Now is the Time to Reinvent Wealth Management

By Jill Jacques

With ongoing disruption and economic pressures from COVID-19, wealth management divisions and advisers have no shortage of challenges to confront—from increased need for virtual practices and cybersecurity to post-election volatility and client demands for more customized service.

There is no doubt the pandemic has caused wealth practices to reevaluate what they’re doing, how they’re doing it, and what needs to change—regardless of when a post-COVID new normal arrives. The wealth management divisions that will experience rapid growth will be ones that have a clear strategy for growth, operational efficiencies and risk mitigation—grounded in a reimagined vision and purpose.

A good question to ask is: How well has your bank articulated a compelling value proposition in the marketplace, redefined products and services and redesigned ways of doing business? Now is the time to reinvent wealth management across the industry.

To accelerate growth, banks should capitalize on key areas that can drive business, like omnichannel availability, behavioral finance, diversity and inclusion, intergenerational wealth, ESG investing and the list goes on. The innovative practices below can help banks differentiate their wealth management brands to attract clients.

Boost your multichannel and omnichannel approach

The wealth management industry no longer competes between traditional (face-to-face, adviser-driven) and digital channels (robo-advice). Clients of all generations, wealth, age, gender and professions are demanding more choice and want both traditional and digital options. According to research from the Aite Group, 53 percent of global wealth management firms reported a major increase in client demand for digital capabilities compared to a year ago.

In the next three to four years, we estimate 80 percent of all wealth management interactions will be digital. In-person meetings will be almost entirely focused on building relationships and discussing emotional aspects of wealth management such as setting goals and prioritizing plans. Clients want face-to-face discussions for advisors’ most valued services—listening and coaching—not data gathering, number crunching and signing paperwork.

For example, one top investment and banking firm’s decade-long digital journey has successfully decreased its average number of households in a book by two-thirds, while growing year-over-year assets by double-digits. This impressive jump in efficiencies is due to its embrace of digital and technology capabilities all along the client and adviser journey. On the front-end, advisers and clients now work together in streamlined digital tools to share data and co-create actions as part of a holistic plan.

New ways of working for advisers are now rolled out in interactive, digital training methods. Data has been consolidated and streamlined to form a true picture of a client across the bank’s multiple lines of business and solutions. Digital and technology have created a more integrated experience for both clients and advisers.

Tune in with effective ‘behavioral finance’

Behavioral finance used to be considered the “softer side” of wealth management, but no longer. Learning how to actively listen to clients and coach them toward making sound financial decisions is quickly becoming the only way to uniquely distinguish an adviser’s value proposition. Leveraging behavioral finance contributes hard numbers. There’s nothing soft about a top five wealth management firm that drove a 24 percent increase in assets under management within one year of integrating behavioral finance lenses and engagement techniques into their advisers’ practices.

What does this look and sound like, and how can the right training get you there? For starters, it looks like first meetings with prospects learning about themselves: what has shaped their outlook and behaviors with money; what makes them feel successful financially; how are financial decisions made in their household; what goals need to be financed. It looks like annual review meetings that check on what client values are driving their financial decisions. It sounds like conversations between advisers and clients to learn about their lives, goals, preferred ways of making decisions—their hopes, dreams and fears. In addition, advisers need to present advice to clients in the way they want to receive it—some clients want to co-create their plan while others only want executive summaries and recommendations.

If your firm’s advisers are having these types of interactions and conversations, you will know how to coach clients through volatilities from COVID-19, trade wars, market swings and more. And your practice management system will run more efficiently.

If you need to better integrate behavioral finance, start by defining your organization’s ideal client beyond assets and age. Do this by conducting quantitative and qualitative research on your ideal client’s preferred ways to engage and how they think about and behave with money. The next step is to match and analyze your current books of business and practice management systems. With this information you can make sure you are not inadvertently attracting a different behavioral profile of client than you find ideal.

Accelerate diversity and inclusion

Another area ripe for enhancement is diversity and inclusion, which has been talked about for years in wealth management. Programs are already in place to hire more diverse advisers and leaders with inclusion initiatives to help individuals entering the industry feel like they belong and want to stay and grow.

Consider that at the beginning of this year, 96 percent of women shared or had primary responsibility for financial decisions in U.S. households and controlled 51 percent of personal wealth in the U.S. ($22 trillion). But only 15-20 percent of financial advisers are women. Black and Latino representation in wealth management is even less. According to the CFP Board of Directors, only four percent of certified planners are Black or Latino, yet those populations hold about 8.6 percent of assets contributing to household net worth. These numbers highlight the need to reimagine and reinvest in advancing diversity and inclusion across the wealth management industry.

Given the growth in small business ownership, intergenerational wealth transfer and digital enablement among once-ignored populations, it would be wise for wealth management practices to improve diversity and inclusion efforts to better serve these clients. To map out a path for change, firms can conduct a robust examination of recruiting efforts, company culture and practices, driven by top leadership.

The first step is to identify conscious and unconscious bias in processes. Then, infusing inclusive behaviors and expectations throughout the organization’s actions can become an intentional goal for growth. It’s the right thing to do—and will attract business as people see more diverse representation in advisers and leadership teams.

The wealth management industry is at a crossroads: Enterprises that realize it’s critical to reinvent ways to enhance the client experience will prosper now and in the future. Conversely, those that stay the same may become outdated and lose business. The pandemic and its effects on society and ways of working have not fundamentally changed clients’ needs. But the situation underscores the urgency of speeding up innovations already in motion—or adding new ones—to ramp up growth.

Focusing on improving these important elements—harnessing a multichannel/omnichannel approach, incorporating behavioral finance, and accelerating diversity and inclusion—will champion your bank’s purpose and vision to benefit your clients, your advisers and the world.

Jill Jacques is the global financial services lead at North Highland Consulting.