Wealth Management Leadership
Now consider the leadership team itself. While developing the questions used to evaluate each wealth management element, several professional colleagues and industry leaders admitted they were not familiar enough with all of the elements to know the most important questions to ask, let alone how to answer on behalf of their firms. One trust company ceo asked for the list as an educational exercise for his board. So there is a second level in wealth management optimization - that of preparing senior leadership for better strategic thinking, investment prioritization, selection of remediation efforts and the regular review of ongoing operations. Take a deep breath before entering this arena — known in many orgs as The Black Hole of Decisionmaking, the Innovators Graveyard or the “DNZ” (the Do-Nothing Zone).
Wealth management is a full contact sport, so client and advisor preferences are usually pretty well known and have historically kept most offerings crisp and responsive – but vigilance is critical. In the current state, a combination of record markets and record profits have created a complacency in wealth management. Ironically, it is that record success that helps draw competition — and disruption. As Jeff Bezos famously quipped, “Your margin is my opportunity”. Amazon’s entry into financial services is more a question of “how” and “when” than just “if”. So get ready.. Savvy leaders invest regularly in innovation and financial services/wealth management has enough friction points and dysfunctional protocols to engage ambitious entrepreneurs for years to come. Some client service elements are so awkward they actually inspire entrepreneurs to act purely out of self-interest! Leadership of wealth management today MUST be looking forward, testing the client experience, talking to clients, increasing the ease of doing business for advisors, streamlining the workflow for client service professionals. Those efforts will reveal the opportunities for improvement, which then can be individually researched and proposed for investment. Senior leadership has to be both engaged and knowledgeable to be effective. Long gone are the days when the boss could remain aloof from the inner workings of systems so closely tied to the quality of the client experience. I remember from years ago the words of a Wall Street veteran ceo, who boasted about not being online or using email, “My kids do that”, he said. The board sacked him and his company ended up spending hundreds of millions in technology catch-up costs.
Walk the Talk
The most successful business leaders of the Digital Age — the Second Industrial Era — are intense personalities who are relentless advocates for the customer experience. Jobs, Bezos, Musk, Howard Schwartz of Starbucks all immersed themselves in the smallest details. No fear of “getting too deep in the weeds” here. Ned Johnson of Fidelity Investments exuded a constant and intense curiosity that led to countless innovations that to him just seemed to make sense. Client centricity is a mindset, a passion — and what my former marketing colleague and Fidelity CMO, David Dintenfass describes as, “an act of extreme humility”. In the world of the consumer champion, there is no fear of being wrong - there is only fear of not understanding the clients.
Financial services overall and wealth management in particular have been spoiled by success - and overconfidence is common. In any business, it requires vision, energy and persistence to reduce current results and invest in the future. Add to that operational reality the demographic perspective that many financial industry leaders are on the cusp of their own retirements and lack both the drive and the financial incentive to rock their boats. It is interesting to see how many younger employees pick up on this inertia and depart the industry as well as the company. Many financial companies report losing more than half of their entry level recruits within two years of hire. There is nothing more lame to the ears of an ambitious and idealistic young person than hearing from a senior leader that the company will be “transforming the industry” even though that same employee cannot imagine opening an account. By the way, does YOUR firm track the ages of the children of top clients and proactively engage with them to help convert their UGMA and UTMA accounts into relationships of their own?
The Tenth Element
So important is the engagement of management, it has a second level of participation in the TOS. Each of the nine functional elements of course reflects “management”, but we now add a separate perspective on the function and contribution of senior leadership. Are leaders knowledgeable, engaged? How do they champion the client experience? How do they inspire client centricity among their associates? Who is on the board — and why? How is the board engaged with the business? How often does senior leadership meet with clients? Client facing professionals? How is leadership updated about innovation? How does the firm engage with technology vendors and service providers?
Successful innovative management teams make it possible to be objective when scoring the Tenth Element. Robust “best practices” exhibit both a structure and frequency that drive innovation and constantly improving client-advisor experience.
Wealth Management Optimization - Total Optimization Score