Get Ready For The Future Face Of Wealth Management
17 May 2017
The vertically integrated model championed by Australia’s large financial institutions may have been sufficient for the last 15 years but it will not even exist for the next 15 years – let alone suffice.
There are many challenges facing private wealth management in Australia, including subdued economic conditions, equity market volatility, digital disruption, seismic demographic changes, increasing client demands and outdated, unsustainable business models. The majority are beyond anyone’s control.
Since 2009, four of the top 10 investment banks operating in Australia have shut down their PWM arms and the remainder are expected to follow, with the exception of one or two. Those that have already exited or are in the process of exiting know that the future only holds more commercial and reputational problems for institutionally owned PWM firms.
This White Paper examines the future of PWM in Australia, pinpointing who the real players will be and looking at the essential qualities of thriving, relevant wealth-management businesses.
The rise of independence is a clear trend that has been building for some time. It is being driven by profound, irreversible structural changes, which we explore in this report.
The last time the industry faced such structural change was at the turn of the century, when the banks and institutions gobbled up wealth managers and life-insurance companies to create today’s vertically integrated behemoths.
The vertically integrated model presented a way the institutions could cash in on compulsory super while adjusting to price pressures brought on by increasingly sophisticated investors and the new administration platforms.
Those who have been around for some time will remember the days when entry and exit fees of up to 5 per cent and MERs of 4-8 per cent were the norm. Thankfully, those days are behind us.
The vertically integrated model championed by Australia’s large financial institutions may have been sufficient for the last 15 years but it will not even exist for the next 15 years – let alone suffice.
As we saw at the turn of the century, consumers are once again the ones driving structural change.
Today they are surrounded with 24-hour access to information, are more informed of their investment advice options, and are looking for something different. Consequently, traditional advice models are going to be left behind.
Furthermore, the face of wealth in Australia and many developed countries is changing. Advisers will increasingly be dealing with a new kind of client.
As these themes gather momentum, the challenge for wealth advisers will be to stay relevant, which requires agility and flexibility – two qualities institutions aren’t known for.
In the past, advisers typically had a narrow relationship with a large number of clients, but moving forward they will increasingly have a broad relationship with a small number of clients. Advice conversations will be more emotional and in many circumstances less technical.
Advisers will not be able to rely purely on their tax, structuring and investment knowledge and experience. They will need a higher degree of emotional intelligence.
A time is coming when advisers will need to decide whether to stay and operate within the confines of an institution, knowing that traditional models are no longer relevant or economically viable, or find an innovative, new model that meets their needs and the needs of their clients.
Anecdotally, those that have already made the leap are able to provide more relevant advice, leading to higher client satisfaction and improved outcomes. On a personal level, they are more successful and enjoy greater job satisfaction.
Over the next few months, we will provide some insight into the broad trends in PWM and encourage advisers to capture the opportunities structural change is creating.
Read more at professionalplanner.com.au
Latest news
10 Koda Advisers in Australia’s 2023 Top 100
21 Sep 2023
Today US financial investment publication Barron’s, in partnership with The Australian’s business magazine The Deal, released their rankings of Australia’s Top 100 Financial Advisers. The rankings are based on a comprehensive national survey. This list offers clients and advisers a unique guide to the leading practitioners in the sector. The formula used to calculate the...
2023 Top 100 Financial Advisers: Frank Macindoe, Koda Capital
21 Sep 2023
For Frank Macindoe, the challenge in long-term investing is to ignore the noise and determine the underlying trends. The adviser and partner at Koda Capital in Sydney takes a considered, multiyear investment approach that aims to minimise volatility while achieving superior returns. “I try not to be distracted by the short term, ” he says....
Subscribe to Koda insights
*Please note that the majority of research Koda produces and distributes is client-access only. Subscribing to the insights distribution list will only give you access to publicly available Koda reports.