Marin Community Foundation
7 Client Insights
Trends

7 Ways Wealth Management Client Attitudes Are Shifting

Originally published by Trust Advisor [link] on February 09, 2016

The landscape of how wealth is managed is changing. If you need any evidence, just look at the emergence in recent years of “robo-advisors” like Betterment, Personal Capital, and Wealthfront. The growth of these new entrants has gotten the attention of incumbent players like Charles Schwab, which executed a smart fast follow strategy with its “Intelligent Portfolios” offering.

Why are these new wealth management offers resonating with investors? It’s because client attitudes towards how they invest and manage their wealth are shifting. These new companies and services are effectively responding to that change and, in some cases, driving it.

When online equity trading emerged, making Wall Street more accessible to retail clients, the industry categorized investors into three types: “self-directed,” “validators,” and “delegators.” These three personas were defined as people who do it themselves, do it themselves but want to validate their ideas with a professional, and those who hand the job over to someone else, respectively.

To some extent, these three investor types still hold true today. Yet, when it comes to wealth management, many investors now expect a client experience that is both high-tech and high-touch. For new models to resonate in the marketplace, providers need to address seven changing attitudes of wealth management clients.

Let me address these seven themes, and highlight ways providers of wealth management products and services are, or should be responding to the shifting investor attitudes.

1. Clients want more control and involvement

Wealth management clients want to feel like they are in control from the beginning, and involved in the process through to the end. This includes the prospecting, onboarding, planning, advice delivery, investing, and monitoring stages of the wealth management life cycle. By moving parts of the client experience online, just as banks did for checking and savings accounts, wealth managers can address this need.

2. Clients want to be knowledgeable

Clients want a way to research and learn about how their wealth will be managed on their own schedule first. There is a desire to access an online knowledge base before talking live with a professional. Clients don’t want to be lectured or sold on investment strategies. They want the opportunity to gain understanding themselves so they can ask intelligent questions. They want the ability to evaluate strategies in the context of their specific situation with their actual financial data. And they want to do this through an intuitive and rich digital experience.

3. Clients want to collaborate with a professional

Once clients feel like they are in control, involved, and knowledgeable, they want to collaborate with a professional. Traditional advice models put the advisor front and center, supported by subject matter experts, technology and tools in the background. Newer models that have started to resonate provide a rich digital experience out front, supported by a personal advisor when needed. This model is concerning to some traditional wealth advisors for fear of being disintermediated by or subordinated to a technology experience. And for good reason.

4. Clients have become more financial services savvy

The rapid growth of ecommerce has fundamentally changed people’s understanding of the products and services they are buying – whether it is an airline ticket, a new cell phone, or car insurance. As ecommerce is applied to wealth management, many clients now have a better understanding of portfolio management theory and how advice on a diversified portfolio is created and delivered. Their advisor may still be perceived as a smart and effective relationship manger, but clients understand these advisors are using tools, third-party investment products, and centralized advice from within their firms.

5. Clients want to pay for value

The increased insight clients have of the wealth management process also leads to a better understanding of where the real value is, and what it is they are willing to pay for it. Good personalized advice, planning, portfolio construction, and monitoring can be worth a lot. However, clients are concerned about how much of the total fees they pay on assets under management are allocated to the relationship with a professional, and for the delivery of what essentially is a pre-packaged solution.

6. Clients are digitally proficient

Digital proficiency crosses all client demographic segments. Users who are accustomed to an integrated online experience, across multiple technology platforms and applications – like on their smart phone, tablet, and laptop – expect to have the same experience with their wealth management provider. They desire to connect with advisors the same way they interact with friends, family, and other business relationships. I’m not suggesting they want to be Facebook friends with their advisor. However, one can imagine a rich client experience that includes online communication tools like live chat and social media.

 7. Clients want to validate and verify advice

Trust but verify. Clients want to be able to verify and validate the advice they’re being given and compare their performance with benchmarks, peers, accountants, and other professionals. This is where transparency is key. Providing clients with easy access to investment performance data and relevant market information will give clients peace of mind that their advisor has nothing to hide.

Changing attitudes are, and will continue to drive disruption in wealth management, and financial services in general. Smart innovators are building new companies based upon these shifts, and established players should recognize the need to adjust and deliver their services in a different way in response to them.

It’s an exciting time to provide differentiating client experiences and it will be interesting to see which companies can pull away from the pack as investors vote with their hard earned money.