Understanding clients’ non-financial concerns

This article is part of
Discretionary Fund Management - October 2014

The importance of developing a deeper understanding of the non-financial issues that drive clients’ attitudes to wealth should not be under­estimated.

Everyone has different motivations and priorities in life, all of which have a bearing on their financial decisions.

These motivations extend far beyond, say, a client’s plan to sell their business by a certain age, into areas relating to their basic values, such as the way they want to raise their children.

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There is a tendency in the wealth management industry to focus on financial and technical facts, sometimes at the expense of meaningful conversations about clients’ thoughts and concerns.

These thoughts need to be at the forefront of discussions – to provide a better quality of advice in the structuring of clients’ financial affairs.

To gain this understanding, a wider and deeper range of questions need to be posed than is often the case.

The answers to those questions need to be considered in a way which ensures that both the wealth manager and client are able to apply proper thought to the broad range of issues that can impact the management of their family and financial affairs.

Ultimately, this is about taking the concept of client-centricity to its logical conclusion.

How can a wealth manager be genuinely client-centric if they also have a range of products to sell?

How can they be acting in the client’s best interests if they are unclear about additional fees that might be incurred?

Furthermore, how can they be advising to the best of their abilities if they don’t fully understand the client and what their priorities are?

The simple answer to all of these questions is, they cannot.

Quite aside from the changing industry landscape that new regulation and the financial crisis have helped create, the core principle of wealth management advice should be to advise in a transparent and impartial manner.

Somewhere along the line, in all likelihood caused by the ‘Big Bang’ deregulation of financial markets, this was forgotten.

The market is now moving back towards the clients’ priorities, but there’s plenty more to do.

The onus is on the wealth manager to recognise that the client-focused model is the sustainable one and there is hope that the sector will continue to make positive steps in the coming years to address client needs.

The industry landscape is now such that those focused on the short term will likely be found out, and it is telling that most of the growth is coming from wealth managers that have anticipated the seismic shifts the sector has experienced.

They understand that financial and technical know-how is only one side of the coin – the other is a detailed and genuine understanding of the client.

David Scott is founding and senior partner of Vestra Wealth