Asset managers and financial advisors are failing to identify the demand for financial wellness services because they are slow to adopt the concept, a consultant says.
Nalika Nanayakkara, EY head of wealth and asset management consulting, said EY research reveals that 53% of client are willing to pay extra for personalized advice and service, and for the next generation or millennials, it reaches 80%. Nearly two-thirds (60%) of clients would prefer to consolidate assets with one trusted advisor if they provided a full spectrum of solutions such as planning, banking products and specialized services like tax and legal, she said
“What our clients are saying is if you are able to really understand my holistic needs and advise and service me in a very personal way, I am willing to consolidate assets with you and I am willing to pay extra,” said Nanayakkara, who spoke this week at the Next Chapter Rockin’ Retirement virtual conference sponsored by Financial Advisor, the Money Management Institute and the Execution Project. She participated on a panel titled, "Financial Wellness: A Slogan in Search of a Business Plan?"
Nanayakkara said one of the things clients want is to simplify their financial life.Younger clients also want all their financials in one place. On average, they have 15 financial services relationships, which include robo advisors, multiple credit cards and multiple micro-investors. And they often talk about financial literacy, not in the form of a 20-page white paper but maybe a TikTok video, she said.
“It’s really understanding and talking to these folks at their level, and if you can create that relationship, they are willing to pay more for personalized advising service,” she said.
Frank McAleer, senior vice president for wealth planning and global wealth solutions at Raymond James, also a panelist, said he is encouraged to hear clients are willing to pay more for service. He noted that he was at a Raymond James conference and one of the topics was fee compression. “It kind of drives me crazy because we are the only industry in the world that continues to do more for our clients, and we don’t charge more,” he said.
McAleer said while he believes the industry has not clearly defined financial wellness, he said advisors must start talking about it unless they risk losing clients. “We say to our advisors all the time, ‘if you are just managing money and we know you have done a good job over the years and we know you are doing a good job, but that’s not going to be enough.’”
At the end of the day, he said, holistic planning and financial planning are evaluated by net new assets and production. He said they can tell which advisors are paying attention to those items and which ones are utilizing different resources offered by Raymond James, such as its trust company, based upon the complexity of the financial plans they put together. “I don’t want to make this all about production, but to me, that is the ultimate sign of more trust being gained, if you are doing more business with clients and utilizing resources at the same time,” he said.
Nanayakkara noted that EY’s most recent data showed that trust in financial services is increasing. She said advisors ranked at the top, higher than doctors, when clients were asked with whom they are willing to share your personal data. And that bodes well for the financial wellness conversation, she added.
“As you think of this holistic ecosystem and all the different parts that play in that system, financial advisors are really the trusted go-to source for multidimensional things,” she said. “The advisor has the opportunity to be sort of the center of the client’s life, to be that quarterback. The question is, will our industry step up to it?”