Many investment advisors are motivated to adopt the wealth management model in order to better serve their clients. Additionally, the wealth management model is much more economically rewarding. However, to move from being an investment advisor to a wealth manager requires a seismic shift in the way that an investment advisor thinks, works, and interacts with clients, prospects, and other professionals.
The first point of differentiation is that investment advisors sell specific products while wealth managers promote financial solutions. An investment advisor may offer a variety of products, but each product is principally investment-oriented. For wealth managers, the client’s long-range financial goals and needs, as determined by an informed and up-to-date client profile, lead to the choice of products. And while it may well be an investment option, the product will not be selected and promoted solely on the basis of the client’s investable assets or portfolio mix. In short, the product is subsidiary to the plan. This represents an entirely different way of going about – and thinking about – a relationship.
Overall, when an investment advisor recommends a product, he or she will lead with the product’s benefits. A wealth manager, in contrast, has an informed view of the client’s total financial picture, as well as a better understanding of his or her goals and limitations, and that understanding will dictate which products come into play. As such, a product will be positioned, not promoted, as the next logical step in an ongoing plan to meet the client’s long-term agenda. Along the way, the wealth manager engenders trust by putting their client’s needs and wants over a given product.
Because the products that an investment advisor promotes have a somewhat limited scope, there are a finite number of options from which to choose. Wealth managers can offer their clients the same investment choices (though positioned in a different way) and can also offer products and services that are not necessarily investment oriented, notably advanced planning options.
Wealth managers can deliver so many products and services because they have cultivated a relationship whereby any of them may be appropriate at a given moment. They have a richer understanding of each client’s personal and financial life that gives them more options to choose from. Again, in order to manage the complex financial lives of affluent clients, the ability to draw upon a wide array of services and products is usually critical. Moreover, wealth managers can combine various products and services as in the case of a customized version of private placement life insurance.
It is not enough, however, to simply be able to offer a longer menu of products and services. For a wealth manager, each product and service has to be put in the context of the client’s overall financial plan. The prime focus is the interplay of products and services and the way they can be integrated to address a client’s complete financial equation over the course of a long and mutually beneficial relationship.
