Keeping up with wealth management

Wealth management is changing. Here are ten things you need to know about the industry in 2015

The traditional model of the adviser seeing the same clients throughout their working life is gradually dying away. Today, a client may communicate with a relationship manager, their affairs may be handled by a range of advisers and their main contact with the firm may be through seminars and online updates. With investment requiring a long-term horizon, what do advisers and clients need to know when planning for the year ahead? 

1. Less is more According to research firm Compeer, at the end of 2003, there were 44 full-service wealth managers with an average of £1,409m investment under management. By the end of 2013, the number of firms had fallen to 36 but their average size had trebled to £4,204m. 

Business has also become more concentrated among a few firms: the top five full-service wealth managers shared 71.3% of revenue in 2013, up from 65.7% in 2010. For advisers and clients alike, it's worth keeping an eye on these trends. 
The percentage of revenue shared among the top five wealth management firms in 2013, up from 65.7% in 2010

2. New target markets For advisers, it's equally important to pay attention to clients' habits. Annalise Toberman, who produces the Platforum report, explains that more wealth managers are engaging with first-time investors, or those with limited knowledge. 

"Some providers appear to have come to the conclusion that the market to target now is the less engaged and those with potentially large savings pots but with little or no investment experience," she says. 

3. Risk profilingRisk profiling has become a core part of the investment process, but while no one questions the wisdom of tailoring advice to individual circumstances, there are concerns about its future. 

"Relatively few industry figures interviewed question the accepted wisdom around assigning and prioritising a client's risk score in the investment process, but implementation has caused many - the Financial Conduct Authority being no exception - to voice apprehensions about risk profiling and the future outcomes of this process," says Platforum's Toberman.

4. Hands tiedAdvisers may also need to prepare themselves for the possibility of more red tape. One wealth manager, who has been in the industry for 40 years, was a partner in a regional firm of stockbrokers sold five years ago to a European bank. Many of his clients have been with him since the beginning of his career and he has intimate knowledge of their lifestyle, their attitude to risk and their investment objectives, helping him to take a holistic approach to their portfolio. 

He feels the constraints of the firm's investment committee, guidelines on asset allocation and risk assessments force him into a less individual service. "I now seem to spend more time completing checklists, ticking boxes and attending internal meetings than on advising clients," he says.

5. New mediaAnother shifting area is technology. "Technology now underpins everything people do," notes Mark Taylor, Managing Director of Equiniti Investment Services. Just as they use computers, tablets and mobile phones to manage their day-to-day lives, clients now want to monitor their wealth managers using a range of different media. 

"Customer expectations are increasing and that is difficult for wealth managers as they are very traditional. They are having to grapple with regulatory issues, they are having to be more transparent and keep pace with new technologies," Taylor says.

6. Online managementTechnology is also encouraging the formation of new kinds of wealth management companies. As well as platforms, which are now ubiquitous across the industry, a growing number of companies are using the internet, rather than personal contact, to set up and manage portfolios. 

7. Hungry for communicationHowever, it also seems that a growing number of customers are concerned about the quantity and quality of communication with their wealth managers. Research by EY for Compeer found that almost half thought they should meet their manager at least twice a year, and many expected four meetings or more - something only a minority of the firms provide. 

8. Greater efficiencyBut by and large, those on the corporate side claim industry changes are having a positive impact on customers. "The change in corporate structure has, in most cases, meant an improvement in service levels and efficiency," explains Sarah Soar, Head of Investment Management at JM Finn & Co. 

9. More cohesionFor Soar, this change in structure is in the client's best interest. "What we are looking to do is to have a more cohesive structure in the way we manage clients' investments," she says. "It is possibly not quite as individual as it was in the past, when investment managers were free thinkers who did what they liked with their clients. Now, there is more of an investment process, but one which lets the investment manager choose what is best for the client."

10. Pension reformsThe wealth management industry faces yet more changes, as pension reforms, set to take effect from April, introduce far greater flexibility into retirement planning. The challenge for the wealth management industry will be to take advantage of those changes to build deeper, and more rewarding, relationships with their clients.

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The original version of this article was published in the December 2014 print edition of the Review.
Published: 16 Feb 2015
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