the evolution of wealth management

The Evolution of Wealth Management

Garth Gibbes & Carl Brillinger

April 29, 2014

2The Evolution of Wealth Management

What is your current market for your Products & Services?

• Who is your client?

• Why do they do business with you?

• What needs they have that you serve?

• What do you provide them that is unique?

• How do you differentiate yourself?


How did Wealth Management Evolve?


What is Wealth Management?

• Why does someone buy or own mutual funds and stocks?

• What is the purpose of an investment?

• Why does a client care about superior investment returns?

• What role does ‘money’ play in a client’s life?

• How important is “trust”?


Wealth Management: a working definition

• An integrated approach to a client’s financial planning needs

• Focuses on client before product sales

• Combines advisory services with product placement

• Geared to a client’s life stage needs


How did Wealth Management evolve

• Pre-1980, Financial Planning focused on affluent clients

• Effect of the baby boom

• Crumbling of “four pillars”

• Growth of product suppliers and products

• Explosion in number of investment advisors

• Changing client needs as they move through their life cycle


How is Wealth Management Delivered?

http://www.ameriprise.com/amp/global/sitelets/life-primer/default.asp


The view


The key industry players in Wealth Management

• Clients

• Manufacturers

• Regulators

• Distributors (advisors)

• Educators

The Evolution of Wealth Management

Investment

Advisors

Insurance

Agents

Chartered

Banks

Trust and

Estate

1. The industry prior to 1980

Affluent clients

Stocks and bonds

“hot tips”

Investment selection

Family protection Young families

Business protection

Annuities, retirement

plans

Personal banking

Deposit services Guaranteed

products

Custodial services

Transfer agents Trustee role Tax planning Estate structure


The arrival of Wealth Management

• Within the last decade, services increased as stock market bubble burst and corporate scandals surfaced

• Clients demanded trusted source of advice

• Advisors are becoming better educated

• Baby boomers and parents required help securing their retirements and transferring wealth to children

• High net worth clients and families now have access to more skilled professionals

• Wealth management firms now compete on trust and reputation and recognize the importance of fiduciary duties


The industry response to aging clients

• More emphasis on lifestyle issues and the role money plays

• The emergence of the “key” advisor or “Chief Financial Officer”

• The explosion in products and approaches to meet client needs

• Mass-marketing of products and services

• Increased focus on client education


The evolution of the distribution industry

• Pre-1980 investment advice was commission based

• Insurance and mutual funds based on distribution model

• Legal and regulatory restraints on advisor activity

• Deregulation occurred in U.S. in 1975 and Canada in 1992

• Crumbling of the “four pillars” came as a result of deregulation

• Distribution through financial advice became the norm

• Canadian chartered banks play a major role in distribution and industry change

Wealth management approach became effective way for distributors to create cross-selling opportunities


Types of distribution companies

• “Full-Service” investment advisors

• “Mutual fund” financial planners

• Insurance financial planners

• “Fee-based” planners

• Referral financial planners


Wealth Management and Advisors

• Advisors are adjusting to their aging clientele

• Advisors moved from specialists to generalists

• Advisors are marketing themselves as comprehensive planners

• Advisors hold multiple licenses (insurance, investment management, commodities, futures, etc.,)

Advisors are using the Wealth Management Approach as a way to differentiate themselves and

provide more relevant information and advice.


Delivery of Wealth Management Advice

• Commission: advisors take a percentage of value transaction

• Fee-base: advisors charge a set fee for their advice based on asset size

• Fee-for-service: advisors charge by the hour or the plan

• Fees plus commissions: advisors receive commissions from manufacturers (trail commissions or service fees); may also charge fees for plans


Who is providing Wealth Management Advice

1. Full-service investment advisors

2. Licensed financial planners

3. Mutual fund sales people

4. Insurance agents

5. CA’s, CMA’s, CGA’s and accountants

6. Do-it-yourself (internet, media, on-line investing etc.,

7. Commercial Banking people


What types of advisors practice wealth management

1. Established advisors: have a mature book of business and long-term relationships with clients

2. New advisors: desire to market a different approach to client relationships

3. Women advisors: taking a more holistic approach to wealth management

4. New immigrant advisors: Understanding the specific cultural needs


Clients who receive wealth management1. High net worth clients: clients who seek a “key

trusted advisor” who can advise on all areas of their financial life

2. Business owners: clients who are transitioning out of their business and into retirement

3. Investment buyers: clients who incorporate their investments into a bigger financial plan

4. Senior executives: clients who are looking at an integrated approach to their financial plan and an advisor who can save them time

5. Women clients: clients who take a more “family” view of financial planning and investing


The role of the wealth advisor

1. To understand the client’s views of money and to match financial solutions to client needs

2. To educate client on issues they may not be aware of

3. To “coach” client to set and attain financial goals

4. To act as a “personal Chief Financial Officer”


The Personal Chief Financial Officer

Wealth Advisor

Investment

Management

Insurance

Needs

Tax

Issues

Business/

Credit

Issues

Estate

Planning

Wealth Planning (from An Advisor’s Point Of View )

Investment

Management

Tax Planning

Estate Planning

Income/Cash

Management

Charitable

Giving


Four client financial life stages

1. Accumulation phase: Family and career building

2. Preservation phase: Planning for retirement and life after work

3. Converting wealth to income: Utilizing assets to finance lifestyle

4. Transfer of wealth: Passing on assets before and after death


How to become the best wealth advisor

1. Focus on your client’s overall financial needs

2. Become a trusted advisor by not being a “product pusher”

3. Improve your listening skills

4. Want to be in your business for the long-term

5. Understand the changing industry

6. Invest in your wealth management education

GOODLUCK!


Q & A

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