How wealth management is becoming key to the future of advice

Your job as a financial advisor is more important than ever. Today’s investors face a wide range of challenges, but they also have a wide range of solutions at their fingertips, from low-cost index funds and exchange-traded funds to free, digital advice.

The good news is, many investors still find value in financial advice, but what they value is changing. Instead of enlisting someone to help them pick the right stocks or build a portfolio, they want holistic and comprehensive planning that addresses all aspects of their financial lives—a wealth manager. 

This is the next seismic shift in financial advising.

The shift to wealth management

In just 40 years, the financial advisory industry has gone through two fundamental shifts, and the third is upon us.

First came the dawn of the true financial advisor in the 1980s, when private investors had access to investment advice, rather than just an order-taker for stock trades. This value proposition resonated well as the markets continued to rise.

“The most recent industry shift was from brokerage to advisory, because commissions became more commoditized, and clients wanted a more advice-based relationship,” says Matt Enyedi, managing director of National Sales. “Now we’re going through another secular shift from investment management and product selection and allocation to full-blown planning and wealth management. As traders were once commoditized, now allocators are becoming so.”

Wealth managers consider the client’s complete financial picture as they offer guidance and recommendations on any decision involving the client’s money or financial assets.

But this doesn’t necessarily mean handling all of the work themselves.

Instead, some call on outside experts such as attorneys, CPAs, and insurance agents to deliver specialized services beyond the advisor’s experience or skill.

"Investors simply need more than they once did."

Complexity and demographics driving a need for wealth management

While low-cost products and providers are part of the reason for this shift, greater complexity and changing demographic trends are significant drivers.

“Investors simply need more than they once did,” says Matt. “The world has gotten more complex. There’s more choice, more volatility, and rapidly changing news cycles that create more tension.”

“But there are also significant demographic impacts fueling this need for planning,” he adds. “We’ve had a 30-year stretch in which we as an industry have focused on accumulation along with baby boomers, and now they’re moving into a distribution phase. Not many have done distribution before at an institutional level and in a scalable manner.”

Rob Pettman, executive vice president of Product & Platform Management, says: “While the focus has been on the accumulation phase for a long time, there’s now an incredibly complicated problem in front of us—the mass distribution of wealth on a level we’ve yet to see. Advisors who can create a repeatable process to help clients through distribution will have a significant opportunity in the marketplace.”

Rob believes a focus on a client’s complete financial lifecycle is the way to do this.

“The opportunity is not about changing how we provide investment management, but how we help clients through each phase of life,” he says. “There are a whole host of issues clients need help with where advisors can provide value: Stretching assets out over their lifetime; creating a plan for long-term care; and planning for the general cost of health care, are just a couple among many.” 

All of these things require a thoughtful wealth management approach.

The emergence of the millennial is also a key trend impacting the financial services industry.

“Millennials control the largest buying power we’ve ever seen, and they’re already becoming important clients today,” says Matt. “They’re saving money more so than any other generation before them, and they actually believe in planning. They’re planners by nature. Advisors who can figure out how to successfully work with this group through a planning-based philosophy will have a tremendous advantage over the competition.”

Advisors who deliver wealth management see growth

Advisors responding to these trends and incorporating more planning services in their practices are experiencing growth and more consistent revenue streams.

“The opportunity is massive for wealth managers,” says Matt. “With all of the tailwinds out there—more money in motion than ever before, aging advisors with fewer entering the marketplace, and a greater demand for advice—advisors who are willing to adjust their value proposition have unlimited potential for growth.”

On top of near-term growth, creating a systematized process for delivering wealth management could also result in a higher business valuation when you’re ready to exit your practice.

“Having a repeatable approach that can live beyond you builds enterprise value,” says Matt, “because you’re creating a road map that can function over the entire life of your business. Someone could come in and take over the reins and continue to implement your processes.”

In general, wealth management enables you to:

  • Deliver the services and experience clients value
  • Build long-term relationships that can generate referrals
  • Expand the share of wealth you manage on behalf of each client
  • Drive the value of your practice higher

Bringing wealth management to the forefront of your business

If you’re looking to begin incorporating more wealth management into your practice to respond to evolving client needs and potentially experience this type of growth, it’s helpful to know a wholesale change may not be necessary. It could just be about formalizing your services and naming them as planning and wealth management.

“Most advisors do wealth management on some level today,” says Rob. “They just need to push it to the forefront of their practice and value proposition. When you think about what active planning actually is, it’s primarily taking the client conversations you’re having and tying strategy to goals—advisors already do this. It’s simply expanding the conversations to include additional topics and creating a process for them.

Matt agrees. “Wealth management is often about institutionalizing what you’re already doing, so it becomes repeatable and scalable—turning casual conversations or services into the primary focus of your value proposition.”


Big picture charts and graphs

Creating a wealth management process

Institutionalizing your services and naming them as wealth management is all about creating a process. If you can describe your planning process to clients and help them understand the value you’re providing throughout their lives, you’re well on your way to incorporating more wealth management.

“Having a clear wealth management process allows advisors to articulate their planning-centric value proposition and really differentiate from all the other business models out there today,” says Matt.

So how do you do it? Here are some ideas.

Create service models and client segments

You don’t have to offer all services to all clients. It makes more business sense if you don’t.

Create different levels of service for different clients. For example, top-tier clients may receive comprehensive planning, while lower-tier clients may receive more basic planning. The type and amount of fees you charge can then line up with your service model.

Fill in the gaps

Build a network of specialists and experts you can tap for services you can’t provide or don’t have time to provide yourself. 

While it’s helpful to understand these specialized services to know what questions to ask your clients, you can outsource specific work so you can focus on your own areas of expertise. It’s important that you continue to drive the processes of discovery and delivering the client’s action plan.

Formalize your services

Create a menu of all the services you offer as part of your value proposition. Then, outline a process to show your clients exactly when you plan to offer these services.

For example, a timeline of major life events can give clients a picture of what financial decisions they will make and need to plan for at different stages of their lives and what services you’ll offer at each of those stages.

Put the plan into action

When it’s time to build out a plan for each life stage, either execute the plan yourself or connect the dots to the specialists. Rather than sending the clients to a CPA or attorney, instead, have a joint meeting to ensure you’re involved in the money management of trust funds or other estate investment management needs.

Headwinds of change can mean tailwinds of growth

They say the only constant in life is change. If you embrace the changes sweeping across our industry right now, you can transform your practice to focus on holistic wealth management and put yourself on a long-term path toward revenue growth and value appreciation.

“If advisors adopt an institutionalized process for providing advice and running their business, while at the same time leveraging technology and linking it to the very uniqueness of their human behavioral advice and coaching, they’ll be unbeatable,” says Matt.

This material is intended for Financial Professionals.