The U.S. wealth management business has evolved substantially over the past five years, becoming more technically sophisticated, client focused, and productive, says Investment Industry Association of Canada (IIAC) president and CEO, Ian Russell, in is latest letter to the industry.
Russell reports that the U.S. wealth business has changed in two major ways: by creating “a new kind of dialogue with clients”, and to pursue new business strategies. “The new approach to dialogue increasingly involves a focus on more frequent and deeper conversations with clients,” he says. Advisors are more attentive to client goals and less focused on benchmark-beating performance; they utilize more straightforward language; and, leverage technology to create more useful financial planning.
“Technology has transformed the financial planning exercise,” he says. “At one time it was an obligatory formal procedure, yielding little client benefit. The plan was completed, paid for, put on a shelf and often ignored. New planning technology, adapted by many firms in the industry, has brought the plan to life, and made it a dynamic and evolving planning tool, rather than a static, point-in-time document.”
This improved dialogue, and broader service offerings, are helping deepen client relationships, he suggests. And, firms are investing more in training to ensure that advisors can meet all sorts of financial needs.
At the same time, firms are being challenged to retain high-quality advisors, many of whom have defected from large wirehouse firms to small brokerage houses and independent shops over the past few years. “With competition for qualified experienced advisors intense, an important element in the optimal retention strategy, aside from providing the requisite products and services and technology, is effective communication on firm strategy and direction between senior management and the advisor,” he notes.
For new advisors, firms are training them and then adding them to existing teams, recognizing that building a book from scratch is no longer a viable strategy. “Few new advisors can meet the required minimum client asset thresholds to compensate for allocated fixed and variable costs,” he says. So firms are focusing more on succession planning with their sales forces, in order to retain assets from retiring advisors.
“The investments made in restructuring the wealth management business in the United States, at both large and small broker-dealers, has been extensive,” Russell says. “The focus has been on training and continuing education of advisors, new management practices, and new products and services. Firms have also taken advantage of advances in technology that have facilitated the delivery of financial advice and products.” This, in turn, has helped rebuild investor trust and confidence, and positioned advisors to help their clients benefit from the recent turnaround in U.S. equity markets.