Surveys
Wealth Manager Objectivity Is Key, But How To Demonstrate It?
Wealth managers struggle to demonstrate objectivity in the way they deliver service, even though this is key to the client experience, and could benefit from using more client-centric techniques such as in-depth risk profiling, a new report by SEI in collaboration with Scorpio Partnership shows.
The report, Objectivity and the Client Experience, finds objectivity, or putting the clients’ needs first, to be more important than the investment management process or delivery of products.
On the definition of objectivity, both clients and wealth managers favored “understanding the situation and needs” of clients. Other answers included having an unbiased investment process and delivering appropriate solutions.
According to SEI, a client-centric approach is often the difference between whether a client has a good or bad experience with a wealth manager, but wealth managers have not found a way of successfully demonstrating this to clients. The responses given on how to demonstrate this were mostly on the topic of services and product selection, which do not relate to investors’ definition of objectivity, the firm said.
Meanwhile, three North American firms mentioned in-depth investor risk profiling as a strategy to delivering objectivity, despite the fact this is “commonly acknowledged as essential” to ensure investors’ needs are understood, SEI continued.
“Although independence has been an industry buzzword for some time now, objectivity is emerging as an equally important topic. Whereas independence is more closely related to ownership and conflicts of interest, objectivity is associated with advice, which is at the heart of what wealth managers provide to their clients,” said Jim Morris, senior vice president for SEI’s Global Wealth Services.
Another recent SEI poll addressed the issue of independence, and revealed a disconnect between the opinions of wealth professionals and their clients: most investors thought finding an independent wealth manager was a pipedream, while 93 per cent of US wealth management providers viewed achieving independence as a “business-critical issue”.
As with the issue of objectivity, the research on independence highlighted the lack of a standard definition. Among wealth managers, 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.
The findings are the result of interviews comparing the views of 250 private clients and wealth management providers, including banks, independent trust companies, and investment advisors. The report is the third in a series of five on the client-wealth manager relationship.