The VIP Forum held its annual executive meeting in Europe, where senior wealth management executives from across Great Britain, France, and Germany discussed challenges and solutions to boosting sales effectiveness. In fact, wealth managers worldwide have aggressive goals. A recent VIP Forum survey shows that most firms are expecting nearly 15% year-over-year revenue growth in 2010 – higher growth than during the 2007 peak. The question on everyone’s mind continues to be how to grow the business in a volatile environment with tepid prospects for organic growth.
The VIP Forum’s Executive Advisor, Robert Reed, led the meeting by discussing key characteristics of the post-crisis client in Europe. Members shared stories describing how clients remain distrustful of financial institutions and want more guidance to achieve their financial goals.
However, the financial crisis created a problem: 65% of clients believe they did not receive value from their advisors for fees charged. Clients’ skepticism of the wealth management value proposition presents a strong headwind for wealth managers to achieve their revenue goals. The Forum shared three proven ways to reignite the revenue growth engine, including maximizing advisors’ capacity for sales and service, applying engagement competencies in all client interactions, and leveraging behavioral finance to engage the skeptical client.
Throughout the day, several discussions provided interesting insights, including:
- Equip Less Tenured Advisors with Risk Management Tools: Some facts regarding risk management: Nearly three-quarters of clients rate risk management and product due diligence capabilities as an important factor in the decision to stay with their firm. However, less than 55% of advisors view risk management as “very important” in client retention and instead overestimate the importance of their relationships. These data points led to a discussion among executives regarding the lack of experienced advisors who are veterans of past financial crises. One member described the ideal advisor as “someone who can explain complexity in simple terms, leverages past experiences, and relates its impact to the client personally– this goes a long way in building credibility.” Given that many of advisors lack this type of experience, The Forum shared how one Canadian institution applies behavioral finance concepts in the advisory process by testing a client’s emotional response to hypothetical scenarios and their impact on the client’s financial picture. This process enables the advisor to better understand the client in the discovery process and build more tailored solutions that incorporate risk management.
- Engagement, Not Technical, Competencies Drive Asset Lift: As one member stated, “Our advisors have been able to serve clients through investment expertise, which is still important but no longer sufficient.” The Forum shared its latest findings that advisors who demonstrate engagement competencies—such as advisors’ abilities to understand clients’ needs and demonstrate emotional intelligence—benefit from double the number of clients increasing assets with them versus their peers. However, the big problem is that many wealth managers face a “talent gap,” as less than 50% of advisors exhibit these skills and behaviors. The Forum highlighted how a European firm institutes protocols that define the volume and content of advisors’ interactions with clients and prospects, creating a more systematic way to create opportunities for advisors to demonstrate these competencies.