DELIVERY HOW YOU DELIVER IS AS IMPORTANT AS WHAT YOU DELIVER!
Jamie McLaughlin CEO at James H. McLaughlin & Co., LLC
We are in the very early innings of a shift in demand where few wealth management firms meet the current demand from families of great wealth and complexity. Families are yearning for investment and non-investment advice mostly free of conflicts. Perversely, they have been unwilling to pay the true costs of these services and firms have socialized them that they can get these services at discounted fees or pricing levels below their true costs. Separately, wealth management businesses economics depends on top line growth where performance and compensation management systems often prefer asset gathering over client service delivery. Consequently, the discovery and guidance process is often not disinterested and too often riddled with a sales bias where a more nuanced feathering out of the true client need is often overlooked or neglected. Two trends are reshaping the integrated advice business broadly and shifting pricing power to wealth management firms who can evolve and adapt to
89 FAMILY OFFICE ELITE MAGAZINE
today’s market exigencies. First, transactional business models, where firms manufacture and distribute products while also advising clients on those same products, place the firms in an inherent conflict. They are being forced to adjust to a new reality where transparency and disclosure are increasingly in favor. Second, the market leaders in wealth management have moved from delivering products or services to focusing on how they provide financial solutions. In this post-product, post-service environment, clients are yearning not only for advice, but for something more existential in nature; an experience that goes well beyond a discussion of their financial affairs. Unfortunately, most clients have been conditioned to expect to be disappointed in the utility of the advice itself. And they have little reason to imagine what else an advisor might provide. The consumer goods and retail industries made this transition some time ago. Successful companies now differentiate themselves by the design of the client experience. A strategy that started with luxury goods — names such as Tiffany, Lexus and Ritz-Carlton come to mind — has trickled down to mass-market brands, including Starbucks and Target. Now it’s being deployed in wealth management. Together, these two trends portend the disintermediation of a concentrated group of manufacturers and distributors. And despite a highly fragmented market of firms and professionals, advisors who provide impartial advice and a unique client experience will command pricing power. Wealth management firms that remake themselves to provide such a client experience will be the ones who not only survive, but thrive in a post-product, postservice era.