Trust in Wealth Advice

Historically, the fast track for wealth advisors to foster trust was to penetrate the client’s already established support network of lawyers and accountants and acquire new accounts through referrals. This practice was not malicious. In fact, it was born from a desire not to pursue prospective clients too insensitively.

However, it has pushed the wealth industry into developing bad habits; advisors now often struggle to actively demonstrate their relevance, instead choosing to wait for clients to come to them. In fact, we found that almost half of advisors still rely on referrals from existing customers as a primary source for new clients.

For clients, referrals go a long way, but they are not proof of the qualities or capabilities that may matter specifically to them. In fact, few investors state that they find suitable financial providers through a recommendation.

Naturally, for some investors, if the relevance of wealth advice is not immediately clear, then its necessity is immediately doubted. For a majority, the core drivers for not working with an advisor are rooted in their preconceptions about the quality or value to be gained from the relationship.

Most significantly, that majority of individuals, who currently are not clients, reference wanting to make independent investment decisions as a reason for steering clear of professional advice.

While some individuals may have the proficiency to manage their investments independently, this approach means that they miss out on the broader holistic advice offered by professional wealth managers. Whether it be planning for a secure retirement, addressing the needs or succeeding generations, or crafting a philanthropic strategy, a professional wealth advisor can support broader objectives beyond investment returns.

Specifically, an overwhelming amount of wealthy individuals believe that the core value of wealth management is rooted in the development and management of a goals-based financial plan, rather than the actual advice and direct management of investments. As such, those who have chosen to make autonomous investment decisions may be overlooking the invaluable strategic input that can be offered by advisors.

As a further proof point to this, active clients report extensive value offered by their advisory relationships, whether it be the efficiency and clarity that is brought to their wealth decisions, the enhancing of their confidence and knowledge, or the support received in family financial discussions.

Today’s investors are information hungry and resourceful. They do not want to be working with empty suits. They are looking for proactive advisors who can clearly outline their value add from the offset.

Proving value? In loose terms, that can be quite difficult. Advisors recognize the significance that investors assign to professional standards and so pursue qualifications with gusto. However, this stands at some risk of confusing consumers with an “alphabet soup” of acronyms and business cards.

Notably, the likelihood of advisors delivering quality outcomes for clients is higher when their professionalism has been evidenced. In fact, over half of clients who work with a qualified advisor believe that they have significantly reduced the time and effort spent managing their wealth, compared to just 40% of those unaware of their advisor’s credentials. Among clients who work with CFA® charterholders, the proportion rises to 61%.

In spite of this, the requirements of the professional wealth advisor are certainly in a state of flux. With new tools and technologies now available for managing wealth, the role of the wealth advisor and the value they can deliver to clients is shifting.

In fact, although over two-thirds of advisors feel that wealth management’s value is defined by “having access to skilled professionals at any time,” investors place another proposition element front and centre. Over half of private clients outline the principal function of wealth management as “the strength and breadth of the digital offering made available to the client.” The perception gap widens with millennials.