The Evolution of Wealth Management

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The Evolution of Wealth Management

• Garth Gibbes Carl Brillinger
• April 29, 2014

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What is your current market for your Products
Services?

• Who is your client?
• Why do they do business with you?
• What needs they have that you serve?
• What do you provide them that is unique?
• How do you differentiate yourself?

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How did Wealth Management Evolve?

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What is Wealth Management?

• Why does someone buy or own mutual funds and
  stocks?
• What is the purpose of an investment?
• Why does a client care about superior investment
  returns?
• What role does money play in a clients life?
• How important is trust?

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Wealth Management a working definition

• An integrated approach to a clients financial
  planning needs
• Focuses on client before product sales
• Combines advisory services with product placement
• Geared to a clients life stage needs

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How did Wealth Management evolve

• Pre-1980, Financial Planning focused on affluent
  clients
• Effect of the baby boom
• Crumbling of four pillars
• Growth of product suppliers and products
• Explosion in number of investment advisors
• Changing client needs as they move through their
  life cycle

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How is Wealth Management Delivered?
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The view
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The key industry players in Wealth Management

• Clients
• Manufacturers
• Regulators
• Distributors (advisors)
• Educators

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The Evolution of Wealth Management
1. The industry prior to 1980
Investment Advisors
Insurance Agents
Chartered Banks
Trust and Estate
Family protection Young families
Business protection Annuities,
retirement plans
Custodial services Transfer agents Trustee role
Tax planning Estate structure
Affluent clients Stocks and bonds
hot tips Investment selection
Personal banking Deposit services
Guaranteed products
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The arrival of Wealth Management

• Within the last decade, services increased as
  stock market bubble burst and corporate scandals
  surfaced
• Clients demanded trusted source of advice
• Advisors are becoming better educated
• Baby boomers and parents required help securing
  their retirements and transferring wealth to
  children
• High net worth clients and families now have
  access to more skilled professionals
• Wealth management firms now compete on trust and
  reputation and recognize the importance of
  fiduciary duties

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The industry response to aging clients

• More emphasis on lifestyle issues and the role
  money plays
• The emergence of the key advisor or Chief
  Financial Officer
• The explosion in products and approaches to meet
  client needs
• Mass-marketing of products and services
• Increased focus on client education

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The evolution of the distribution industry

• Pre-1980 investment advice was commission based
• Insurance and mutual funds based on distribution
  model
• Legal and regulatory restraints on advisor
  activity
• Deregulation occurred in U.S. in 1975 and Canada
  in 1992
• Crumbling of the four pillars came as a result
  of deregulation
• Distribution through financial advice became the
  norm
• Canadian chartered banks play a major role in
  distribution and industry change
• Wealth management approach became effective way
  for distributors to create cross-selling
  opportunities

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Types of distribution companies

• Full-Service investment advisors
• Mutual fund financial planners
• Insurance financial planners
• Fee-based planners
• Referral financial planners

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Wealth Management and Advisors

• Advisors are adjusting to their aging clientele
• Advisors moved from specialists to generalists
• Advisors are marketing themselves as
  comprehensive planners
• Advisors hold multiple licenses (insurance,
  investment management, commodities, futures,
  etc.,)
• Advisors are using the Wealth Management Approach
  as a way to differentiate themselves and provide
  more relevant information and advice.

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Delivery of Wealth Management Advice

• Commission advisors take a percentage of value
  transaction
• Fee-base advisors charge a set fee for their
  advice based on asset size
• Fee-for-service advisors charge by the hour or
  the plan
• Fees plus commissions advisors receive
  commissions from manufacturers (trail commissions
  or service fees) may also charge fees for plans

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Who is providing Wealth Management Advice

• Full-service investment advisors
• Licensed financial planners
• Mutual fund sales people
• Insurance agents
• CAs, CMAs, CGAs and accountants
• Do-it-yourself (internet, media, on-line
  investing etc.,
• Commercial Banking people

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What types of advisors practice wealth management

• Established advisors have a mature book of
  business and long-term relationships with clients
• New advisors desire to market a different
  approach to client relationships
• Women advisors taking a more holistic approach
  to wealth management
• New immigrant advisors Understanding the
  specific cultural needs

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Clients who receive wealth management

• High net worth clients clients who seek a key
  trusted advisor who can advise on all areas of
  their financial life
• Business owners clients who are transitioning
  out of their business and into retirement
• Investment buyers clients who incorporate their
  investments into a bigger financial plan
• Senior executives clients who are looking at an
  integrated approach to their financial plan and
  an advisor who can save them time
• Women clients clients who take a more family
  view of financial planning and investing

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The role of the wealth advisor

• To understand the clients views of money and to
  match financial solutions to client needs
• To educate client on issues they may not be aware
  of
• To coach client to set and attain financial
  goals
• To act as a personal Chief Financial Officer

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The Personal Chief Financial Officer
Wealth Advisor
Investment Management
Insurance Needs
Tax Issues
Business/ Credit Issues
Estate Planning
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Wealth Planning (from An Advisors Point Of
View )
Investment Management
Tax Planning
Estate Planning
Income/Cash Management
Charitable Giving
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Four client financial life stages

• Accumulation phase Family and career building
• Preservation phase Planning for retirement and
  life after work
• Converting wealth to income Utilizing assets to
  finance lifestyle
• Transfer of wealth Passing on assets before and
  after death

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How to become the best wealth advisor

• Focus on your clients overall financial needs
• Become a trusted advisor by not being a product
  pusher
• Improve your listening skills
• Want to be in your business for the long-term
• Understand the changing industry
• Invest in your wealth management education
• GOODLUCK!

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• Q A