As we discussed last week, we think Portfolio Construction Forum are doing a great job of building an agenda that is increasingly relevant for practices that are interested in process and product design as they are in pure investment ideas. Don't get us wrong there is still a strong emphasis on investment outcomes but, in a world where SMA's are more prevalent, how it all fits together and how it feels in the hands of consumer are also relevant. For instance, on of the guest speakers form the US, Scott Welch, advocates for shifting from a product-centric to a client-centric approach. In a recent article, he notes that trends we are seeing in Australia are also evident in the US, albeit on a larger scale and in a parallel context.

Below we have written a summary of that article which may resonate and give some food for thought. If you are interested in reading more find the original article here. Or, better still, why not come along in-person or virtually to the PCF Strategies Summit next week (21st/22nd August). We still have  online passes and tickets for the in person event at the Roundhouse at UNSW. We'd love to have you along.

In other news we are also working on a range of economic scenarios that we will be debating with a group of industry luminaries on the second day and we should be able to share some pre-reading and warm-up right here next Tuesday.

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"Wealth Management Is Now a Design Industry" by Scott Welch, CIMA®, and Ryan Krystopowicz, CFA® from the United States.

Article Summary

Traditionally, wealth management firms have focused too heavily on pushing products and services rather than prioritising the client experience. However, firms that understand their customers' needs and deliver tailored solutions are more likely to succeed in the long run.

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Key factors for delivering a successful wealth management solution include:

1. Client experience: Firms must focus on building empathetic relationships and trust with clients.

2. Process: The traditional sales-centric model must shift to align with overall business strategy.

3. People: Having the right people who can build rapport and understand clients' emotional and life-changing needs is crucial.

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Wealth management teams typically consist of roles such as Relationship Manager, Planning, Insurance, Credit/Lending, Estate and Trust, Investment Specialists, and Client Services. However, research suggests a potential conflict between the logical profiles of business development officers (BDOs) and the empathetic nature required for relationship managers (RMs).

The increasing complexity of wealth management solutions is evident in the small percentage of ultra-high-net-worth clients firms can acquire and service. Successful RMs must possess the ability to deliver solutions with empathy and professionalism while also generating leads through their networks.

The adviser value pyramid illustrates the hierarchy of value advisers can provide, with life-changing value at the pinnacle, followed by emotional value, functional value, and financial value. Top advisers focus on enhancing the client experience, providing financial and non-financial motivation, offering access to expertise, and growing portfolios.

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The wealth management experience in the US is summarised by several key trends:

1. HNW families demand objective, consultative wealth management advice;

2. New products and services address previously unmet needs;

3. Outsourced solutions ease institutional-quality investment management burdens;

4. Technology advancements enable seamless delivery of solutions across borders;

5. Niche players provide specialised services as outsourced providers;

6. Consolidation allows for scale, innovation, and higher margins.

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Wealth management in the U.S. has also been transitioning into a post-product, client-centric stage where the focus is on delivering a highly competitive marketplace experience. Firms that can adapt and offer excellent, holistic advice cheaply and efficiently are well-positioned to capture a more significant share of the wealth management market. 

Scott offers an insight into how Australian advisers can learn from the U.S. experience by prioritising the client experience, developing tailored solutions, leveraging technology for seamless delivery, and collaborating with specialised providers to meet evolving client needs in a scalable manner.

Join us at the summit to understand how to apply these client-centric strategies in your practice. Register for free access to the livestream here: Portfolio Construction Forum Strategies Summit 2024 Live Stream.