Get Used to Not Being Your Clients’ Only Wealth Manager
As clients continue to adopt a more branched model of managing their finances, it might be something advisors just have to accept.
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We don’t know how to tell you this, but your clients are seeing someone else.
While advisors traditionally strive for exclusive relationships, global investors work with an average of 2.3 wealth managers, according to a recent Ernst & Young report that gathered data on 3,600 advised clients ranging from the mass affluent to ultra-high-net-worth channels. In addition to an RIA, a client might work with a robo-advisor, private bank representative, tax specialist or financial coach. Coupled with the rise of self-directed trading, advisors aren’t just competing against rival firms, they’re competing against their own clients for wallet share. Instead of aggressively fighting to pull those assets back in-house, however, advisors may simply need to accept this branched reality.
“Ten years ago, advisors would hide behind the idea of, ‘If I’m an RIA, I’ve got to have 100% of your wealth or I can’t be a fiduciary,’” said Laura Varas, founder of investor data firm Hearts and Wallets. “No one believes that anymore. It was ridiculous then, and it’s ridiculous today.”
I Want It All
Over the past decade, client demands have ballooned as their assets grow. Beyond core portfolio management, clients want tax, estate, retirement planning and more. And they might not wait around for a single firm to build it all.
“Client expectations are rising at a time when relationships are becoming more fluid and more competitive,” Jun Li, head of EY global wealth and asset management, said in a statement. “Clients today are more engaged, more informed and more willing to act when they do not see clear value.”
The EY report also found that:
- Some 45% of wealthy clients plan to move between 25% and 50% of their assets away from a current wealth manager in the near future.
- More than a quarter of assets are already in self-directed accounts.
Clients are also getting more confident in their abilities to manage their finances or seek help beyond a sole advisor. The Covid-19 pandemic introduced myriad self-directing tools to a new wave of investors, and millennials and Gen Zers are trying to avoid any retirement planning mistakes their parents may have made, Varas told Advisor Upside. As a result, many Americans are naturally splitting their assets.
“People don’t just go to Stop & Shop,” Varas said. “Sometimes they go to Whole Foods, the deli or order online. Pitching people on consolidating who don’t want to is only going to irk them.”
The Multi-Advisor Model. Some advisors have already begun adapting to this multi-store environment and leaning into collaboration. “Many of our clients work with multiple advisors,” said Joon Um, a CFP with Secure Tax & Accounting. “We’re often the tax advisor working alongside their financial advisor or estate planning attorney.”
