1. Security – The most critical element in wealth management and in financial services overall. Clients expect the security of their assets, information and communications from the threats of identity theft, asset theft and data manipulation. Increasingly important is the proactivity of the wealth manager to help clients protect themselves from new threats to identity and assets entering through social media.
    • Current cybersecurity solution(s)
      • Two factor authentication
    • Client records for sharing in the planning process
      • Client “vault” for documents and important information
      • Document sharing capability for electronic management and updates
    • Security offerings for clients including credit surveillance

 

  1. The Risks of an Aging Investor Population – How will you manage the implications of an aging clientele? There is both a business opportunity presented by the demographic shift and the need for significant de-risking of the wealth management firm. Opportunity is well documented with forecasts of intergenerational wealth transfer. Less energy has been devoted to the risks of aging, including financial exploitation, diminished capacity to make financial decisions, the shift from a self-directed client to a level of dependency, how to engage with clients and families when diminished capacity is suspected. In addition to internal business risk issues, companies and advisors will need to comply with federal regulations governing the relationship with clients as well as state consumer protection laws relative to financial services, elder financial abuse, discrimination and fraud.
    • Assessment of aging client competency
      • Family tools for assessment
      • Client self-evaluation
    • Remediation process for diminished capacity clients
      • Role of trusted contact and procedures, POA protocols
      • Remediation of clients with and without available family members
      • Asset and account transfers due to diminished capacity
    • Re-registration procedures for deceased clients
    • Inter-generational wealth management strategy and procedures
      • Estate planning

 

  1. Advisor Hiring, Training and Retention – For all the focus on digital tools and capabilities, the foundation for all successful wealth managers is a commitment to hiring, training and retaining trusted professionals – whether as managers of eco-system elements, or as financial advisors and client service providers. Financial advisors have a median age older than 55 and the industry is challenged to bring young people into advisor roles. Process innovators are attracted to other industries that appear more interesting. Altogether, leadership in wealth management will ultimately be taken by companies able to create an environment worthy of the industry’s best people. And the best people may have children, aging parents and other responsibilities. Arguably, these employees have the highest “EQ” – an important need for high touch wealth management.
    • Recruiting philosophy, strategy and process
      • Management
      • Advisors
      • Client service and other professional roles
    • Talent pool sourcing and maintenance

 

Evaluation Methodology

Each of the nine elements is evaluated based on a blend of adoption and proficiency, scores 0-10. Adoption is a critical concept because simply having a capability does not mean the capability is known to the clients or that it is offered proactively by the advisors. A good example is estate planning, which many advisors say they do but most of the clients say otherwise. Gresham Company practice management surveys of top advisors have revealed that many top advisors believe they offer critical services – like estate planning – but do so for only a portion of their clientele.  With respect to proficiency, how effective is the service provided? For example, asset allocation advice is not optimal if it does not solve for tax efficiency using asset location. So there is both a qualitative and quantitative perspective to be joined in each score for each of the nine elements of wealth management. These combinations seek to reflect the offering’s total effectiveness - both the quality and pervasiveness of the solutions for clients. (See Appendix for The Top Twenty Client Analysis)

The second key benefit of the Client Experience approach to valuation is prioritization of investment in the practice. Until your firm scores a 90 (for the nine elements overall), there is potential for improvement. Selecting where and how much to invest among the nine elements is a very important consideration for every practice. It’s not all about hard dollar costs - the decision of what to do and when is very much dependent on individual firms and their personnel, time horizon and ambition. To quote one advisory firm ceo, “there are aspects we could incorporate now and others to make an objective” – an elegant understatement of the challenges inherent in change.  

Investments in the remediation of each element are made easier when there is more precision about the current state. One of the great organizational challenges of a wealth management eco-system is the number of distinct elements. There is complexity inherent within each element — complicating the process of investment prioritization. Given the complexity of each element, there are likely many different organizational “owners” — especially in bigger firms - making investment in each element a competition for resources. Across nine wealth management elements, how does an organization decide which element is most deserving of investment? Very few firms will have the managerial bandwidth and financial resources to invest across the spectrum of nine elements, setting up an inevitable need for leadership to set priorities from among competing, dissimilar options.

This leadership challenge highlights another aspect of the wealth management eco-system — it requires an owner. It is easier to optimize a successful wealth management client/advisor experience at small scale than to achieve high levels of customization and personalization across a large enterprise with many advisors. Most clients know and appreciate the trade-offs, and firm size certainly plays a role when high value clients choose their primary advisors. But there are many advantages of size, and larger firms can compete well (in the current environment) when their resources and scale are applied against big ticket items like cyber security packages, sophisticated portfolio management tools, inter-generational planning expertise, and — increasingly — cutting edge digital client engagement systems. Smaller firms can typically win with higher touch — accessibility of key professionals, personal service and continuity of personnel.

Technology is proving to be the equalizer in the “size” competition, led by better CRMs with embedded artificial intelligence to better manage client data, discern opportunities and alert the humans to specific action steps — e.g. “next best call”. As these systems develop, they support customer service “journeys” that enable clients to self-actualize their basic service needs without human contact. Money movement was once a tremendous drag on service professionals and has become mostly client self-directed at big firms and on large scale service platforms. More opportunities for service innovation include account opening, onboarding, account supervision including monitoring for suspicious activity and diminished capacity, as well as re-registrations associated with deceased clients. But who in the org is deciding what to do and where to invest? Big firms have “technology” experts but do they know and truly understand the requirements of advisors interacting with clients? And if we ask “the business” – the client-facing team, will anyone there take the time to help translate client engagement needs into a punch list for the CRM techworks?

To help in this process, we first evaluate each wealth management element utilizing questions based on the advisor/client experience. This process is part objective, part subjective, testing first if a solution is offered by the practice, then how that solution compares with client expectations for simplicity and effectiveness. Finally, how broadly is the solution applied across the firm’s advisors - providing a sense of its ease of use and relative importance in client engagement. Again, a mix of qual and quant measures combined to render a score of overall effectiveness.

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