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Opinion

How You Deliver as Important as What You Deliver

August 15, 2013

Two trends are reshaping the advice business, shifting pricing power to firms that evolve to serve today’s market.

First, transactional business models, where firms manufacture and distribute products while also advising clients on those products, place the firms in an inherent conflict. They are being forced to adapt to a new reality where transparency and disclosure are increasingly in favor.

Second, the market leaders in wealth management have moved from delivering products or services to focusing on how they provide financial solutions. The consumer goods and retail industries made this transition some time ago, entering a period when successful companies differentiate themselves by designing a client experience. A strategy that started with luxury goods — names such as Tiffany, Lexus and Ritz-Carlton come to mind — has trickled down to mass-market brands, including Starbucks and Target. Now it’s being deployed in wealth management.

Together these trends portend the disintermediation of a concentrated group of manufacturers and distributors. And despite a highly fragmented market of firms and professionals, advisors who provide impartial advice and a unique client experience will command pricing power.

Designing the client experience gives firms and advisors the opportunity to connect more deeply with clients as they study what the market responds to best. With input from employees and, potentially, partners in other professions, wealth managers can discover how clients want complex products and services delivered. The process includes a careful review of work flow and work process, and how they affect the ultimate interaction with the client. It takes time and is often iterative, as firms explore and determine client preferences. Ideas can be tested, and bad ones can be jettisoned.

In this post-product, post-service environment, clients are yearning not only for advice but for something more existential, an experience that goes beyond discussion of their financial affairs. Unfortunately, most clients have been conditioned to expect to be disappointed in the utility of the advice itself. And they have little reason to imagine what else an advisor could provide.

The most successful firms understand the need to create a client experience. Their leaders will be business managers who have had client-facing duties and know what clients want:

  • First and foremost, compatibility in values and culture.
  • An alignment of interests and true impartiality.
  • A relationship with an advisor and a team, with no single individual “owning” the client relationship.
  • Solutions, not products, and access to the best thinking, whether in-house or outsourced.
  • Privacy and security.
  • Simplicity in the face of increasing information complexity.

The firms that remake themselves to provide such a client experience will be the ones that not only survive but thrive in the post-product, post-service advice economy.