5 things today's investors want from a wealth professional

Love being a journalist though I do, it was just my luck to join the profession at the worst possible time. The squeeze on advertising revenues caused by increased competition, the huge oversupply of media graduates and, most of all, the growth of the internet and ubiquitous “free” content, all conspired to produce a perfect storm. I certainly don’t envy my colleagues in the traditional media now, managing ever larger workloads on increasingly small budgets.

For the last few years, I’ve worked mainly in the financial advice and wealth management sector, helping firms to attract, retain and educate clients through content marketing and social media. Interestingly, the parallels between the wealth profession today and journalism circa 1990 are pretty uncanny. The old advice model, in short, is doomed. The firms that survive and prosper will be those that adapt to changing customer needs and develop a completely new value proposition.

Thankfully help is at hand. New business models are emerging and there are some excellent consultancies — here in the UK, in North America, Australasia and elsewhere — helping firms to navigate the changing commercial landscape.

And now, ta-dah, we also have a blueprint to for advisers looking to future-proof their business in the form of a report called The Value of Premium Wealth Management, jointly produced by CFA Institute and Scorpio Partnership.

Researchers reached out to 1,370 private wealth advisers across the United States and Canada, as well as 4,000 individuals with an average wealth of $2 million, to determine what the next phase of the profession’s development will look like. What they really wanted to identify was the difference in perceptions between advisers and clients, and, in particular, what it is that clients (and proactive clients) want that the profession is currently not providing.

In a nutshell, they found five key things that advice and wealth management firms need to be doing to remain relevant and attractive to a new generation of investors.

1.Develop these three attributes

Asked which attributes were most essential for a wealth professional to have, respondents singled out three — communication, integrity and financial acumen. In other words, technical expertise is still very important, but on its own it’s not enough. Emotional intelligence and the ability to inspire trust are just as crucial if you want to be a successful adviser.

2. Define and promote your value proposition

Of the 4,000 wealthy individuals surveyed, 25% do not currently use an adviser. What’s more, of those 75% who do seek advice, one in four said their primary source of advice was their retail bank rather than a specialist wealth manager. On the one hand, this is a damning indictment of the wealth profession; but it’s also an enormous opportunity. In North America alone, there are millions of wealthy people who would benefit from good advice. By conveying exactly what their value proposition is, and making a persuasive case for it, advisers can claim a healthy share of all that untapped business.

3. Take a holistic approach

Having consistently said as much for years, I was particularly gratified to see the CFA-Scorpio report conclude that the investment piece is only a small part of what wealth professionals should be doing for their clients. Advisers who claim to be able to beat the market consistently are fooling themselves, their clients or both. Of course, developing a suitable investment strategy is crucial, but it’s in helping the client to stick the plan, as well as in specialist areas such as family enterprise management, estate planning and philanthropic strategy, that an advisory firm really adds value.

4. Focus on client experience

Connected to that last point is the need to think in terms of client experience rather than just performance. The report reinforces the fact that, increasingly, investors are less concerned with how their portfolio has done relative to specific benchmarks, than they are with having peace of mind. They want to know that, whatever happens to the economy and the markets, they’re going to be able to carry on leading the life they want to lead, and won’t have to worry about running out of money before they die.

5. Embrace new technology

As someone who earns a living helping advisers to build their digital presence, the fifth and final finding of the CFA-Scorpio report came as no surprise. 70% of millennials (i.e. those under the age of 35) surveyed said they believe the core value of a wealth manager is the strength and breadth of their digital offerings. Robo-advice specifically has polarized opinion among advisers, but if you ask younger investors, they overwhelmingly like it. 89% of Millennial respondents said they wanted traditional advisers to incorporate at least an element of robo technology.

There will, doubtless, be firms that feel threatened by the changes sweeping through the wealth profession. Others will bury their heads in the sand — just as many editors and media executives refused to accept throughout the 1990s the revolution taking place in the journalism industry. But change happened anyway, just as it’s happening today in the wealth profession and will continue to do so. Rather than fight or ignore that change, it surely makes sense to embrace it — or, at the very least, adapt to it.

Remember, young investors are the mass affluent and high-net-worth individuals of the future. Ignore what they’re saying today and you might just find you don’t have a business tomorrow.