A More Personalized Approach to Private Wealth
Like the finance industry as a whole, the private wealth sector is in the midst of a period of profound transition.
The challenges confronting it are legion. There are the philosophical dilemmas — the active versus passive debate, for example. And then there are the structural issues, particularly the two facets of the sector’s generational divide: Private wealth managers are aging as are their clients. How each of these ranks will be replenished remains an ongoing question.
A major component of these challenges can be distilled to technology, whether in the form of increased competition from robo-advisers or how managers can more effectively harness social media to engage with clients. The larger question is, Will digitally connected, tech-savvy millennials — and “plugged in” prospective clients of all ages — come to doubt the ultimate utility of hiring a living, breathing private wealth manager?
Mindful of these dilemmas, my colleague Will Ortel has repeatedly encouraged advisers to consider their value add — and their fees — to figure out ways to better connect with their clients, whether through technology or by offering them more personalized service than they would receive either from a robo-adviser or even a “traditional” wealth manager.
Recognizing these issues, we queried CFA Institute Financial NewsBrief readers about what they thought was the most glaring change the sector needed to make to acclimate to the philosophical, generational, and technological shifts roiling the industry.
The consensus that developed was illuminating.
Of the 433 poll participants, a significant plurality (41%) cited a greater emphasis on goals-based investing as the most important change that needed to be made, while 32% said that a stronger emphasis on risk management was the most necessary shift. An additional 10% declared that improved performance reporting was the industry’s most glaring need. Meanwhile, 16% cited the need to foster better client-interaction skills, and a mere 1% identified improved social media presence to be the most pressing issue.
Poll: What changes are most necessary for the private wealth industry?
Fully 83% of respondents see the challenge as largely about how to best fulfill the specific needs of the client. The challenge is not principally technological, social, or even structural in nature. Rather, the message that emerged was that the sector needs a restored emphasis on investing basics as well as a more personalized approach to client service.
So, what can private wealth managers take from these results? Instead of developing a one-size-fits-all rubric or concentrating on honing their social savvy, whether interpersonally or via social media, private wealth managers might be better served by focusing on their metrics, their risk mitigation, and, especially, their development of individualized strategies designed for clients’ particular situations, which take into account what clients ultimately want to achieve with their wealth.
In the end, it’s a fairly simple and basic message: Focus on the client and investing fundamentals.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.