The pace of change in the wealth management industry is accelerating more quickly today than perhaps at any other time in my nearly 40 years in the business. Digital competitors, low- and no-fee investment choices, and the commoditization of investment portfolio construction and monitoring are just a few long-simmering trends.
Of course, the needs and desires of our clients always have and will continue to impact the industry more than any other factors. With so many options across the price, service and advice spectrum, today’s client is very clearly in the driver’s seat. And that’s a good thing. After all, we should wake up every single day focused on how we can best serve our clients.
The questions remain: “How do today’s financial advisers adapt to the ever-evolving industry?” and “What are today’s best practices?”
REFLECTING ON CHANGE
First, let’s recognize that change is nothing new to anyone in the wealth management industry. In fact, it could be said that the only constant is change.
The industry has faced changing regulations, recessions, recoveries, numerous presidential and congressional election cycles, wars and climate disasters. In the 1970s and 1980s, we experienced sky-high inflation, double-digit interest rates and economic stagnation. In the late 1990s and new millennium, we saw the tech bubble burst, the Great Recession and now a global pandemic.
All the while, the wealth management industry needed to adapt in response to these events and evolving client preferences. We saw the rise of the advisory, fee-based revenue model with fewer conflicts than the commission-based, transaction model that had been the industry norm for decades. More recently, we’ve experienced a continued morphing of advice delivery models with the integration of tech-enabled advice delivery as well as more robust regional firms and independents.
In short, we’ve seen it all over the course of the past five decades. However, the one unalterable priority remains the need to answer our clients’ all-important question: “Am I going to be OK?”
WINNING AT WEALTH MANAGEMENT
As we look ahead to the next several decades, advisers will need to continue answering this question. At Janney, here are a few best practices we believe will not only provide an outstanding client experience, but also produce the best business results for advisers.
Serve clients with a diverse team: Clients can be much better served by a team of advisers than a solo adviser. There are simply more hands on deck and the opportunity to bring thought and skill diversity that will benefit clients. Across a team, members can serve as specialists in roles dedicated to client services, investments, financial planning, client acquisition and marketing.
At Janney, the growth rates and success metrics are much better for teams than solo advisers, with teams having 44% higher production and 1.6 times higher net new assets on a per-adviser basis. Notably, teams with diverse makeups in terms of gender, age and ethnicity have the best success metrics of all. We believe creating diverse teams ultimately opens more opportunities for both the client and the adviser.
Run a fee-based, fiduciary-advisory model: A fee-based relationship creates a virtuous cycle for advisers and their clients, removing the inherent conflict of interest that commission-based approaches can pose. Advisers acting primarily in a fiduciary capacity create higher levels of trust with clients, get more business done, generate increased referrals to potential clients and have higher client retention.
Embrace financial planning: Ensuring every client relationship has a formal financial plan is the single most important best practice to address client needs and desires. A financial plan helps to set client expectations of return and value. When clients feel all of their financial needs are being addressed, deeper relationships are formed. It’s fairly self-evident that when advisers focus on the things that clients find most valuable, the result is an increase in assets under management and adviser production.
Don’t take my word for the benefits of planning. In a recent survey of thousands of Janney clients conducted by Aon, we scored 9.44 on a scale of one to 10 in terms of satisfaction with our planning capabilities. In addition, Janney financial advisers running predominantly planning-based practices see a 92% increase in average assets per household and a 158% increase in average household revenue.
Clearly aligning what clients want using a planning process works. It’s a win-win for everyone. The combination of providing clients with a robust digital platform and expert insight from human advisers offers a superior experience compared to only one or the other.
It goes without saying that the wealth management industry will continue to evolve and innovate, creating new competitors and changes to the “norm.” However, I firmly believe that advisers who leverage the power of team-building, financial planning and offering advice in a fiduciary capacity will survive and thrive for decades to come.
Jerry Lombard is president of the private client group at Janney Montgomery Scott.
Aaron Klein on how advisers will use tech to change client behavior
As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.