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To Serve the Global HNW, Advisors Must Become One With the Machine

Advisors have to take a leap into the future, both in terms of technology and their own roles.

Global private wealth continued to grow in 2016, but if advisors want to keep managing it, they’ll have to take a leap into the future, both in terms of technology and their own roles.

According to the 2017 edition of Boston Consulting Group’s annual Global Wealth Report, which surveyed over 125 wealth managers worldwide, overall global wealth increased by 5.3 percent in 2016, 1 percent faster than it did in 2015.

The biggest movers were those whom the study deemed “upper high net worth,” those with private wealth ranging from $20 - $100 million, who grew at an 8 percent rate. Furthermore, the number of wealthy, as well as the amount of wealth they control, continues to grow. The number of millionaire households grew at a rate that outpaced 2015 and BCG predicts millionaire households will control over 50 percent of the world’s wealth by 2021.

Needless to say, more clients with more money are good news for advisors. However, to reap the rewards of this growth at the high end of the wealth scale, advisors will have to adapt and grow as well. The days of the same group of middle-aged advisors shifting between firms like deck chairs are coming to a close. The study found that the sources of new advisors are starting to shift. Whereas the vast majority of new advisors simply came from other firms, more and more are filtering in directly from school and from other sectors and industries. 

As a result of these changing demographics, as well as the evolving needs of HNW clients, advisors’ roles are necessarily changing. Brent Beardsley, a senior partner at BCG, explains: “If you think about it, the modern financial advisor is also more of a life coach, who will say ‘let me help you think trough these things,’ rather than providing investment acumen. That investment acumen can come from central offices, CIOs, etc. I still need to deliver that acumen as a financial advisor, but I don’t need to construct it from the ground up.”

The study predicts three types of advisors emerging, based on the preferences and needs of targeted clients: 

  1. Orchestrators. The traditional quarterback ideal (this advisor has few) largely HNW clients who demand a great deal both in terms of time and performance. The advisor acts largely as the primary point of contact between clients and specialists.
  2. Enablers. This advisor will be associated with a large organization (be they firms, banks, etc.) and will marshal the back end resources provided by this circumstance to maintain a larger, self-directed client base drawn from a broader wealth band. His main job will be to provide easy access, including technical support if necessary, to the resources his organization provides.
  3. The Guardian. A more traditional solo practitioner, this advisor will target HNW clients with low involvement and understanding and will maintain a medium client base, 150-250, and wield a high degree of discretionary power.

"The important thing here is these [categories] are based on how the client wants to interact with the wealth manager, not how the wealth manager wants to interact with the client," says Beardsley.

The main thread that BCG believes will unite these managers is technology. They anticipate that in the future clients won’t find their advisors through the grapevine, but will be assisted by sophisticated matching programs. Further, wealth managers will have to change the entire way they go about creating and incorporating digital initiatives. The study maintains that while the vast majority of advisors currently recognize digital as a key to their future business and many have begun to put measures into place, the effort thus far has been somewhat haphazard.

According to Jürgen Rogg, partner at BCG, “The true client value and differentiating elements that are intended, have not yet been reached.” Many digital launches are too focused on opportunistic launches and matching what competitors are doing, with little attempt to disrupt or create breakthroughs, Rogg said. This lack of imagination is reflected in the fact that many digital “innovations” are largely exercises in feature selection based on a firm’s existing technology, resulting in arbitrary, disconnected digital silos.

BCG’s solution? Focus on the most important points of the client’s journey. “You should not think about 20, 30, 40 potential uses for client apps; you should think about 3-5 moments of truth that are essential points of interaction between a client and an advisor,” Rogg says. He also stresses that integration is key. “It’s good to start with various features, but is that cutting through to your back office, where money and efficiency sits? Technology must affect the core of your business, not just look good.

“We are absolutely confident and optimistic that those wealth managers who [adopt this approach] first will be able to leapfrog the competition.”


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