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Money in motion

How Wealth Advisors Can Capture Money In Motion

Risk and opportunities abound for advisors seeking to manage the more than $3 trillion in assets being moved around.

By Jill Zucker, Jonathan Gordon and David Schiff

Looks can be deceiving.

Overall growth in assets held by affluent Americans — those with $100,000 to $10 million in investable assets — was a sluggish 2 percent in 2015, creating the impression of a wealth management industry in stagnation. Beneath the calm surface, however, an estimated $3 trillion (or 12 percent of assets) was in motion. For wealth management advisors, this asset flow represents both a threat and an opportunity, depending on their ability to retain and capture a disproportionate share. Competition for these assets will accelerate in coming years, with industry incumbents and startup attackers launching new offerings and seeking to open new channels.   

New McKinsey research reveals the causes of this movement of assets and sets out four practical marketing and sales tactics advisors can deploy to attract these flows. Over 50 percent of affluent consumers moved money at least once in 2015, with transfers between institutions representing most of the movement — about 60 percent, or just under $2 trillion. Market pressures, including regulatory change and emerging competition from digital players, are likely to accelerate the flow of assets.

Six Insights Regarding Money in Motion

  1. Yesterday’s competitors may not be tomorrow’s. Traditionally, most wealth management advisors have focused their competitive sights on clients at firms with business models resembling their own. But when it comes to moving their assets, clients take a much broader view: only 20 percent of net transfers are to firms with a similar business model. Recently, advisors at direct providers and regional brokerages have gained the most from the movement of money.
  2. The majority of consumers are now comfortable with remote human advice. According to McKinsey’s research, over two-thirds of consumers, across ages and affluence levels, are comfortable with remote advice from human advisors. This growing comfort level will likely lead to more money in motion flowing to advisors with robo capabilities.
  3. Consumers may not always know what triggers them to move money. Consumers often cite disappointing investment performance or the desire to consolidate accounts, as the primary motivations for transferring their money. However, statistical analysis reveals that the most powerful triggers are advisor outreach, dissatisfaction with product offerings and clients’ job changes or retirement.
  4. Advisor outreach — timing is everything. When an initial trigger of advisor outreach coincides with a second trigger of a family-related event i.e., getting married, having a child or paying for college, the client is 13 times more likely to respond with a shift in assets. And when advisors reach individuals dissatisfied with their current advisor and institution, clients are 19 times more likely to move money.
  5. Successful firms provide a seamless client experience. The most important avenues for attracting money in motion are mobile channels, as well as the classic methods of social and professional recommendations, and talking to an advisor in a branch or by phone. Consumers considering a change seek a mix of digital and traditional touchpoints, making a seamless experience critical.
  6. Frequent client contact is critical. Whether the outreach is personal or digital, the more often advisors reach out to their clients, the more satisfied clients are with both advisor and their institution.

Capturing Money in Motion

To capture a healthy share of money in motion, wealth management advisors must commit time and investment to optimizing their interactions with clients and prospects. Four actions are critical to a successful approach:

  • Develop targeted and personalized outreach. Advisors need to focus marketing resources — particularly in digital media programs — on anticipating prospects’ and clients’ most persuadable moments, such as retirement and job changes. Some wealth management firms are going a step further, deploying software that allows advisors to send emails that feel personalized, yet are automatically driven by the home office.
  • Boost client engagement. While some wealth advisors are hesitant to bombard their clients with frequent contact, many should be more active in driving ongoing client engagement. One approach is the thoughtful packaging of viewpoints and analysis, playing to the analytical strengths of an advisor team or parent firm.
  • Invest in data and predictive analytics. Advisors should lobby parent organizations to deepen their analytical capabilities by combining internal behavioral and demographic data on clients with external sources such as social media. In addition to their use of models predicting life events, advisors will benefit from quantitative insights on client segments, as well as anticipating the next product to sell and the best times to contact clients.
  • Look to high-growth industries for inspiration. Industries with successful growth stories are ripe with examples for wealth advisors. One is the loyalty tactics of the travel and retail industries, such as recognition and premium service for high-priority customers. Advisors can also learn from high-performing sales forces, such as in pharmaceuticals, that optimize team structure and geographic coverage and emphasize ongoing training and professional development.

Successfully adopting these priorities will not happen overnight. Advisors can start with focused initiatives that offer clients small yet valuable sets of products, and refine the program based on the results of each iteration. The financial outlay need not be large; the greater commitment on advisors’ part is to develop a client service approach that is agile and suited to the changing environment. Reorienting a firm’s model to attract new business can seem daunting, but in an industry where $2 trillion is moving among institutions annually, sticking to an outdated process is by far the greater risk.

Jill Zucker is a New York-based partner and leader of McKinsey's Wealth Management Practice in North America. Jonathan Gordon is a partner and Co-Leader of McKinsey's Global Marketing Practice. David Schiff is an associate partner in McKinsey's Marketing and Sales Practice.

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