Prior to the financial crisis, clients prioritized performance above all else when it came to their wealth managers. Now, according to PwC’s 2011 report “Anticipating a New Age in Wealth Management” released on Tuesday, client service and value is becoming more critical.

The 2011 report, which surveyed 275 institutions from 67 countries, found that the status quo is shifting: New competitors are displacing larger, more established firms and new regulations and client expectations are forcing private banks and wealth managers to change the way they operate. It is those firms and wealth managers who can shift with the changing tide that will be leaders in this new world.

In this post-crisis world, the client is “cautious, smart, less loyal and expects excellent service and clear value,” according to PwC’s report. Firms need greater operational efficiency and effectiveness to survive.

“The DNA of the wealthy client has been transformed by the global financial crisis, the scandals we’ve been through and regulation,” said C. Steven Crosby, PwC Global Private Banking and Wealth Management, Americas, in a recent phone interview. “Clients are less trusting than they used to be. They want transparency and clear value for their money. Standing still is no longer an option and institutions must now quickly adapt or face being left behind.”

The good news is that for those firms that can keep their heads above water, there are many opportunities for growth.

Nonetheless, the survey found that the industry faces pressures in key areas: Clients are now more active in managing their financial affairs and they are paying more attention to reputation, regulatory compliance and risk management. Wealth managers’ average cost-to-income ratio remains high, with 28% of respondents reporting cost-to-income ratios of less than 60%. Only 9% achieved revenue growth of more than 10%. Survey respondents see new competitors on the horizon and over 30% expect significant mergers and acquisitions in the space in the next two years.

“Private clients have traditionally been relatively easy to manage, but the financial crisis and recent scandals have awakened the sleeping giant.  With clients taking a much more active interest, wealth managers now have to work harder to earn their long-term loyalty and trust.  Delivering the clear value that clients want is contingent on understanding and anticipating their changing needs, circumstances and perceptions,” Jeremy Jensen, PwC Global Private Banking and Wealth Management, EMEA leader, in a press release.

Meanwhile, wealth managers are having more trouble keeping money within their firms when the children of their wealthy clients inherit money. Fifty percent of client assets leave the firm on intergenerational wealth transfers, a lost opportunity for many. Survey respondents said referrals from existing clients are still the way they gain most of their new clients. At the same time, only 37% of CEOs believe existing clients would recommend them to new potential clients.

One of the biggest barriers to growth in the industry is a shortage of good talent, which is difficult to find and expensive to train, Crosby said. Forty percent of respondents rated their client relationship managers as average or below in terms of their ability to meet client needs. Eighty-one percent of respondents think their firm’s relationship managers understand their clients’ investment objectives, while only 56% agree that they have a full grasp of clients’ overall financial goals, retirement income planning needs (34 percent) or extended family issues (26 percent).

Increased regulation, and its cost, was the No.1 challenge to business growth, according to the survey. Thirty percent of participants said the regulatory environment will have a significant impact on their operating costs. Reputational risk was seen as the top risk to the organization, ahead of market, credit and operational risk.

The PwC Global Private Banking and Wealth Management Survey was conducted between December 2010 and April 2011. Survey questionnaires were open to members of the private banking and wealth management community, and completed by 275 institutions in 67 countries, including 62% from Europe, 24% from the Americas and 14% from the Asia-Pacific region.