In Part 1 of this series, I explored a brief history of wealth advice integration in Canada, up to the present day when large organizations continue to increase their dominance in the family wealth management industry.
So, we know that this advice integration strategy has worked well for large financial organizations (i.e.: ‘Sticky Clients’), but as an investment fiduciary for affluent Canadians, the important question I have is: What are the specific challenges large financial organizations face when integrating advice for the High Net Worth Market?
The comments that follow are my personal, professional views based upon my 26 years of experience practising in the Canadian wealth management industry for both Big Bay Street firms and Independent Wealth Management firms, in both business leadership and client advice/service roles for varying segments of wealth clients. I should also declare that I’m currently the President, CEO, and Co-Founder of an independent investment management firm (HighView Financial Group), so if people consider my views biased, that’s their choice and I understand; I’m simply sharing my career experiences as a long-standing, investment fiduciary about what challenges face organizations advising the High Net Worth Market.
I believe that if someone would objectively measure – from a client’s perspective – the degree of success associated with the integrated wealth management advice provided by large financial organizations, they may find that it works well for the mass wealth market but faces distinctive challenges for investors in the high net worth market. This is primarily due to the integration of advice across traditional, siloed business divisions that address the unique needs, desires, and complexities of high net worth individuals, combined with the difficulties faced by large financial organizations, given their ability to create and derive revenue from proprietary financial products, in objectively advising across the diverse professional financial disciplines required by high net worth individuals.
The needs of the Mass Wealth Market (i.e. families with investable assets < $ 1 Million) are generally straightforward, as individuals tend to accumulate their wealth through employment activities, and have a single purpose long-term goal of lifestyle funding for retirement.
In contrast, the needs of the High Net Worth Market (i.e. families with investable assets > $1 Million) are generally complex, as these individuals tend to be corporate executives, professionals (doctors, dentists, lawyers, etc.) and entrepreneurs, who often have a broader set of goals that not only speak to lifestyle funding but also – given the amount of financial assets that they own and are able/willing to pass on after their death – family legacy and philanthropic needs. Additionally, professionals and entrepreneurs frequently have complex financial structures such as holding companies, family trusts, and operating companies, which can make wealth planning a sophisticated process that requires the expertise and services of other professionals such as accountants, lawyers, and actuaries. Some large financial organizations are starting to employ in-house professionals such as accountants and lawyers who can speak to these unique client needs but my personal experience has been that it’s challenging to replicate the objective and expert advice of an independent legal or accounting professional.
As a result, the integration of wealth advice for affluent families is considerably more complex than that of the Mass Wealth Market investors. Integrated wealth advice provided by large financial institutions is – in my professional opinion – working toward meeting these clients’ unique needs but has not yet overcome some of the associated challenges.
In part 3 of this series, I will discuss the struggle affluent families seeking wealth management advice find between convenience and competency.