On Wednesday, November 13th, the Financial Communications Society hosted its final 2019 luncheon event in Chicago, which took place at the Union League Club. In attendance were financial marketing and communications professionals, media agencies, and investment and wealth management executives — including an esteemed keynote speaker from the CFA Institute.
With a focus on findings from The Next Generation of Trust: A Global Survey on the State of Investor Trust by the CFA Institute, several factors influencing decisions of high-net-worth investors (across multiple demographic criteria) were explored. These factors are prescient in helping financial advisors identify how they should tailor their approach to better market themselves.
In addition to the survey results, the event featured a panel of three financial and financial communications experts who unpacked some of the ideas from the survey in the context of their own experience as well as provided insight into the threats and opportunities they see for advisors moving forward.
Here are 5 key takeaways that I extracted from this excellent event:
Why Clients Switch Wealth Managers
Because discussions around money inspire intimate conversations around very personal goals, the relationship between high-net-worth clients and their wealth managers isn’t one that is easily abandoned; 68% of high-net-worth clients (across all age groups) will stay with their financial advisor or wealth manager. However, the clients who do seek to switch advisors are largely influenced by referrals from family and friends to make the switch.
Top Reasons for Clients to Switch Managers:
- Private wealth manager retires
- Unhappy with the relationship
- High fees
The Hardest Part About Choosing A Wealth Manager
Though accumulating assets is a concern for high-net-worth individuals considering an advisor at all, the CFA Institute’s survey found that the issue that prevents potential clients from making a move to select a manager is being unsure of the right questions to ask in order to properly vet managers.
The CFA Institute has addressed this issue with their website: The Right Question: https://www.the-right-question.org/en/.
Wealth Managers MUST Cater to Women, Minorities and the Next Generation
With 60% of women leaving their financial advisors after a divorce or when their spouse passes away, it is important to recognize that if a wife’s relationship to an advisor is secondary or detached to her spouse’s relationship to that wealth manager, chances are good that she’ll uproot to seek a trusted advisor that she can connect with elsewhere. Women tend to respond to more “coach-like” holistic relationships with managers over a “transactional” approach that is often taken by male clients. Advisors must adapt their approach to cater to the nuances that women — from executive women, to divorced women, to widowed women — seek in a long-term wealth advisor relationship.
Firms MUST Invest in Diverse, Multi-Generational Managers – It’s a Selling Point
Clients tend to gravitate towards advisors that look like them and whose life experiences they can identify with. For example, an Asian-American Millennial female client may identify less with a Caucasian Baby Boomer male advisor than with an advisor that more closely reflects her own generational values and gender role. It is incumbent upon wealth management firms to properly tap into the talent pool for hiring women and younger advisors that can connect to the experiences of women, minorities, and the next generation of clients. And it is this expansive approach to building a team that makes a firm progressive in the eyes of potential clients.
As part of a differentiated experience for these client segments, advisors must demonstrate a winning blend of financial expertise, personal connection, and adeptness at leveraging digital platforms and technology to support performance, to show a client how they’re being moved from point A to point B, and to provide transparency for the client at any point. After all, younger generations have come to expect technology to supplement different components of their life, providing visibility and transparency — and the advisory and management of their assets is no exception.
Wealth Managers MUST Be “Extra” – Especially Over Robo Advisors
In the future, millions in client assets could bypass individual private wealth advisors and land at firms like Schwab or Fidelity unless advisors can define their clear and valuable differentiation to clients. While empathy is a characteristic critical to a successful client/manager relationship, the private wealth manager needs to cultivate their own brand to build trust in the context of how they will partner with the client to achieve results …but will also need to demonstrate how they will proactively go above and beyond in a concierge-like capacity for a high-net-worth client. After all, it is the individual advisor that the client is truly buying into, not necessarily the firm. Personal advisor brand trumps corporate firm brand.
The CFA Institute study found that 26% of clients overall would opt for a robo advisor over a human one. However, the human advisor advantage is that a pure robo advisor solution lacks the ability to fully serve a client with complex financial needs tied to human circumstances. Life is nuanced and human challenges take time to solve. High-net-worth-clients who are overwhelmed with the complexities of their financial situation and life goals are best served with a human advisor who can help at every step of the way, applying their expertise (and technology) in a meaningful way that cultivates both results and trust, and even advising beyond financial situations in a genuine manner. This is the “above and beyond” that will help differentiate human advisors from robo advisors.
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