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Changing Landscape of the Wealth Management Industry

The recent economic downturn has brought about quantum changes to the Wealth Management industry. It has triggered many debates on the role of wealth managers and private bankers in the crisis and the need for greater accountability on their part. The industry has perhaps not witnessed the kind of scrutiny it faces now. Investors are demanding greater transparency in the wealth management services and the industry is also seeing increasing regulatory and political pressures. In order to build trusting and sustainable relationships with the customers and achieve profitability targets wealth managers are looking at investing in a more client-centric wealth management model.

Building Trust - The aftermath of the global financial crisis was erosion of clients trust in their wealth managers. Bankers now need to demonstrate that their customers' best interest is above their own profit intentions.  In order to build healthy sustainable relationships, wealth managers must communicate effectively with the client, bringing in greater transparency. After all, it is essential to keep the client informed when the market movements impact the client's portfolio.

Client Engagement - In order to enable clients to take more educated decisions on their finances wealth managers must invest in passing structured information to their clients on factors impacting their investment portfolios. Banks can look at the following ways to manage information flow to their clients:
• Arrange experts to address clients on factors impacting the financial world and the impact on investor portfolios
• Share financial reports specific to individual investor's interests
• Share webcasts on clients' Internet banking account specific to their interests

Internal Compliance Framework - Besides complying with the restrictions imposed by regulators, wealth management firms need to introduce self regulating measures to safeguard the interests of investors.  Wealth management firms need to maintain strict compliance and audit policies applicable to relationship managers and ensure that the advisors are compliant with sales techniques and communications plans. Wealth advisory firms can have regular audit checks on the accounts managed by their wealth managers to ensure that the accounts are managed in the clients' best interest. Rate of portfolio turnover would be an important metric in judging an advisor's performance. However, advisors' performance should be judged on long term performance measures rather than the gains earned on the investors portfolio in the short run. The quality of advice given to the clients can also be gauged by direct client feedback.

Training and Competency - In order to offer clients personalized advice on finances, risk analysis and in depth analysis of factors impacting their investment portfolios, it is essential for banks to train their relationship managers on different facets of managing wealth.

In the end, it is up to regulators and wealth management firms to ensure that their advisors have the required technical competence standards to practice in this industry. One step could be internal certifications and trainings to improve the competency standards of their advisors.

Posted by Priyanka Diwan on October 25, 2010 5:19 AM |

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