Wealth management clients are not shy about making their needs known. But sometimes, all it takes is looking at your own revenue trends to see the impact of clients’ changing preference. Take a look at recent results from an Aite Group survey of several hundred financial advisors:

Advice is a fast-growing revenue stream.

I will wager that if you look at your firm’s revenues today, you will likely see a similar shift from traditional product revenues to consulting and advice revenues. Note that over the past six years, consulting and advice fees have more than doubled.

As clients prefer to receive advice over products, decoupling advice from the product becomes necessary in order to support a strategic planning discussion with clients that can be monetized. Decoupling advice helps enable firms to charge directly for the true value-generating component of the relationship—the advice.  Accenture research shows a growing number of clients want wealth advice based on life goals. When clients talk life goals and your advisors talk products—you do them a disservice. This issue deserves your firm’s attention not only because clients prefer it but also because more rigorous fiduciary responsibility and formalized suitability standards are beginning to demand it. And shifting the discussion from a simple product recommendation to a more strategic approach fits clients’ needs better in an industry where the trust factor is increasingly important.

The firms that get this right will take it seriously enough to appoint a dedicated executive advice lead to oversee things like:

  • Strategy for providing advice
  • Segmentation of emerging investor groups
  • Levels of technology
  • Pricing in a tiered, pay-as-you-go model

This executive lead’s first task would be to take client-facing functions out of product silos and place them independently from multiple products and investment strategies to help clients get the holistic advice they want. That means your firm must provide a user-friendly, single view across all channels, geographies and asset specialties. Merrill Lynch has done this with its One platform.[1] It consolidated five legacy systems into one, enabling advisors to provide managed account services at the relationship level, rather than the product level. United Capital’s FinLife platform for RIAs focuses on advice for employment and spending behavior, rather than investment portfolios.[2] By separating the financial planning layer from the broader technology platform, United Capital’s FinLife platform for RIAs is able to generate incremental revenue strictly from advice.

Building an advice-centered culture that moves advisors from favored products to advice strategy types could help deliver the client experience our research shows clients are asking for now. When decoupling advice from the sale of products, you should also look at your advisor compensation model to align it to service or advice provided versus products.

The human side of the wealth management model is becoming increasingly important, even if more clients adopt robo as part of the mix. If your firm is brainstorming on how to get the mix right, I’d love to talk with you about it. As always, please email me, Kendra Thompson, if you have insights or questions you would like to share.

 

[1] http://www.wealthmanagement.com/wirehouse/merrills-new-advisor-platform-sees-early-success
[2] http://www.thinkadvisor.com/2016/04/20/united-capital-opens-its-tech-tool-chest-to-indie?slreturn=1513359420

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