Personal Finance

Value Of Premium Wealth Management: Survey Shows What Investors Really Want

Even after the traditional balm of strong market performance, investors and advisors alike are a bit unsettled these days.

Welcome to the age of engagement.  Even after the traditional balm of strong market performance, investors and advisors alike are a bit unsettled these days. Whether it is the prospect of tougher markets ahead or a growing sense that wealth management fees aren’t well aligned with value delivered, or the potential for Big Tech to crash what has been a clubby industry, change seems certain.

Investment performance will be a necessary yet insufficient condition for satisfied clients and vibrant advisory businesses. But add in the pace of technological innovation and disruption, and many advisors are scrambling to retool and reorient their businesses midflight.

Engaging clients with broader relevance, proactive skills, and a modern hassle-free user experience have replaced beating the index as the markers of successful advisor enterprises.

While the shift to an advisor value proposition that focuses on the full spectrum of clients’ financial lives might seem intuitive, CFA Institute research conducted in late 2016 with Scorpio Partnership confirms it. We surveyed over 1,300 wealth advisors and 4,000 wealthy individuals in the US and Canada (with a median net worth of $2 million) about a variety of dimensions of a wealth management offering.

As expected, advisors and investors often agreed about what was important, including many of the legacy services such as portfolio management and asset allocation decisions. But where advisors and client perspectives diverged, we found the challenges – and opportunities – for thoughtful advisors to adapt their practices to the future.

For example, when we asked advisors and investors about the factors that drive loyalty to a wealth manager, roughly a third of the investors surveyed cited sustainable investment techniques and solutions as a driving factor, but just 8% of the CFA charterholder practitioners surveyed cited sustainable investing.

Similarly, when we asked investors and practitioners about important expertise required for private client advisers, investors reported real estate investing, hedge funds, private equity/venture capital, management of family enterprises, and philanthropic strategy as being important far more often than CFA charterholders did. The practitioners surveyed in our study seem to have a narrower view of their business than what the wealthy individuals surveyed reported as being the dimensions of importance (and, presumably, of value) to them.

The gaps in perceptions between practitioners and wealthy individuals get even more interesting when we asked both groups to consider the importance of various dimensions of a wealth management offering over the coming five years. While there is good alignment between advisors and clients on a number of dimensions (including the importance of financial plan creation, tax planning, asset allocation, and portfolio management) there are some gaps where CFA charterholders put greater weight on the importance of behavioral finance and inheritance planning.

While every practice is different, advisors should consider if their value proposition fits with what investors are telling us about what is important to them both now and in the future, and how that value is communicated to clients.

In our “The Value of Premium Wealth Management” report, advisors can see graphically the wealth management dimensions that investors report being important both now and in the future.

Our takeaways from this study are that advisors need to reconsider their value to both existing clients and emerging prospects.  Technical knowledge remains important, especially in the face of uncertain market environments.  But our survey respondents indicate that they want a broad wealth management offering, steered by practitioners with the savvy and intellectual curiosity to be proactive in assessing emerging opportunities and bubbling risks.

Even as technological innovation buffs off some of the pain points in client relationships with an improved client experience, personal effectiveness matters more than ever: advisors need to be able to relate their work directly to their clients’ goals, fears and dreams. In the new age of engagement, sustainable connections between practitioner and client will make the difference in an era of challenging markets and new providers to make clear the value that advisors offer their clients.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.