Old-school advisers exit the industry
Until recently, large wealth managers were weathering the financial crisis pretty well. Their margins, and a lack of direct exposure to credit problems, made them a ray of sunshine in the investment banking gloom.
But the old-school approach of financial advisers to “sit tight and weather the storm” is out of date. Large banks that retain their credibility are shooting for clients worth more than $30m (€22m). They are not interested in relatively small accounts.
A conference in Boston, hosted by NorthStar Systems, has revealed crucial differences between traditional advisory techniques and the new model.
Delegates said the next generation must advocate continuous portfolio adjustments into sectors such as alternative investments and high-quality bonds. A traditional adviser would say current market conditions are another bear market, albeit a bad one. Modern managers should respond to circumstances not seen in recent history.
Delegates said that since the crunch had begun, they had spent more time helping clients through portfolio changes.
Some wealth managers want to bring clients back to basics. Susan Hirshman, consultant and former managing director at JP Morgan Asset Management, said goals must be developed for “must-haves, nice-to-haves and aspirations” so that in a down market, “must-haves” could be financed.
Not enough time has been spent on educating clients about vital issues, with the result that some of them have voted with their feet. Russell Campbell, vice-president at Amcore Financial, said to retain customers, he recommended “realigning to higher income. A balanced portfolio with a 6% yield.”
One conference delegate said affluent clients were shifting their business to boutiques, because they did not have large enough accounts to satisfy quality banks such as JP Morgan. Campbell said their fees would count for more at smaller firms, prepared to offer the right service.
Modern technology and outsourcing can make smaller firms competitive, if they can respond to demands for effective servicing and communications.
Hirshman said: “Don’t push a story. Listen to your advisers to get bottom-up feedback.”
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