As a senior executive in the financial services business, I have worked closely with clients and advisors for more than 30 years. The pace of change during this period has been remarkable. The evolution of investment solutions combined with the increased capabilities and efficiency of technology has created a significantly different menu from which clients and advisors can optimize their results.
Investor behavior also is shifting. This is mostly a by-product of a lower interest rate environment, the aging of the Baby Boom generation, and the aftereffects of having survived some exceptionally volatile markets in the last decade. We have cycled through a growth and performance environment to one that is more balanced, wherein investors still seek growth but not at the expense of safety.
It's difficult to create a definitive view of what clients want because all clients are different and have unique goals and objectives. There are, however, some clear and embedded investor behaviors worth noting.
To successfully navigate the future of the Financial Services industry, those companies that structure themselves by putting clients in the center of their strategy and respond to what clients really want will thrive.
Based on our experience, here is a list of the top seven attributes clients want today:
1. Protecting Current Wealth
Investment performance will always matter, but investors are now focused on performance within the context of their relative financial goals. Risk reduction, risk mitigation, and product due diligence strategies are both expected and valued.
2. Value Trumps Cost
Investors measure value through results, service, proficiency and the qualitative aspects of the relationship. If their needs are met, cost is rarely an issue.
3. Consistent Communication
Clients want facts. In a world moving at warp speed, in which investors have access to massive amounts of data, set it and forget it no longer works. The need to make tactical portfolio decisions may or may not be embedded forever, but tactical communication is here to stay. Helping clients navigate is imperative!
4. Customized Solutions
Clients want well thought-out investment strategies that are specifically optimized to their needs. New products should be designed to be flexible and customizable. Advisors need to prepare for a world of global asset allocation, liquid alternatives, and active/passive optimization. In addition, we will be challenged to manage fixed income portfolios more tactically.
5. Broad and Diverse Relationships
Today's investors have to balance multiple challenges, long-term investment strategies, short-term tactical maneuvers, estate planning, long-term care, and a myriad of other complex issues. They prefer a relationship that is supportive of their multiple needs and has the intellectual capacity to guide the process. Financial Advisors should balance their teams by addressing both age and diversity gaps and asset managers should recognize that the future investor is evolving.
6. Transparency and Simplicity
One of the surest ways to develop strong relationships with clients is to recognize that transparency and simplicity are highly valued. We need to make sure clients understand the underpinnings of all investment solutions, the risk/reward trade off and liquidity limitations. As for simplicity, clients want aggregation and consolidation. The ability to see their assets in one place with an integrated aligned strategy is paramount.
7. Trust...Supported by Proficiency
Our business has always been one where trust is critical to long term fully engaged relationships. However, there appears to be an emerging trend where trust is no longer enough. Trust continues to be important to clients, but they have a higher demand that proficiency supports their trust. Said another way, they will discount trust and friendship if they have doubts about proficiency. As an industry, we must continually challenge ourselves to aspire to higher levels of proficiency and expertise.
We will have a better industry and accomplish much more if we focus on the client and deliver results fully aligned with “What Clients Want."
Jim Tracy is director of Consulting Group Wealth Advisory Solutions at Morgan Stanley Wealth Management. This organization includes the Consulting Group, Graystone Consulting, Financial Planning Solutions, the Wealth Planning Centers and the Family Wealth Director Program. The objective of this business is to integrate and link the Wealth Planning and Investment Advisory Solutions for Morgan Stanley.