The Evolution of Wealth Management
Garth Gibbes & Carl Brillinger
April 29, 2014
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?
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How did Wealth Management Evolve?
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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”?
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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
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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
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How is Wealth Management Delivered?
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The view
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The key industry players in Wealth Management
• Clients
• Manufacturers
• Regulators
• Distributors (advisors)
• Educators
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The Evolution of Wealth Management
1. The industry prior to 1980
Investment
Insurance
Chartered
Trust and
Advisors
Agents
Banks
Estate
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
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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
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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
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Types of distribution companies
• “Full-Service” investment advisors
• “Mutual fund” financial planners
• Insurance financial planners
• “Fee-based” planners
• Referral financial planners
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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.
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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
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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
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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
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Clients who receive wealth management
1. 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
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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”
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The Personal Chief Financial Officer
Wealth Advisor
Investment
Insurance
Tax
Management
Needs
Issues
Business/
Credit
Estate
Planning
Issues
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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
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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!
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Q&A
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