Advisers feel the heat

Tuesday, July 7
Posted 2 p.m. EDT

According to the 13th Annual Capgemini and Merrill Lynch World Wealth Report released in June, the number of global millionaires dropped from 10.1 million to 8.6 million in the past year. That's not happy news -- not only for the wealthy who have lost money, but for financial advisers who design and service their portfolios.

In a recession, when the "trusted adviser" becomes more crucial to clients who are watching their portfolios drop, financial headlines touting the record-breaking ponzi-scheme crimes of Bernard Madoff and Allen Stanford are contributing to a crisis of confidence among clients. (In a Vanity Fair article, Stanford is quoted as saying to an employee of his Caribbean banking startup: "It is unbelievable. People are so stupid, they will risk all their money, give it to someone they don't even know, for two points.")

The PriceWaterhouseCoopers Global Wealth and Private Banking Survey titled "A New Era: Redefining Ways to Deliver Trusted Advice," notes that only 43 percent of client relationship managers feel they have achieved the status of trusted adviser. The survey collected data from 238 wealth managers in 40 countries.

In a Webinar presentation last week, C. Steven Crosby, the U.S. leader of Private Banking and Wealth Management for PWC, said that almost half of the wealthy trust their own research as opposed to that provided by their wealth advisory firms.

The survey also noted that during the first quarter of 2009, the average U.S. firm experienced client attrition of 6 percent to 10 percent, and asset attrition of 11 percent to 25 percent.

To staunch the losses, the survey concludes that firms and advisers need to focus efforts and money on client retention, which includes offering "best-of-breed" money managers and a menu of nonproprietary products, better strategies for retirement and intergenerational financial planning, and increased adviser training in "soft skills," meaning effective and transparent communication.

The survey says that expansion plans have been scaled back for many firms, except for some of those in the top tier. Those firms that can't step up to the new client-service model will likely be acquisition targets.

The impending sea change in the wealth management industry -- even if forced by the scorched economy -- should bode well for clients who are seeking the best the industry has to offer.

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