Financial advisors will need to provide more transparency for clients and develop more long-term client relationships rather than focus on immediate increases in assets under management, according to a new survey of wealth managers and banking investment executives by PricewaterhouseCoopers.
The changes in the industry will apply equally to independent advisors, broker-dealers and banking investment advisors, says C. Steven Crosby, head of PricewaterhouseCoopers' private banking and wealth management practice.
Changes will include more focus on client services and a need for financial advisors to have global experience, he says. The higher up the wealth pyramid advisors move, the more these changes will be apparent, he says.
A major shift will occur as more firms consolidate because smaller firms will not be able to adapt to these changes or afford the increased costs of compliance and reporting that the new transparency will require, Crosby says. New information technology will be needed to keep clients informed and smaller firms may not be nimble enough to make the change, he says.
Transparency will also mean clients can find out exactly where their money is invested at any given point in time, he notes.
As an aside, Crosby says, "Hedge funds and alternatives will return as trusted investments, but for the purpose of diversification rather than high yield."
Fee and compensation structures will change to reward financial advisors for developing loyal client relationships and for handling increasing numbers of estate issues and intergenerational transfers of wealth, rather than selling the hottest product of the month.
"A differentiator for a successful firm will be to have financial advisors who are trusted counselors for wealth management," Crosby says.