Chapter 1
Capturing clients on the sidelines
Many clients want advice and planning but are holding back.
Wealth management clients overwhelmingly want advice and planning. Our research finds over 80% of clients express interest in financial advice and planning, yet half remain on the sidelines. These idle clients present a huge untapped opportunity for the industry: the providers who can engage them can lead the way in reshaping how wealth management is delivered.
Percentage of clients currently using planning and advisory services, alongside levels of planned usage
Clients are often hesitant to engage because of fragmented products and services, and complicated fee structures. But more fundamentally, these services often simply do not address a client’s full set of financial needs.
Advice and planning services today more frequently focus on specific goals and objectives: goals-based solutions have come a long way in helping to frame a client’s objectives in actionable terms, tied to metrics that can measure progress and success. But working toward these goals – whether for college, retirement or estate – represent only a part of someone’s financial life. Clients need greater help with the day-to-day management of their finances, as well as support in achieving the level of financial independence that enables their larger aspirations.
Budgeting and savings are critical opportunities to engage clients in conversations about their everyday financial management, which is often overlooked: just 28% of clients discuss saving to meet goals with their wealth manager. While tools have emerged to nudge clients to save and increase automatic contributions, many clients struggle to understand how much and when to save. Providing clear and constructive savings advice based on a deeper understanding of income and expenses can be a significant step to improving a client’s financial well-being – and can serve as a conversation starter to other financial needs.
Beyond the everyday and specific objectives, clients aspire to reach a level of independence where their money empowers them – whether it helps to remove worry or achieve a greater purpose. Wealth management providers that can identify and enable these outcomes can create deeper bonds with their clients through guidance and coaching.
The best opportunities to engage clients in conversations about these topics arise during major life events: our research shows the highest use of advice and planning during these moments (which are also the ones where clients are most likely to switch or move money). Anticipating and engaging clients at these times is critical.
How life stages affect usage of planning and advisory services
A third of wealth management firms we interviewed are moving beyond traditional profiling and are working to build more robust frameworks that address life events more completely. Beyond providing specific products to respond to a new need, innovative firms are better integrating these events into client profiles that are recalibrated around the changing circumstances. They then can anticipate additional needs earlier and proactively address them.
Chapter 2
Providing solutions while meeting product desires
Though clients are increasingly thinking less in terms of products, specific segments continue to see high value and should not be ignored.
While many clients seek solutions agnostic of specific products, there are clear client segments who value access to a breadth of products – and are willing to move money for them.
One in five clients is willing to switch for greater availability and access to products. This likelihood of switching specifically for products increases significantly with wealth, level of investment knowledge and risk attitudes, despite these client segments being less likely to switch on an overall basis.
Clients who are most likely to switch for products
Our research looked at the breadth of available investment and non-investment products, access to specialized and exclusive products, and a mix of planning and advisory services. In aggregate, our results showed that almost half of clients (48.6%) assigned high value to these elements, but to varying degrees.
Proportions of clients who rate investment products as higher value
Perception of value for investment products varied most based on a client’s level of investment knowledge: four out of five clients who self-identify as having very high investment knowledge see high value in products. Similarly, client perception of value for products increases based on the level of investable assets, as clients with greater wealth tend to seek access to more exclusive products that meet complex needs.
Clients with the highest tolerance for risk see greater value over more conservative and moderate clients, which may result from an openness to try a breadth of products – including less traditional ones – to achieve greater results.
Experimenting with different products is one driver for clients engaging with an average of five different types of providers. For example, millennials may have a checking account with one firm that offers no fees, a savings account at another firm with high yields, a brokerage with an online provider, a retirement account at a full-service institution, and a micro-investing service with a FinTech.
The key challenge for wealth management providers is determining how to balance this interest in a diverse set of products with their clients’ best interests and risk appetite, as well as the costs of providing access. On the investing side, offering more sophisticated options to mainstream clients is more challenging because of potential conflicts of interest, regulatory hurdles and minimum investment requirements.
Educating and empowering the clients who are demonstrating interest in specific products is a key factor in building greater trust, as well as to introducing broader discussions about their goals and desired outcomes.
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Chapter 3
Achieving clear outcomes for clients
Leading providers must balance offering individual products and services with simple, clear solutions that meet client needs.
While there is clear demand from specific segments for product breadth and choice, most clients in our research want advice and planning that is timely and built on an aggregate understanding of their financial lives. The future of wealth management will be focused on such solutions that are proactive, wholly personalized and intuitive to use.
The challenges for firms wanting to excel in this space are large: fragmented service models and platforms often stand in the way; providers struggle to enable and incentivize planning activities, as advisor compensation is often not adequately tied to financial planning; and advisor platforms are largely lagging client demand for holistic advice.
Significant advancements in managing personal data and the improved quality of technology-driven interactions are helping but can only go so far with limited information.
Platforms that connect data and aggregate accounts across providers are a big first step. Firms are investing in an array of digital tools for advisors to turn data into richer conversations with clients. But data alone cannot solve this problem: providers must engage clients in discussions that build complete pictures of the problems they are trying to solve, then focus on turning their individual products and services into the right solutions to meet these needs.
Wealth management providers are working with product manufacturers and technology companies to create the platforms to enable this. Newer platforms are shifting from products to solution delivery by integrating activities focused on outcomes for clients.
By better combining such capabilities, leading providers can ultimately make it easier for their advisors and technologies to deliver clear value to clients who are ready for the next generation of financial advice.
Summary
The future of wealth management will focus on outcome-based solutions that provide easier, faster and more personalized ways of matching products and services with real-time client demands.
