Wealth Management Overserviced

Wealth managers have taken a large revenue hit during the economic downturn. Assets under management fell precipitously during the past year, and clients increasingly placed more of their remaining holdings in low-margin products. At the same time, operating costs increased, as clients demanded more advice and firms tried to counter poor portfolio performance with greater levels of service. As a result, Wealth managers project that 2010 profit margins could fall as much as 75% below their 2007 peak, according to the 2009 Wealth Segment Economics Survey, done by The VIP Forum.

In the past, firms had a steadily growing base of assets under management and could afford to serve clients across a broad range of wealth segments with the same services. However, the crisis starkly revealed the vulnerability of a service model that doesn’t effectively align client value with actual cost-to-serve.

Recent research by The Corporate Executive Board’s VIP Forum, an industry group comprised of wealth-management firms, identified that leading firms have begun to move away from a generic, expensive “one size fits all” model that perpetuates “overservice” towards a more carefully calibrated “give-get” service model. This research also points to the following best-practice strategies for helping wealth managers effectively implement a “give-get” model:  Read more…