Behind a Wealth Management practice

Raul Tortima - 01/11/2019

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Despite all new trends in the aftermath of the 2008 crisis - namely robot-advisors, low interest rates, stricter regulation, the millennials, the essence behind a wealth management service has not changed. Because of these ever alive factors, which I`d rather call dimensions, the best way to address these challenges is plunging even deeper into the core of a daily practice, trying to extract improvements as much as possible.

The operational dimension does not get much credit for all the firm`s success, to a good extent due to the expenses view usually associated to it. It`s a narrow perspective, although there may be cases in which the efforts in processes and technology to improve it may not pay off at the end. Therefore it`s essential to understand when, why and how to change the current modus operandi. When optimizing the line of production - entire front to back - it`s absolutely important to find the best balance of nimble and safe, not only releasing the staff from the burden of several double checking, but mostly resting assured they will have as many noble activities as possible. By streamlining and eliminating barriers across back, middle and front-office, as well as delegating to an external provider all non-vital functions, it`s possible to truly turn the automation into an ally, not the other way around. The final outcome is more productivity, happier co-workers, processes less prone to errors and reduced risk associated to the firm`s reputation.

The client dimension should be always based on transparency, confidence and partnership. Despite the recurrent saying "client comes first", numbers show a quite different reality. In the end, what really counts and produces a strong loyalty is establishing among all clients a feeling they are paying a fair value for all the provided services. The cornerstone to acquire that is basically a combination of keeping the clients confident, somewhat relaxed about what the firm does, along with a strong understanding they are special, unique to some extent. By making the clients truly believe the wealth manager knows his pains and will do his best to alleviate them, the wealth manager becomes a partner, rather than just another service provider. When coupling these approaches with a strong transparency by opening all the firm`s kitchen - showing internal processes, systems and alike - the client feels less as another number, but rather as a partner, that the firm and the wealth manager truly care about.

Being the financial dimension both the final product and the investment underpinning all the other dimensions, it is paramount that revenue and profit always come together. Growing revenue, but adding proportionally more expenses may be a short-term strategy, but it is a path to suicide in the long term. In this sense, having measures that expand basic AUM per client is a good start, like total profit per client (taking into account all prorated expenses) and any growing potential, based on a hidden AUM still to be catched. This outlook may highlight possible distortions and help boost the profit, keeping the same pace of revenue growth. Automation also plays a very important role in this matter, but that should not be overlooked, to avoid the common case of a medicine killing the patient, when the technology or heavy processes overwhelm a reduced staff being unable to absorb it.

There is no doubt about the positive impact for the firm when it exposes itself as a state-of-the-art kind, always in touch with the forefront of a wealth management practice. However, it is as important to convey a strong idea of continuity, that the firm will be there the next 50 years ahead. Having a true technology partner, that deeply understands the investment market business, all the available pieces of technology and, even more importantly, how to couple them correctly, is a mix of science and art. There may exist a bunch of tech providers selling the same approach, but finding the one provider that truly understands the specifics of a given firm, why and how to apply some tech tools that may really improve profitability and leverage a firm's brand, is like finding a needle in a haystack.