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GUEST ARTICLE: Quick Tips On Proving Value Of Wealth Advice During Turbulent Times

Peter Aykens, CEB, Financial services research leader , 28 July 2015

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There is no better time, arguably, for wealth management advice to prove its worth to clients - or potential clients - than when markets are turbulent, as they are now, this article argues.

A question that repeatedly comes up is how can the wealth management industry show clients that it adds value and justify its fees? In times of stress, when markets are volatile and there are worries – as there are now about Greece, China or the Middle East – this can perhaps be easier to show because there is heightened need for advice. Wealth managers can point to difficult markets as an opportunity to prove the value of what they do and, hopefully, win clients’ respect and gain new customers. In this article, Peter Aykens, financial services research leader at best practice insight and technology company CEB, examines how firms can prove their worth.

CEB advises more than 10,000 companies around issues of talent, customers, and operations, including 90 per cent of the Fortune 500, nearly 75 per cent of the Dow Jones Asian Titans, and more than 85 per cent of the FTSE 100 constituency of blue-chip companies.

The views expressed by the author aren’t necessarily shared by the editors of this publication but we are pleased to be able to share these ideas and hope readers will respond.

It is no secret that client and advisor relationships are rapidly evolving as savvy customers constantly question whether they are getting the best value, often diversifying the number of advisors they use. At CEB we found that only 38 per cent of high net worth clients used just one financial provider in 2013, compared to 55 per cent in 2011. Meanwhile, the rise of “robo advisors”, such as Nutmeg, means that many potential clients are opting for “do-it-yourself” execution for at least a portion of their portfolios, further eroding the mind and wallet-share of clients’ primary advisors.  

With these pressures facing the traditional wealth management industry, many firms are searching hard for new ways to show their value, boost their client relationships and, with it, their assets under management. 

Economic uncertainty - whether it’s the Greek debt crisis, a looming EU referendum in the UK or the meltdown of China’s stock market - can present a golden opportunity to deepen and consolidate client relationships and prove the value of the service they provide.

Naturally, these kinds of headlines come hand-in-hand with client anxiety. Although a shaky bailout deal for Greece has now finally been reached, images of Greece’s closed banks and empty ATMs have no doubt stirred anxieties among wealth management clients across Europe, many of whom are already feeling negative about their providers, according to our biannual study of consumer financial attitudes. 

However, this uncertainty can open the door for wealth managers to strengthen client relationships, through providing goal-driven advice and tailoring programmes to guide clients through a period of instability. CEB research shows that clients are 36 per cent more likely to remain loyal to a provider that rates well in tailoring and teaching - building trust, and enabling confident decision-making - rather than just ongoing service and investment performance. 

So what are some of things that advisors need to focus on? 

Present the risks in a personalised way
While the Greek drama has had a knock-on effect to European and, at times, global markets, advisors should keep clients focused on their personal, long-term goals. While short-term market volatility can be uncomfortable for clients, knee-jerk changes to asset allocation can have significant and damaging long-term consequences for returns. Advisors can best avoid this outcome by keeping risks in perspective and looking realistically at portfolio exposures to long-tail events. 

Focus on client goals, not market headlines
Client conversations should be centred around holistic advice that tailors discussions to client goals and gives actionable steps on how to achieve them. Firms need to take a step back and reassure clients that despite dramatic headlines in the press, they may not be impacted as seriously as they think. One wealth firm we work with has accomplished this by drastically reducing their client reports from dozens of pages to just five, to reflect only the outcomes directly impacting client goals, as opposed to every possible market scenario. 

Allow clients to see the full picture 
Many firms have enhanced their websites to give clients greater access to all of their own finances, including detailed scorecards that track progress using personalised success metrics, rather than just comparisons to industry benchmarks. Particularly during times of macroeconomic uncertainty, this builds greater confidence among clients about their financial goals and agreed upon long-term plans. One particularly successful European private bank introduced this recently and has since seen a significant uplift in client activity and overall satisfaction. 

Being able to offer this kind of tailored and actionable advice for clients at times of uncertainty is what separates those wealth management firms able to keep their clients’ attention from those struggling to maintain mindshare and over-focusing on asset growth. 

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