Tuesday 28 April 2020 8:53 amCFA Institute Talk

Five ways to retain your wealth management clients in 2020

What is city talk? Info Info. Latest
These are articles written by professionals for investment professionals. They are contributions from external subject matter experts who do not work for CFA Institute, but may be a CFA charterholder as well as a member of a CFA Society. All are experts in their field and strive to deliver useful insights that help investment professionals make better decisions.

The global wealth management industry is being buffeted by demographic changes among investors, as well as technological advancements such as the arrival of robo-advisers.

Recent research commissioned by Bank of America on millennials’ spending priorities in the USA – with millennials defined as those aged 24 to 41 – found that about 25%  of those who are saving have $100,000 (about £80,000) or more in savings – a growing number.

Meanwhile, many wealth management firms’ profits are slipping as investors switch to passive index funds. In response, many fund managers have adopted machine learning to find cognitive biases in their clients’ approaches so that they can demonstrate the value of managing investor biases.

The fight-or-flight instinct is part of human nature, but it doesn’t serve investors well. Fleeing the market at the first sign of turbulence won’t impress clients. If advisers can demonstrate how behavioural coaching is valuable, then clients are more likely to stick with it.

Competition is fierce

Passive index funds aren’t the only threat to the wealth management industry. Technological advancements, in particular, intimidate financial advisers. The world views investments as a commodity, so people prioritise convenience over all else.

Robo-advisors pose a threat because they provide convenience and promise a human-like experience. People can call and ask questions such as “What account should I pull money out of first for retirement?”. Computers are designed to process inquiries like these, and the next decade of quantum computing and 5G will make processing even easier. At the same time, increasing artificial intelligence (AI) technology will expand robo-advisers’ capabilities.

Unfortunately, this technology drives down the cost of advice. Increased capabilities lead to increased trust, so more and more people will rely on AI in the next three to five years. Human advisers must find a way to prove they’re more valuable and precise than their robotic counterparts.

A robo-advisor may be efficient, but can’t replace human empathy and active listening skills. Wealth management is as much an art as a science, and it requires the human element of creative problem-solving.

So, how do you capitalise? By becoming a resource for clients in all aspects of their financial lives. I’ve had one particular client for more than 30 years. We started our relationship planning for his retirement. Together, we ran the numbers on major life decisions: moving home, transitioning careers, etc.

We would engage in discussions about family, health, mentorship – you name it. That client stays with us not only because of my financial advice, but because I’ve got to know him as a person. A computer can evaluate how to do something, but it can’t process the why like a human can.

Here are five ways that you can provide valuable services to modern investors:

1. Shift from being an expert to an adviser

Only 44% of high-net-worth clients say they trust their financial advisers’ guidance, so there’s a lot of room for improvement. Build rapport with clients and establish checkpoints for having value discussions. By offering an opportunity to give feedback, you let your client know that you take their journey seriously. Clients will cherish advice that considers their life priorities.

2. Broaden your range of services

As people become busier, they want to work with companies that offer one-stop shops for all their needs. Offering only investment management or financial planning isn’t enough for today’s clients. They want comprehensive financial services that offer departments licensed to cover everything from income tax to legacy planning. If clients feel that they can outsource everything to you, then they’ll stick with you.

3. Expand your network

Build relationships with other professionals so you can serve as a resource. If you have a large referral network (lawyers, banks, lenders, etc.), you’ll come across as extremely valuable and credible. Communicate whether you and these partners compensate each other for leads or referrals.

4. Regularly contact your clients

Great advisers do not use a ‘wait until they call’ approach. Establish regular check-ins. Give yourself a task in your customer relationship management software to contact your clients every 30, 60 or 90 days, depending on the client’s preferences. Saying “I’d love to catch up!” goes a long way.

When speaking, ask whether they’re on track to reach their goals. Also, learn what’s going on in their lives and ask whether there’s anything you can help with. Maybe your client’s daughter is getting married and trying to work out how she wants to handle joint finances. This is a tremendous opportunity.

5. Be proactive, not reactive

Proactively monitoring clients’ accounts will set you apart. Stay on top of sending meeting notes and checking in on follow-up items. Ask them what their preferred methods of communications are. Point out news or articles that are relevant to their goals, then see whether they’d like to discuss them.

Retaining clients in an information-saturated digital world means you must communicate the benefits of working with you. By being proactive, offering comprehensive services, and demonstrating that you’re a one-stop shop, you’ll retain clients for years and, hopefully, generations to come.


If you liked this post, don’t forget to subscribe to the Enterprising Investor.

Visit CFA Institute for more industry research and analysis.


By David Geller

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/skodonnell

Share: