More than half of wealth managers believe the industry is undergoing a dramatic change, according to a new survey by SEI, and a further third concede the industry is at least somewhat moving in a customer-centric direction.
For one-third of respondents, that means bolstering holistic planning at the expense of product sales, while another 27% of respondents say solidifying recurring revenue, i.e. fee-based accounts, is a top priority.
“The economic downturn and financial crisis have exerted tremendous pressure on the industry,” says Al Chiaradonna, senior vice president of SEI's Private Banks segment. “There has been a significant increase in regulatory scrutiny and compliance pressures, leaving firms no choice but to increase resources to address this burden.”
At the same time, clients have become increasingly cautious, more closely scrutinizing their own investment activities and the wealth managers who oversee them.
This scrutiny extends to how wealth managers get paid. Historically, wealth management has been very transaction-focused. Much like service providers that charge clients 25 cents every time they make a photocopy, this type of approach can sometimes be perceived by the client as nickel and diming by the firm, he says.
“A truly client-centric approach is a more sustainable business model for wealth managers,” Chiaradonna says. “A client-focused model versus the more typical account-centric model creates a true partnership between the wealth manager and the client. The result is that the client is far more likely to seek out advice from the wealth manager. Over time, this builds a far greater bond of trust and results in a better business relationship.”
