Ian Russell’s latest Letter from the President contains insights and takeaways from the SIFMA Private Client Conference held April 8 in Chicago. According to Russell, the conference “provided a timely opportunity to review the broad themes influencing the wealth management business in U.S. capital markets and gain insights on the challenges and opportunities unfolding in the business, the competitive positioning of large and small firms, and adjustments to business models in response to changing demand.”
While the event focused only on the U.S., Russell states that “Canadian firms confront similar demographic and technology trends, and face the same business opportunities and challenges.”
What follows is a summary of the letter:
Since the financial crisis, the wealth management business in Canada and the U.S. has made enormous strides — improving business practices, meeting higher regulatory standards for disclosure, transparency and proficiency, identifying new products and investment strategies, and adopting new financial and estate planning tools and techniques.
In recent years, four broad trends have influenced business conditions and performance, and forced adjustment in wealth management practices and business models. These include:
Demographic patterns among the investing public are changing dramatically.
Advisors and firms are responding with greater sensitivity and customization in the delivery of financial advice, and employing professionals that match the diversity of their clientele. Women professionals are now taking centre stage among advisors and management in the securities industry.
Technology is advancing at a rapid rate.
Firms are responding to growing client demand for greater flexibility to connect with their advisors, anticipating the robust application of technology to deliver products, provide financial statements and communicate with clients outside conventional working hours.
While the key challenge for advisors is communicating with tech-savvy millennial investors, many aging investors have adapted effectively to modern technology requiring advisors to step up the application of communication technology to all clients.
Clients are living longer.
This longevity increases the complexity of the financial planning process and investment decision-making, requiring high yielding investments in a world of zero interest rates as well as effective balance between ongoing asset accumulation and income-generating investments to meet cash needs, a balance tailored for the personalized phased-in retirement of many clients.
Government and regulators have intervened more aggressively in the wealth management business than ever before.
Reform has moved at a faster pace in the U.S. in response to the more serious collapse in investor confidence brought on by the financial crisis. The risk for the industry in both countries is that regulators fail to effectively balance investor protection and interfere with the efficient and cost-effective delivery of financial products and advice.
The U.S. industry is working collaboratively and constructively with the SEC and the Department of Labor to find an outcome that deals with the inherent conflicts in the advisory business and yet avoids interfering with investor choice or adding client costs.
The full letter is available here.