Many wealth managers claim they have tried to become more needs-based in their approach to client conversations, but stumble at what is perceived to be a tough hurdle to overcome: clients don’t want to pay for advice.
Getting a reliable picture of clients’ real objectives in life, understanding their true risk appetite and aligning their objectives with their wealth all take a significant amount of time; yet this is not justified if the client does not see any value.
Even compensating the lack of recurring advisory income by charging more for securities transactions works against a wealth manager in the end.
Once clients realise your fees are significantly higher than what they would pay if they were to buy the same securities through an online trading portal – which, in this day and age, they will realise – they will most likely feel cheated.
It is increasingly common for wealth management institutions to invest time and effort in client education. Apart from continuously training and upgrading their own practitioners, this is probably the most effective way to invest in the sustainable growth of their business.
The aim is not to enable clients to manage their own wealth. Instead, clients need to realise that managing wealth is a profession which requires knowledge and experience – and that typically takes many years to develop.
Some clients believe that they are financially savvy. But proper education may help them open their eyes to the reality that most of them are not.
Many clients also judge their wealth managers for the investment advice they give. Proper education also therefore helps them appreciate and realise that investing is not about predicting the future, but first and foremost about managing risk.
Many clients are simply skeptical about the credibility of the financial sector.
After the many scandals that have hit the industry, they believe it largely consists of a bunch of greedy crooks talking vulnerable individuals into ineffective investment schemes for the sole purpose of generating revenues at their expense.
Effective education, therefore, can help these individuals understand that wealth management is actually an honourable profession, which is able to add significant value to their lives.
And those individuals who actually do know that it is important to spend some professional time on managing their wealth, but simply postpone it, may benefit from effective education; it will help them understand the importance on taking action now – with the help of professionals.
This hopefully goes to show that client education is essential in view of our ambition to develop a sustainable wealth management profession.
The more effective we become in demonstrating to HNW individuals the value they may expect from professional wealth managers, the higher the chance we can convince them to accept that they lack the time, knowledge and experience to manage their wealth on their own.
The likelihood they will be willing to pay for it is also then higher.