How are Wealth Advisors Evolving?

Date: Sep 01 2016

David Toth

In my previous blog post, “Is the Multi-Family Office Pricing Model Broken?”, I noted that there has been a 15% drop in the pricing of wealth management-related services for ultra-high net worth client prospects since 2012. Since then, I heard back from several of you asking about how advisors plan to respond to these changes in the market.

Their response to the changing dynamics of price and value actually involves two steps:  things they have already done, and the things they are in the process of doing.

What they have done already

Many advisor firms have established pricing committees or a formal process to help them become more rigorous about their pricing. Furthermore, they’ve used these committees and processes to help ensure they’re selecting the right clients. Advisors will ask prospective clients thoughtful questions about what the client is looking for, what their needs are, and what sort of assets they possess. Advisors are using all of that information to determine whether the firm is the right fit for that client, as well as whether the client is a good fit for the firm. After all, if you are only adding a few new clients a year, you want to make sure it’s a good match.

Most firms have also expanded their use of alternative pricing structures, introducing retainer, hourly and engagement fees as alternative ways to charge for their non-investment services. These fees now represent 21 % of the overall fees they collect.

Despite all of this, the confidence that multi-family offices have in their own pricing structures has actually dropped to the point where 67% don’t believe their pricing structures are “optimized”—more than twice as high as that number was in 2014-2015.

What is the State of the Ultra Wealth Advisory Business? Find out more>>

What they are in the process of doing

Leading advisors are starting to take a more discerning look at ways to establish the right price and establishing fair value. When it comes to price, they’re getting better at understanding their own costs in a very detailed, systematic way, and at realigning price and value by changing their price structures to align with the value they deliver. As far as delivering value is concerned, leading advisors are adapting their resources to better meet the evolving needs of clients, while also managing the perception of client value by using their skills to consistently discover their clients’ needs.

Karen Rush and I led a FOX public webinar entitled “The State of the Ultra Wealth Advisory Business”, which frames these issues and others that are affecting wealth advisors today, including business growth, pricing strategies, and what's on the mind of ultra-wealthy families. The webinar is complimentary to watch on-demand. Watch now>>