One of the main takeaways from the data, compiled from interviews with senior executives from 12 of the top 50 UK wealth management firms, is that discretionary fund managers (DFMs) are “facing mounting pressure to provide a distinct proposition as they all vie for the same pot of money”.
But in order to market their unique selling points to clients, wealth managers need to focus on what clients care about when selecting an adviser.
Globally, 36% of high net worth individuals base their decision on where to stow their assets on the firm versus 24% who make this decision because of an individual wealth manager.
Therefore, wealth managers need to be more strategic about cultivating and leveraging their brand value moving forward.
Trust beats performance
But that’s not to say quality advice will play second fiddle, SEI added.
Interestingly, SEI’s research revealed that clients viewed trust and expertise as more important differentiators than investment performance.
Innovation through tech and other means was also cited as another way for wealth managers to stand out in a congested marketplace.
However, only a sliver of investment firms’ budgets is going to proposition development (14.7%) and business model changes (14.8%), according to research by Capgemini, referenced in the SEI report.
Omni-channel strategy
Although UK wealth managers face many of the same regulatory and cost hurdles as active fund managers, where many fund houses have the advantage is in refining their tech capabilities.
Asset managers like Charles Schwab, Vanguard and BlackRock have either bought or built robo-advisers to beef up their offering.
And with forecasts hinting that robo-advisers will manage around 10% of total global assets under management (around $8trn) by 2020, wealth managers will need to have an omnichannel strategy to service the evolving needs of their client base, said SEI.
Outsourcing and industry consolidation will also be key components for delivering profit and growth to future wealth management firms.
Although avoided by many firms, strategic outsourcing is often times what is best for the client.
Inorganic growth strategies, whether through M&A deals or divestments is also a vital means of survival for traditional firms to leverage economies of scale and “bringing firms into the 21st century”.
