and banking, and is shared contextually at the right point in time, should be paramount.