As a result, some advisers still position themselves as facilitators of transactions.
Transaction facilitators tend to concentrate on products they know best, not services, and, therefore, their client offer is narrow. This is even more so where the adviser relies predominantly on income from the underlying products sold – the inherent structure rewards that behaviour.
Wealth managers on the other hand take a comprehensive approach to advice, offering holistic, integrated solutions. Through a highly consultative approach the wealth manager blends together a range of financial services required by the client and their families over their lifetime. They recognise that some clients’ needs may be met through products, some through services (in-house and externally sourced).
Offerings include investment management, but also retirement and estate planning, salary packaging, taxation planning, debt management, charitable giving and lifestyle/cash-flow management. The most successful wealth managers working in the consultative space position themselves as the client’s chief financial officer. Warr Financial Planning (WFP), Melbourne, is doing just this. It is the single point of contact for managing a client’s financial affairs across all its professional advisers.
WFP principal Anthony Warr says “you’re not necessarily going to be the client’s only expert but you’ll have the ability to identify the needs of the client, then think strategically about the solutions they require and the experts that need to be engaged to provide those solutions”.
For WFP, the biggest challenge in working as a wealth manager is finding the trusted professionals to ensure clients receive the value and benefit of integrated solutions.
“We like our clients to walk away from their meetings with other professional advisers with the same feeling that they get when working with us and that’s not easy. You’ve got to have a strong network of trusted professionals, such as investment managers, bankers, lawyers, tax specialists, etcetera,” Warr says.
Most importantly though, a wealth manager is the trusted adviser to the client and their family. Before they can blend a solution of products and services together for their client, a wealth manager develops a real understanding of their client’s needs, objectives and values. It is this client-centric focus that truly differentiates the transaction facilitator from the wealth manager.
Warr emphasises the need for the wealth manager to discover what the client’s ultimate driver is and what the most important value to the client is. “A client’s financial data is a veneer – there is something that is driving them behind those financials and if you can get a client to discover that then you are going to develop the utmost trust,” he says.
The consultative approach now adopted in WFP as a result of Warr’s participation in CEG’s Cultivating Advice program is integral to unearthing their clients’ drivers and to the development of the trusted relationship. Once you have that trust there are flowon benefits for both your business and your clients.
“It is through a long-term trusted relationship, which focuses on the client’s needs and the provision of integrated solutions to meet those needs, that your client will have the peace of mind that their key driver will be met with certainty. Only then can your client get on with living and enjoying the most important things in life,” Warr says.
The key benefit for your business of a clientcentric approach is ultimately fewer, yet stronger, relationships with clients that truly value the benefits you provide as their wealth manager.
“There is strength in the relationship and the flow-on is greater client retention and higher quality referrals. With that comes the ability to capture stronger profits and improved business sustainability,” Warr says. With benefits to both your business and your clients, it is not surprising that in our 2002 survey of financial advisers, titled “The Road Ahead: The Future of the Advisory Business”, one of the major findings was that holistic wealth management was expected to become the dominant business model.
So, with the benefit of time where has the industry gone? As client-centric wealth managers are not motivated by commission structures, a good indicator of the take-up of the wealth manager model is the trend in fee-based income. Our Dashboard Reports show fee income as a percentage of total income doubled across both average and high profit firms from the 2003 financial year to the 2006 financial year. That’s a clear indication of the industry’s move to a holistic wealth management model.
So, move towards a client-centric business model, recognising that your livelihood depends on your ability to help your clients and their families have the peace of mind that comes with knowing they will achieve the things that are most important to them now and in the long term.
