How wealth managers can leverage complexity for competitive advantage

In response, more than half of clients (52%) are proactively initiating discussions with their financial advisors about the impact of market movements, and 44% are requesting more frequent advisor meetings. Additionally, 44% of clients globally are exercising greater control over their investment portfolios during times of market turmoil, which can be a risk for wealth managers, who need to safeguard value by keeping clients from being reactive. 

Meeting these heightened expectations comes at a cost for wealth managers and requires advisors to reprioritize. However, it also provides a valuable opportunity for advisors to provide an experienced voice of reason at a time of turbulence. That has the potential to achieve valuable improvements in clients’ perceived readiness – a vital consideration at a time when 32% feel underprepared to meet their financial goals, and 50% feel underprepared for wealth transfers.

Broader suite of financial and non-financial services is the next frontier for differentiation

Expanding the scope of services – combining core products and services with ancillary services – can go a long way in making clients feel assured and prepared in the current operating environment. It is clear from our research that clients of all profiles increasingly expect firms to develop a holistic understanding of their lives, and integrated services help clients to feel better prepared.

Our research shows that clients are actively using and looking for services like tax planning, retirement planning, eldercare advisory, and family governance services – and there is increasing appetite for these services from wealth management firms.

At a time when clients more frequently want to interact with their advisors and seek guidance, wealth managers have the ability to introduce clients to new product types, which is also an area where clients are seeking more options in these changing market conditions.

Enhancing client readiness is key to attracting and retaining client assets, which are moving at an accelerating rate. Our research shows that (32%) of clients plan to increase the number of wealth managers they work with in the next three years, and that 45% expect to move between a quarter and a half of their assets.

Investment performance still remains the most important reason for selection of a primary wealth manager followed by investment selection, but clients are increasingly citing the brand and reputation of a provider, digital tools and technology, and personal relationships with advisors as reasons for selecting a wealth manager.

Changing times call for change in strategies

Clients’ growing desire to make changes to their portfolios, to the frequency of advisor meetings, or to their primary advisor entirely means that wealth managers must focus on the key drivers of switching and selection to stay ahead.

Investing time and resources in activities that enhance clients’ resilience to growing threats is crucial. Simply doing “more of the same” will be insufficient to address client concerns.
Faced with this challenge, leading wealth managers will adapt and innovate. The question is: How?

Our global research into client preferences, selection criteria, reasons for switching, advisor engagement, and demand for products and services suggests that many wealth managers could benefit from:

• Meeting the growing demand for core services. Although 65% of clients already use financial planning services, another 22% would be interested in doing so. And while less than half (42%) of clients use multi-generational planning services, almost as many (34%) are interested in exploring this possibility. 
• Developing value-adding in-house capabilities. Many clients use tax planning (64%) but typically receive this specialized service from external providers based on wealth manager referrals. Strong demand for tax advice from younger, wealthier clients suggests that developing in-house capabilities could build future client engagement and satisfaction. 
• Stepping up product introductions. Many advisors appear to be underestimating client demand and failing to offer the range of specialized, ethical and digital assets that investors increasingly expect. For example, 27% of clients would like to know more about alternative investments, but only 15% have been engaged by their advisor.
  
• Leaning into specialized ancillary services. High-quality ancillary services are a powerful source of differentiation. Half of Millennial clients use advice on health care or elder care, and 35% of all clients would like to discuss this service – creating an opportunity to impress clients by providing tailored support on this sensitive topic.

In a volatile world, even the wealthiest and most financially literate clients are feeling less confident. Crucially, they’re also becoming more proactive, and their expectations of their wealth managers are fast evolving. Historic assumptions about inertia and risk aversion look increasingly outdated. Wealth managers have an opportunity to respond decisively – boosting their relevance, differentiating themselves and driving future outperformance.