Report Cover

Huh… I Have to Add Value as an Advisor!?

As you may have noticed from my last post, at work we recently launched the World Wealth Report 2015. For those of you not familiar, some context…

  • 19th annual year of publication (my 6th year as Program Manager)
  • First 15 years had Merrill Lynch Global Wealth Management as our partner, and the last four years RBC Wealth Management
  • Built on extensive (and exhausting) research, spanning subject-matter-experts from both firms, the world’s largest survey of HNWIs (over 5000 of them across 23 countries), our wealth manager survey (over 800 individual advisors across 15 countries) and many 1o1 discussions with firm executives across the world
  • Report is THE industry benchmark for understanding how many millionaires there are in the world, their wealth, their investing habits, and their service needs
  • Includes our in-depth ‘spotlight’ section, which tackles each year a key industry issue that is applicable globally (you can see the last few as an image below) WWR History - 19 Years

I wanted to spend some time today giving you an overview of the key findings of the 2015 spotlight – The evolving role of the wealth manager.

The starting point is that while all HNWIs are generally satisfied with their wealth managers, younger HNWIs have a wide range of specific needs and expectations that are not being met. Our research finds that wealth managers are consistently underestimating the needs of younger HNWIs who, compared to older ones, reveal not only higher levels of concern about all aspects of their financial lives, but also exhibit lower levels of satisfaction and a higher propensity to leave firms and wealth managers if their needs are not met. Check out the image below if you don’t believe me!

WWR 2015_Figures 19

Next, we see that firms and wealth managers face a host of industry challenges, including ongoing issues such as regulatory and cost pressures, and more recent threats from new entrants, all of which are driving the evolution of the wealth manager’s role. It will not surprise many of you to know that the longer-standing issues are well-known to firms, however the disruption from new entrants (particularly automated advisory services, or as some know them, “robo-advisors”), presents a significant challenge as well as an opportunity. In particular, the wealth management industry is far behind in adapting to the more emerging digital capabilities demanded by HNWIs, with the “awareness gap” with automated advisors especially frightening, as you can see below.

WWR 2015_Figures 22

So, you may be wondering, how can one compete in such an environment? Wealth managers must continue to reorient their role and value proposition toward delivering goals-based planning and wealth management, and acting as the conduit to a full range of capabilities, both inside and outside of the firm. Certain services, such as investment management, are increasingly becoming commoditized, creating a need for wealth managers to adapt and justify fees and value beyond investments.

WWR 2015_Figures 24

Progress will not occur by accident, so wealth management firms have a major role to play in this transition by setting a clear strategic direction to re-align their model, communicating it to wealth managers, and empowering them by investing in key capabilities and resources. Specifically, firms must take action along four key dimensions:  understanding HNWI needs and industry dynamics, evolving the overall service model, investing in key high-demand (from advisors) capabilities, and engaging and empowering wealth managers.

  • On understanding HNWI needs and industry dynamics… Especially in focusing on data rather than assumptions related to the client base. For example, “common knowledge” says that younger HNWIs only have simple needs and are only interested in utilizing online services to fulfill their wealth management needs. In fact, the financial planning needs and concerns of younger HNWIs are acute, running much deeper than those of older HNWIs, resulting in high demand for professional advice. They are more worried than wealth managers realize about affording retirement (67% stating so vs. 48% as assessed by wealth managers), managing education costs (54% vs. 31% as assessed by wealth managers) and passing down their wealth (50% vs. 40% as assessed by wealth managers), just to name a few examples. Therefore, building solutions that encompass not just digital enablement (which is indeed high-demand among this group) but also deep planning capabilities, will be key to success.
  • On model re-alignment… Pure Automated Advisory Models, to Holistic Goals-Based Financial Planning and Wealth Management Model, or a Hybrid Advice Model. For the majority of firms, the sweet spot is likely to be the hybrid advice model which occupies the spot between automated advice and full financial planning, taking advantage of both technology-driven and traditional advice provided by a wealth manager. The wealth manager makes judgment calls on whether to steer clients toward digital or the firm’s personal relationship-based services. Already, several firms are moving toward variations of this model.
  • On investing in key high-demand capabilities… Among several, the most important stand-out as wealth-planning tools, such as scenario planning and asset allocation, identified by 80.5% of wealth managers, as well as the ability to have access to experts, such as legal, tax, and philanthropy at the firm and through third parties (71.8%). Another key capability demanded by wealth managers is to have hassle-free account opening procedures (71.3%), a development that could see innovative concepts such as e-signatures become more mainstream.
  • On engaging and empowering wealth managers… It is of course vital to be vigilant on change management, training, and hiring strategies to adapt to this more challenging landscape.

So what is the overall conclusion? Like other profitable businesses, wealth management is facing increasing competition from technology-enabled providers offering similar services at lower cost, compounded by regulatory developments.

Facing a crossroad between adapting to technological change or sticking to their traditional ways, firms and advisors have a choice—respond or get left behind. We all remember (maybe?) previous industry leaders such as Kodak and Blockbuster, with their declines well-documented and a result of an unwillingness or inability to change to digital trends.

There is also hope. Disney, for example, has combined ongoing investment in digital technologies and data-driven operational and client experience improvements to remain a leader in the entertainment industry. Indeed, some wealth management firms and wealth managers are aware of the evolution underway, and are beginning to take the first steps of what promises to be a decades-long transformation.

Firms that have not yet embraced the coming wave of change have a limited amount of time—one to two years at most—to begin defining a strategic path that will carry them through the transition. The most successful firms will be the ones that initiate and maintain an open dialogue with wealth managers and solicit input and feedback, while also providing guidance and resources.


Of course this is but a teaser, and I encourage you to check out the more detailed analysis by downloading the report at


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