Such a statement could be drawn from a page out of a marriage counselling book. However, it is equally important in the context of a financial relationship between a wealthy client and their adviser.
For a long time, the construct of the adviser/client relationship was set by simple laws of supply and demand. Good advisers able to supply coherent investment advice and access to the markets for high net-worth clients were in short supply.
Demand, fuelled by swelling ranks of wealthy individuals, was strong and growing. So clients paid handsomely for expert advice that was calculated as a percentage-based fee of the total assets they handed over to be managed. To an extent it was an arranged marriage of mutual convenience.
Today, information flows freely and digital platforms have thrown open the market gates for a new profile of investors.
The supply of financial information has been democratised. Access to markets, particularly online, is much more available if you have the capacity to shop around. There has also been a recalibration of the cost of investing for private clients, so it is aligned to the return.
Thus, clients seeking a financial relationship arrive better informed and with a more exacting set of demands. Rocked by financial scandals they are more sceptical than before, and are demanding robust evidence of the value advisers add. The financial marriage most want today is a more collaborative, two-way relationship that is less a case of expert and novice and more of a partnership.
This is a subtle but very significant shift in the context of relationships and it matters to the financial advice industry.
Historically, high net-worth individuals entrusted an adviser with improving their financial situation; indeed, 73 per cent of clients over the age of 60 still cite that as the main responsibility of their relationship manager. They became comfortable in the relationship – and with good reason – and typically did not demand more. In effect, it became a relationship of benign co-habitation.
Yet among the under-40s a shift is occurring. Just 48 per cent of these individuals hold the adviser responsible for improving their financial situation and almost a third (29 per cent) are looking for a wealth mentor (compared to just 11 per cent of over 60s). They are looking for more from the financial marriage. They want to see clear progress on outcomes. They also want their relationship to be more equitable. The result is that just 30 per cent of European HNWs now say that they use professional advisers and usually follow their advice and recommendations. While 19 per cent identify as self-directed investors and 21 per cent say they only use professional advisers for information and advice concerning more complex investments.
Ultimately, investors are taking a more active role in managing their money and they are equally keen to proactively track performance.
Further, self-service reporting has brought portfolio snapshots to the fingertips of clients who can now measure results with granularity previously only achievable through a professional adviser. This situation gives clients the transparency they crave. It also starts to raise questions around the value an adviser adds.
This reassessment of the relationship value is most likely the single most important development of the last five years. Unsurprisingly, clients who share the burden of setting their wealth strategy, taking decisions and reviewing performance are becoming restless about advisory fees and wealth fees are in a state of transition. The mood in terms of the relationship is that what individuals pay for needs to be linked to an outcome.
This mindset is spreading in appeal. Some of this has been driven by regulatory adjustments. Some of it has been driven by popular sentiment. Asset-based fees in particular appear to be in gradual decline. In Europe, 33 per cent of HNWs currently pay using a percentage fee but just 29 per cent would like to in future.
Similarly, the use of transactional charges looks set to drop from 16 per cent of European HNWs now to 13 per cent in future.
By contrast, fixed fees look set to rise in popularity from 19 per cent of Europeans now to 21 per cent going forward and time-based fees will experience a similar increase from 8 per cent to 12 per cent.
This should not come as a shock. The traditional ‘percentage of assets’ model means that the client is effectively compensating their financial provider for the value they bring to the relationship, rather than the value they receive.
Understandably, clients want more control and transparency and are signalling this by engaging with fee structures that more closely reflect their view on the appropriate terms of a financial relationship. Advisers must work harder to demonstrate value and, in particular, to show clear water between the services they provide and those that can be automated.
The reality is that the bread and butter of investment advice: market analysis, portfolio evaluation and risk management, is performed at its core by a computer.
The same digital revolution that made financial information freely available also led to an exponential growth in the amount of information. Keeping pace, let alone meaningfully interpreting that data, is too much for most human brains to contemplate.
But advisers can excel at weighing multiple elements of complex modern lives. They can offer empathy, support and security that computers cannot. By listening carefully to clients’ life goals and providing solutions to achieve them, advisers can add meaningful value that is easier to quantify.
By engaging with clients regularly, they can anticipate life events and remain relevant in their clients’ constantly evolving lives. And by shifting away from prescriptive advice towards genuine collaboration they can form strong, intimate relationships.
Great marriages rely on good communication, a willingness to listen (and change when required) and a mutual recognition that the marriage creates something stronger than the sum of its parts. Great advice relationships are just the same.
Sebastian Dovey is managing partner of Scorpio Partnership
Key points
The trick to securing an enduring relationship is a mutual desire to constantly focus on what brings the best out of both sides
Just 48 per cent of under-40s hold the adviser responsible for improving their financial situation
Advisers can excel at weighing multiple elements of complex modern lives
