Executives from RIAs, broker-dealers, family offices and banks believe challenges facing the industry will force them to better serve clients’ emotional needs, according to a new study.
More than 80% of wealth management leaders surveyed at Fidelity Clearing & Custody Solutions annual client forum agreed with the statement that their firms need to “deliver value in a different way than we do today.” Tension around fees, the fiduciary rule and new technologies have roiled the industry, according to Fidelity.
The country’s second-largest custodian joined its competitors and others in warning advisors of the disruption. Schwab Advisor Services recently counseled advisors that they would need to offer a wider set of services. Executives, meanwhile, acknowledge they need to upend their firm’s priorities, according to Fidelity’s study.
“The pressure and the proof is what has come together to make firms take action and take this seriously,” Matt Chisholm, Fidelity Clearing’s head of practice management and consulting, said earlier this week. Chisholm took over his post in March, replacing new RIA segment head David Canter.
Fidelity Clearing produced what it calls a “new advice value stack” derived from an October report by Bain & Co. on what matters the most to clients. The pyramid model starts with managing money and achieving financial goals at the bottom, with peace of mind and fulfillment at the top.
“It’s an absolutely great opportunity. The key is doing it in a scalable way that results in reliable outcomes but still connects with the clients’ emotional ramps,” Fidelity Clearing President Sanjiv Mirchandani told executives at the forum, which the company held in Orlando early last month.
Firms focus most on money management and goals today, with scant attention paid to emotional values, according to the survey of 118 executives right after Mirchandani’s presentation. Advisors should shift to emphasizing clients’ ability to care for loved ones and leaving a legacy, Chisholm says.
“It’s the idea of creating enough space for an investor not only to create peace of mind but to take it a step further,” he says.
Other key elements of value at the top of the model include free time, living free of worry and finding one’s purpose in life.
Clients’ growing awareness around pricing and fiduciary standards, along with digital tools and other factors, require firms to aim on such targets, Chisholm says. Succession planning, automation, data integration and other means will help firms drive shifts in their pitches and models, he notes.
“It is challenging,” Chisholm says. “I don’t think firms can just naturally jump in at the top and decide tomorrow that fulfillment is at the top of the value stack.”
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