As wealth managers keep pace with increasingly savvy clients, new services continue to reshape the industry.
“It has evolved quite a bit over the last 10 to 15 years, for sure,” said Tom Rein, director of Whitley Penn Financial Services LLP, the wealth management division of Whitley Penn LLP, a Fort Worth-based accounting firm.
No longer do the average wealth managers focused exclusively on stock recommendations and financial retirement targets; rather, they continue to add services reflecting a client’s total financial picture.
“It’s changed from transaction-oriented relationships with traditional brokers to more of a wealth manager who looks more at the holistic financial picture of a client,” Rein said.
Sharing Rein’s outlook is Sam Long, an attorney with Shackelford, Bowen, McKinley & Norton LLP in Dallas.
“A lot of wealth management companies are now offering what traditionally might have been thought of as estate planning services,” said Long, who counsels individuals and businesses in estate planning and administration, family wealth preservation, and federal, state and local taxation.
“They are trying more and more to offer more in the way of advice and things of that nature than simply buying and selling securities and that sort of thing,” Long said.
Rather than focusing exclusively on retirement savings, as has been the industry’s longtime focus, many wealth managers now offer investment management, retirement planning, estate planning and similar services that involve constantly evaluating a client’s plan and making modifications as needed.
Due to the ongoing nature of that approach, in which wealth managers confer with clients regularly, clients are increasingly seeking fixed-fee arrangements rather than transaction-based charges from their wealth managers.
“If you have transaction-based [fees], there is obviously some dilemma there in terms of the more transactions, the more the company makes,” Long said. “But from a client’s standpoint, they would rather pay someone well to advise them but not so they have an incentive to have a lot of transactions.”
Only 29 percent of clients prefer transaction-based fees, also known as percentage-based charges, according to a late 2015 report by Scorpio Partnership Ltd., a London-based business management consulting firm.
Fixed fees continue to be preferred by many clients, though fees based on a percentage of a client’s assets constitute the more common approach.
But that’s changing.
“Clients want good advice, integrity and don’t mind paying a fair price for that service,” Long said.
Rather than recommending stocks as one of their primary services, Rein said, many wealth managers offer clients new services just to survive in an industry that must keep pace with their demands.
“The industry is changing. What we find is folks who are a little more sophisticated about relationships that give them more than just investment answers. Their concerns are more than just where to put their dollars,” said Rein.
He dismissed speculation that the current financial climate is more volatile than in years past.
“The stock market has turned into an entertainment medium with technology and information resources more available today than ever before. The market is volatile, but no more so than it has been.”