Wealth management swept the advisory industry about five years ago like Hurricane Olga swept through the unsuspecting Caribbean in mid-December. It was the hottest buzzword, cropping up in everything from casual conversations to business plans, and almost every financial services firm changed their name or their promotional materials in some way to incorporate the term. In fact, most of the major independent, regional and wirehouse firms feature it prominently on their Web sites, as do their more successful practitioners. Less true with private banks, although, arguably, it is their business model, service offering and deep client relationships that many firms consider the benchmark.
But it takes more than a name change to effect change, and despite the prolific use of the phrase reality is somewhat different. In a recent study we conducted with more than 6,100 professional advisors we discovered that just 28.3% of practitioners actually operate as wealth managers. The good news is that it's the second most used business model in the industry (after generalist, the model of nearly half of all advisors) but still far less pervasive than marketplace positioning would have you believe.
The intention made perfect sense-given the increase in personal wealth and its complexities-and still does. But the transition hasn't happened. Why? Our work with advisors reveals that the three biggest factors behind a failed attempt at wealth management are (1) insufficient knowledge of the client to deliver on a broader mandate, (2) limited experience with the sophisticated strategies that round out the product and service platform, and (3) poor-to-disastrous implementation results.
In short, many advisors are trying to adopt a new business model prematurely and without the needed preparation-actions that are capable of causing irreparable damage to key client relationships. All of this can, of course, be remedied with focus, information, practice and a willingness to collaborate with experts and specialists that can augment the core capabilities of the transitioning advisor. Straightforward but time-consuming efforts that may pave the way for many more advisors to finally, successfully make the transition...