Gary Harvey of ipac wealth management explains how clients can find the right institutions and advisers to help them develop an appropriate – and hopefully successful – wealth management strategy.

Date: May 2011

Tags: Expectations, Relationship, Segmentation

• Clients should look for advises who are professionally qualified, who have experience of working through market cycles, who they can trust, and who work in a firm which gives them the required support
• While people are disappointed when markets go down and investments fall, the thing which drives core disappointment is when it is unexpected
• It is important for advisers to illustrate to clients what a downside actually means
• If done correctly, client segmentation should lead to better products, services and advice for particular target clients

For clients to determine who is the right adviser for them, the first thing they should look for is someone who is professionally qualified, said Gary Harvey in an interview. That way, the individual understands the nature of what the client is looking for.

Secondly, Harvey said he would look for an adviser who has experience of working through market cycles.

The difference between having lived through these means advisers understand emotions and acquire different views to impart on clients – both on the upside and downside, he explained.

Thirdly, he said it is important to choose an adviser who works within an organisational structure which gives them the support services to enable them to provide the right level of advice.

Finally, clients need to find someone they can trust. They are going to have to share personal, financial and emotional information to their advisers, so a rapport is critical, said Harvey.

Expectations

When entering into a relationship with a wealth manager, clients need to understand the type of individual and firm they are talking to, said Harvey.

Given the different wealth management models, it is critical to understand them fully.

It is essential, therefore, that a client is be clear about whether they are just looking for execution, or they want long-term financial advice – either generally or specific. Otherwise, there will be a mismatch in expectations, said Harvey.

The last few years, for example, have led to many areas of disappointment for clients, he explained.

The common theme in such cases is that the client doesn’t understand – and wasn’t made aware of – the real downside scenario, he explained. That is the root cause of disappointment.

While people are disappointed when markets go down and investments fall, the thing which Harvey said drives core disappointment is when it is unexpected.

Understanding different market scenarios and outcomes

According to Harvey, it is important for advisers to illustrate to clients what a downside actually means.

For example, he asked, if a structured product is dependent on certain criteria, and should those not be met then the value falls to zero, and the best- and worst-case scenarios have been fully explained, how many people would actually buy it?

So the driver is understanding the worst-case scenario and being able to explain it to clients in a way which is meaningful to them.

The danger in the industry is that it might be too technical and not clear enough for all customers to understand, said Harvey.

Client segmentation

If done correctly, client segmentation should lead to better products, services and advice for particular target clients, said Harvey.

It is a way of also ensuring that there is the right infrastructure and technical knowledge to deliver the required advice.

Segmentation should, therefore, lead to a better outcome for certain groups of clients.