As the wealth management industry continues to become more competitive, the need to establish your company as the go-to wealth manager becomes ever more vital.
WealthTech firm Kidbrooke recently asked; what is driving the competition for wealth management businesses to win with customers? According to the firm, technology is the watchword.
The company remarked, “Technology is the source of the problem, because it is driving down costs and fees while accelerating the commoditization of offerings. Technology is also the answer, because the intentional, intelligent application of technology can help wealth managers reinvent and differentiate themselves.”
Kidbrooke highlighted four key themes that are embraced by wealth management leaders – these being connectivity, trust, confidence and action.
Connectivity is often the first step to establishing a relationship – with many of those who are investing novices needing to believe they are able to trust their wealth advisor. Those who are new to investing may require more education on financial planning basics to understand both their aims and their risk tolerance.
Similarly, wealth managers should know those who are more experienced will not require advice like beginners, instead needing investment ideas that are more complex and sophisticated. Therefore, the key to differentiating yourself from competitors is to tailor your options to the level of knowledge of the customer – with Kidbrooke promoting a ‘simulation-based approach’ that can help financial advisors and wealth managers evaluate investment performance differences in future scenarios.
Similar to connection, trust is the second key theme wealth managers must work on with their customers if they want to stand out. This can include understanding what makes a customer tick, understanding concerns about outliving their pension savings and inflationary pressures during retirement – all key ways for wealth managers to build trust with clients.
Kidbrooke suggested using data to create anonymised case studies on how financial planning has helped other clients manage their fears and feel confident in planning their financial futures, adding that advanced financial analytics can help clients visualise how their investment choices can help them succeed.
The firm continued, “Leveraging award-winning financial analytics to analyse your customer data promotes trust and confidence in your wealth management service. Customers don’t want to be bombarded with doomsday predictions of runaway inflation nor do they wish to receive rosy forecasts of double-digit growth. They want to believe in the advice they receive, and therefore it is crucial to ensure that the analytics you use meets the latest industry standard.”
Trust can help breed confidence – which is Kidbrooke’s third theme. By providing them with support in financial plans and making decisions, this can build confidence among customers. The company used the example of uncovering unconscious bias such as confirmation risk, a bias that could steer a customer to make a bad decision, as a way to provide confidence to the relationship and stand out from the pack.
Another way confidence can be built with customers is through understanding where they are in their lives – are they getting married or having a child? Are they taking on a new job? These are just two examples, but can be big differentiators in a clients ability to be confident in their wealth managers.
The final theme of the cycle is action. Once a wealth manager has developed a connection, built trust and inspired confidence in their client – the client moves on to making their investment choices. From here, wealth managers should try to bring ‘simplicity to complexity’ – in other terms, start small with one fund or asset class to make the process less daunting than building an entire portfolio.
Wealth managers can also differentiate themselves by integrating technology into their service offerings and including non-financial factors such as attitudes towards risk and longevity in their customer profiles to help them understand how they make decisions at different points of their lives under differing market conditions.
Kidbrooke remarked, “Following the cycle of connectivity, trust, confidence and action is essential to attracting and retaining customers, and indeed motivating customers to refer their friends and colleagues. By creating a feedback loop, and assessing data you receive from customer conversations on a regular basis, you can drive your company to make continuous improvement to your offering. Meaningful customer dialogue is the best market research you can acquire.”
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