Surveys
Majority Of Investors Think Wealth Manager Independence Is A Hope Not Reality - SEI Poll
Only a third of investors believe it is possible to find a truly independent wealth manager, according to new poll by SEI and Scorpio Partnership, while 72 per cent believe independence is either important or somewhat important.
According to the research, most investors believe that independence in a wealth industry relationship is “more a hope than an expectation”, SEI said.
The findings are part of Independence: The Right Standard, the second in a series of research papers focusing on the relationship between wealth managers and investors.
The latest results reveal a disconnect between the opinions of wealth professionals and their clients: while most investors think finding an independent wealth manager is a pipedream, 93 per cent of US wealth management providers viewed achieving independence as a “business-critical issue”.
This divergence of opinion likely stems from the lack of a standard definition of independence, SEI said. Among wealth managers nine distinct aspects to independence emerged, with the importance they put on the various aspects differing greatly. In terms of demonstrating independence to clients, “no product pushing” came out as the most important message to communicate, followed by open architecture and business controls.
However, when clients were asked about the key facets to independence, they wanted their wealth managers to build this into core strategy, and also cited delivering open architecture and a client-centric advisory process as top priorities. Perhaps surprisingly, “no product pushing” was not a high-ranking answer from investors.
The question of independence has become more prominent since a number of scandals emerged during the financial crisis, and particularly the “one bank” model, whereby private banking and investment banking divisions overlap, has been criticized by many. Others however argue that the businesses can complement each other, as long as the right processes and incentives are in place.
In the SEI research, investors said they realized fees and commission on product selection were an impediment to independence, but among both investors and wealth managers moving to a fee-based advisory model was not a popular solution to this.
Instead, shareholding structures, reporting lines, and internal fee-sharing agreements were given as possible options for wealth managers to achieve independence.
"In our current investing environment, clients are placing increased emphasis on the concept of the 'trusted advisor', with independence taking a central role. It's encouraging that both sides place great value on independence, but there is a clear difference in opinion on the best course of action and the probability of wealth managers attaining full independence," said Jim Morris, senior vice president for SEI's Global Wealth Services.