fwm: confidence-shakers and deal-breakers

Confidence-shakers and Deal-breakersWhy Wealth Managers Can Fail to Convert Prospects into Clients

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They sent two managers to the meeting. Having an interview with two people across a table is fairly intimidating. It was over-powering, this hard sell by two of them, with them both promising too much – I felt – about what they could do.

– A male user in their 60s with £250,000 - £500,000 to invest

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A Note from the Founders

findaWEALTHMANAGER.com is about to enter its third year and we are soon to build on our success in the UK with a Singapore launch. Our online matching service was developed to help high net worth investors navigate the wealth management market more effectively and to help high-quality institutions reach out to prospective clients in a more cost-effective and targeted way. findaWEALTHMANAGER.com seems to have really struck a chord with investors and our user numbers continue to climb.

We really value the fact that findaWEALTHMANAGER.com has a direct line to those who matter most: end clients. This is also clearly of huge value to the media, who are increasingly interested in the wealth management sector and keen to hear about what clients are asking for today. As such, we are regularly appearing in both the broadsheet and financial press conveying the views of our clients and talking about the trends our research reveals.

Being able to talk to clients in depth and as an independent third party about their experiences of wealth management puts us in an enviable position. In many instances, we are able to gather insights that institutions would never otherwise hear. Furthermore, these conversations occur at all stages of the client lifecycle and include all kinds of experiences, both good and bad. We believe these interviews are essential reading for both senior executives and front-line advisers, and we are delighted to be sharing our research with the wealth managers on our panel.

This is the first in a series of papers which will be distributed exclusively to our member firms, with each tackling a different area of the client experience and investor trends. We are starting, as logic would dictate, with the early stages of wealth management relationships and specifically the areas where things can sometimes go awry.

All names of individuals and institutions have been fully anonymised and it should also be noted that individual comments have been selected to illustrate common themes which emerged rather than just one-off instances of a particular mistake. A very wide range of wealth managers were discussed and our aim is to highlight broad trends.

Dominic Gamble and Lee Goggin Co-founders of findaWEALTHMANAGER.com

A Note from the Founders

https://www.findawealthmanager.com/blog/press/

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First contact and meetings

What can turn prospects off?

The initial calls and meetings a client has with a wealth manager are really the first time the firm can start to try to deliver on its brand promise; this is also highly likely to be a time when the institution is being directly compared to peer organisations the client might also be considering across a number of variables. As the client moves towards a buying decision, softer considerations like the client-adviser match can matter just as much as the “hard numbers” of fees and performance track records. As such, initial meetings and calls are rightly described by the client quoted adjacently as “sensitive situations” where the best candidate doesn’t necessarily always get the job – simply because they hadn’t presented themselves to their best advantage or reacted well when asked for something a little out of the ordinary.

As might be expected, there were also instances mentioned of what is undeniably poor practice. While these are surely one-off incidents, it is a sobering thought that the instances outlined below and overleaf all happened to clients at leading wealth managers not very long ago at all. Even more sobering is the fact that in a large amount of cases these really were deal-breakers, leading the prospect to walk away from that firm. In many more instances the client invested a smaller amount than they had originally intended, often splitting a portfolio with possibly a view to choosing an alpha provider once one firm has differentiated itself more. Considering the average tenure of a UK client is around eight years and the average account opening size of our users is around £700,000, mistakes like those described below have clearly been very expensive for the firms concerned.

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First contact and meetings

One of the wealth managers was clearly in a state of disarray following a restructuring. That came through very clearly and for that reason they were excluded from my shortlist.

– A male user in their 40s with £2,500,000 - £5,000,000 to invest

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I asked one of the companies to call me at a certain time. I waited and waited but they never did, even when we scheduled another call. One of the most important things is your first impression, so I’d already started to write them off at that point.


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It’s like all processes of interviewing: they are sensitive situations. I know that some people can be distinctly short on charm yet very good at what they do, but I just had to choose the one that I thought I’d get on best with. There may have been someone better, but you just have to go with that feeling.


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Poor organisation and internal issues

Our conversations with users reveal that organisational and administrative failings do indeed often prompt prospects to walk away, as do indications of current (or future) disruption. We are finding that clients are increasingly interested in the ownership structure of a prospective wealth manager, particularly if M&A has unsettled previous relationships or caused service standards to slip.

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What can turn prospects off?

One guy was just awful. He’d obviously been on a sales course and to be honest he was a bit spivvish. He just went straight into his sales patter and to me he was just trying to sell rather than understand my needs.

One I saw had these lavish offices in London, now who pays for that? It does make you slightly concerned, particularly as this company wasn’t even at the top end. You do get the impression that people are living quite a luxurious lifestyle off of you. The one I eventually chose has open-plan, practical offices. It was clearly a working environment and I liked that.

With some of the other wealth managers I looked at it felt that they were trying to sell a product that didn’t particularly meet my needs. I didn’t feel I’d be getting an individual investment service. Speaking to my friends in a similar situation, what we all want is to perceive that it’s a solution particular to our specific needs. For all I know my current provider might be giving me the same as everywhere else, but it’s the perception rather than the reality. Everyone likes the idea that it’s particular to you.

– A female user in their 60s with £1,000,000 - £2,500,000 to invest



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Too much hard sell; too little understanding

The interviewees are highly sensitive to feeling “sold to”, particularly if they feel their profile and needs have not been fully investigated.

Steering towards standardisation too soon

Many clients are aware of the trend towards commoditised investment strategies and several that we spoke to have a good understanding of their merits. What they said they do not like, however, is to feel that they are made to fit the product rather than the other way round.

The significance of setting

There are, of course, many client segments for whom brand prestige and a “luxe” feel are important. However, several of the interviewees indicated that they had been turned off by wealth managers occupying what they perceived to be overly opulent premises. Pleasant, but clearly practical, offices seem to resonate particularly with slightly sceptical clients.

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Fees – 13%

Performance – 33%

Service – 54%

The all-important issue of fees

On the subject of fees, the interviewees were generally of the view that the RDR reforms hadn’t quite delivered the level of transparency over fees clients might have hoped for (many actually directly referenced the RDR). What several said they were looking for was a simple way to compare the fees of several wealth managers. Significant frustration is caused by the fact that fees tend to be broken down in different ways by different institutions.

The interview panel included a number of clients who had been really quite aggressive in negotiating fees down – and interestingly these were of very different profiles in terms of age, profession and gender. In all instances the clients had arrived at a number they were willing to pay and simply removed those wealth managers which could not meet that figure from their selection process. It should be noted that the clients in question bore “no hard feelings” towards these institutions. However, several interviewees did express surprise that some firms were able to accommodate them on costs immediately and others were unable to come close, despite the proposed mandate being the same for each firm. These clients did put forward the possibility that offering relatively small portfolios may have impeded their bargaining power at some institutions, further highlighting their appreciation of the commercial realities of managing wealth – which is something we’re hearing a lot more about in these cost-conscious times.

An interesting observation from the discussions on fees is just how many clients declared themselves – completely unprompted – as being “very concerned with value for money” or similar. Even in cases where the investor in question was quite new to professional wealth management, interviewees reported having attempted to make a meaningful analysis of what a firm would likely deliver in terms of returns net of fees. Comments like “X seemed expensive for that level of performance” were common, even among self-professed novices.

It would be helpful if all companies had to present a standardised template showing their charges to enable proper comparisons to be made. This should automatically be given out with the advertising literature when you arrive.


If I’d have known that performance was going to be virtually the same I would have looked more carefully at other things like incentives. One of them offered me a fee holiday for part of the money I was bringing over, for example, and I’d have thought more about that.



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Reasons our users leave wealth managers

Clients leaving

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The importance of an “all-in” figure

Clients have become far more cost-conscious as a result of increased transparency over fees. What wealth managers may not appreciate, however, is just how focused some clients are on having absolute clarity over how much a wealth manager will add – net – to their bottom line.

Something that seems to be a particular annoyance to clients is discovering what they perceive to be a “hidden fee”. One client recounted how her prospective relationship manager made much of the fact that she would not get charged transaction fees on her account – only for her to see when she looked through the contract a fee for registering a nominee account which had not been mentioned.

Another particularly cost-conscious interviewee expressly asked for what he describes as “a clean number” from a range of prospective wealth managers, but found this to be a painful process which saw him “correct numbers and clarify endlessly”. He wanted the institutions vying for his business to come in at a very competitive Total Expense Ratio for running his portfolio which included all management fees, underlying charges, Stamp Duty and VAT, yet in most cases there was something missing which meant that the actual TER would be significantly higher.


A significant year-over-year uplift in demand for discretionary investment management services

Growing Discretionary Demand from Q1 2013 to Q4 2014

Q4 2013 66%

77%Q4 2014

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

69%

77%

My key insight from doing this is that wealth managers find it almost impossible to tell you what the real cost of running a portfolio is. Stamp Duty is 0.5%. If you’ve got a high churn in a portfolio that pushes your costs up significantly, but they don’t include it. They forget the VAT, because they don’t consider that to be a cost. I want to say to them: ‘It’s money out of my pocket so it should be in the TER. It may not be money in your pocket, but it’s still relevant.’ It’s like these things are almost irrelevant to the wealth managers.


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What does impress clients?

As described in the following pages, several interviewees said that an offer from the institution for a representative to come to their home was something they really appreciated or would be impressed by. They also volunteered a variety of other things which had had a very positive influence on their feelings towards a particular provider. Predictably, they all centred on the person feeling that the institution really wanted their business and that it was keen to understand them as an individual before proposing any solutions.

The interviewees indicated that they were also very keen to learn about the prospective wealth managers they were matched with, although not necessarily to learn about any venerable history the institution may have. Investment ethos and approach, risk management, client loading and ownership structure were all volunteered by the clients as areas they were interested in – particularly if they had had a disappointing wealth management experience previously.

Several clients indicated that they had been sent the wealth manager’s presentation in advance of meeting with them and they really liked the fact that they could prepare questions and have more of a dialogue when the meeting went ahead. While wealth managers are right to fear bombarding prospects with information, it should be noted that many of the interviewees referenced having “studied” each firm’s literature in its entirety before meeting with their representatives.

One interviewee said he felt it was incumbent on him to carry out a reasonable amount of research on the prospective wealth managers he was considering since he was looking for a long-term relationship and didn’t relish the thought of having to search again for a new provider the next year. He also made the salient observation that, “This is the biggest investment I’ve made to date so I need to do some due diligence on them”. Importantly, this client wasn’t offered as much information as he was looking for and he had to request it. It might well be the case that information overload isn’t perhaps something to fear so much as clients feeling that they aren’t being facilitated to find out more.

User preferences for investment services, at the end of Q4 2014

A breakdown of our user demands for investment services by gender


FemaleMale

Discretionary

Advisory

Execution-only9% 3%

88%75%

35% 12%

Discretionary

Advisory

Execution-only

77%

32%

8%

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A “feel” for the firm

Something which comes through very strongly in our conversations with findaWEALTHMANAGER.com’s users is that clients often perceive wealth managers to all be essentially the same. As illustrated by the comments overleaf, many clients are actually very keen to get a greater sense of a wealth manager’s investment ethos and what the brand represents. Since the wealth managers on our panel are usually being compared to two other matches by each client, we would urge them not to underestimate the power of “setting out their stall” very clearly early on in their interactions with the prospect. In the UK’s highly diverse (and arguably quite opaque) wealth management market, clear messaging on what an institution stands for can be a crucial differentiator.

When it comes to the factors which influence a client’s decision to go with a particular wealth manager, it hardly needs to be said that a plethora of tangible and intangible elements are at play. Wealth management is, however, very much a relationship business and the ability of client-facing personnel to forge a personal rapport quickly with a prospect is of course absolutely key. Importantly, this also extends to the client services staff and the assistants of relationship managers who are often interacting quite heavily with prospects. In clients’ minds, exchanges on even quite mundane issues can stand as a proxy for the wealth manager’s service standards generally. For instance, one interviewee recalled what marketers refer to as a “wow” moment when an assistant tracked a relationship manager down while he was on holiday in order to make an appointment to suit the client. Significantly, that firm is still under consideration, despite its charges being higher than the other institutions the client was matched with.

Ultimately, however, an incredible amount rests on the relationship manager’s ability to connect with the client in quite a short space of time. Yet there is a lot that firms can do to weight the odds in their favour on this front by thinking carefully about who would be a good match for each prospect – in terms of both personality and expertise. We see a good deal of divergence in how wealth managers deal with the leads generated by findaWEALTHMANAGER.com and it is abundantly clear that those which allocate leads efficiently and effectively have higher conversion rates. Those firms that allocate leads have a top quartile conversion rate of 33% or more. Meanwhile, the wealth managers which don’t allocate fare far worse, converting only around 8% of business. Arriving at the precisely the right skills and personality match first time might be tricky, which is why flexibility over subsequently changing is arguably required, but our research clearly shows the value of a systematic approach right from the start.

Our user demand for regional wealth managers

Better adviser/client match = better conversion

Wealthmanager

Client


Historical data

10%

Q4 2014

25%

>33%

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What do clients want to see more of?

A gentle initial approach

More explanation of ethos Choice of adviser

Pre-sending presentations


With the company I went with, it wasn’t a hard sell at all. For the first phone call we had a general conversation about my background and interest in investments, geared towards to finding about my reason for doing wealth management.

They sent the presentation before the meeting. I think that’s a great idea because you can look at it before you go and ask informed questions while they talk you through it.

I really got on with my adviser, which is why I went with that firm probably. I did know that I could ask for someone else though, which is good.

I got that I could ask for an alternative investment manager. I did actually have an issue first time so I requested an alternative.

I think that it would be good if more of them explained their investing style, like if it is value-focused or defensive, a little bit better. I like to know what they are as a house. I’d like to hear more about that from the person I meet.



– A female user in their 20s with £500,000 - £1,000,000 to invest



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Home visits very highly valued

findaWEALTHMANAGER.com attracts HNW individuals from across the UK and a significant proportion are based in the regions. While in general about a tenth of our users are specifically looking for an institution with a regional presence, others are happy to travel to London (or perhaps another of the big cities) to meet with their wealth manager for regular meetings.

However, a number of clients brought up the possibility that they would look very favourably on an institution which offered to come to their residence for an initial meeting – even if they largely said they probably would never actually take up the offer. Of course, the high costs of providing this at the prospecting stage means that most firms will probably reserve this for the clients at the upper end of the wealth scale. That said, several clients with comparatively modest investable wealth said they had indeed been offered a home visit from a variety of firms and had appreciated this very much: not wanting to travel due to health issues was cited on two occasions.


Conclusions

As with the example of home visits above, it is not always possible to give all clients in every segment the absolute personalisation that institutions would surely wish to if costs were not a consideration. However, the interviews carried out for this paper, and all the conversations we have had with users since our launch, clearly show that there are a number of improvements wealth managers could make to their approach to client acquisition which have little to do with budgets. Rather, they are about looking at things from the prospect’s point of view and better appreciating the emotional aspects of choosing a wealth manager, of which there are of course many.

The industry has been talking explicitly about the client experience and client-centricity for some years now, and we have been very pleased to see regular client satisfaction studies become the norm among UK wealth managers. Any effort wealth managers make to better understand the wants and needs of their clients will pay huge dividends for them – helping them to make strategic decisions with more confidence and to single out “easy wins”, such as those described in this report, which are likely to make all the difference to their client acquisition and retention rates. We hope to significantly enhance that understanding by sharing our own unique view of what HNW individuals are looking for today and we look forward to bringing to light a great deal of insights from across our user base in the months and years ahead.

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Contact usT: +44 (0) 207 193 5691 E: [email protected]

@findaWM findawealthmanager-com

Find A Wealth Manager Ltd (FRN:580712) is an appointed representative of Talbot Capital Ltd which is authorised and regulated by the Financial Conduct Authority (FCA). © Find A Wealth Manager Ltd 2015. All rights reserved.

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Topics include:• The factors which influence HNWIs’ buying decisions• Client experience issues – pre, during and post sign-up• Client preferences as to asset classes, markets and

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fwm: confidence-shakers and deal-breakers

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