The nature of competition within wealth management has changed significantly over the last decade, leading organisations across the industry to adapt their advisement and sales practices in ways that help them gain and sustain market share.
A number of factors have influenced the new landscape of wealth management. Most prominently, low interest rates and lagging consumer confidence have damaged profitability, while Brexit-related concerns have done more damage to business outlook optimism than anything since the 2008 financial crisis, according to a joint survey conducted by PwC and the Confederation of British Industry.
In such a tight market, wealth managers need to do all they can to stay competitive, which has led many organisations to move down into the mass-affluent market to attain their growth goals. Managing this audience and meeting its expectations of multi-channel service delivery has changed the way firms do business. Robo-advisors are growing in popularity, and the utilization of those along with other investment products that include automation is projected to more than quadruple between 2020 and 2022.
So, what does this mean for wealth management advisors?
With automation reducing advisors’ day-to-day involvement and governance getting ever tougher, especially with regard to more complex investment products, advisor compensation is changing. Transparency into remuneration and incentives is necessary to ensure that customers are connected with the products that best meet their needs while aligning with their risk profiles.
With this shift in focus, firms are moving toward more customer-centric metrics for determining how advisors are compensated. By tying compensation to transparent benchmarks like customer success, customer satisfaction, and loyalty factors, you can encourage more productive advisement behaviors that deliver long-term value and financial success.
Shifting away from traditional practices can be challenging, but in this new environment, it’s become a necessity to harmonize customer-centric sales metrics with remuneration.
There are three primary keys to achieving this goal:
- Use data to evaluate advisor performance
Data analysis is the key to uncovering both helpful and counterproductive advisor behaviors – helping you identify patterns and outliers (like an overly heavy focus on one particular product) that you can use to encourage or discourage particular activities. Identifying the positive behaviors of your top performers allows you to structure your organisation to replicate them. At the same time, identifying the negative behaviors of those who are falling short gives you the ability to tell them exactly where they’re going wrong and coach them into acting more productively.
- Create new incentives
Income is a great motivator, so your incentives should drive the customer-centric strategy you’re looking to put in place. Create targets based on customer needs assessments and pay out to advisors based on whether they’re meeting those needs.
- Work smarter with artificial intelligence
Even as a nascent technology, artificial intelligence (AI) is already making its impact felt across industries, and financial services is no exception. PwC has identified artificial intelligence as a difference-maker for wealth management companies in a wide variety of ways – from identifying sales opportunities to creating new and improved products to improving the customer experience, and much more. AI is only beginning to scratch the surface of its potential, and the industry has already begun investing heavily in it.
Through the process of applying these concepts, you’ll assess, test, refine, and remake your business processes in ways that tie customer-centric metrics and sales compensation processes directly to your business strategy. With the help of better processes, stronger data, and efficient automation, wealth management organizations can adapt quickly to any regulatory or market change – and stay ahead of the competition.