The time for a bold shift in advisor-facing solutions is now. The conversation buzzing around the wealth management industry isn't merely about the evolution of solutions; it's about the strategic evolution necessary to meet the changing demands of advisors and clients alike if wealth management firms are intentional about growth and recruiting top talent.
Approximately three-quarters of registered investment advisory firms (RIAs) were hiring in 2023, according to a report by Charles Schwab Advisory Services (Charles Schwab Advisor Services 2023 RIA Compensation Insights, December 2023). Our wealth management clients tell me that the fierce competition to onboard the best means embracing a more agile, adaptable approach.
Firms are recognizing that it's no longer enough to offer cookie-cutter solutions or rely solely on legacy systems if they’re going after a dream team of advisors. This should include offering enhanced benefits such as greater flexibility in portfolio management and strategic tax transition.
We believe the key to delivering value is to place the advisor-client relationship at the center of the equation. This means providing tools and technologies that empower advisors to deliver personalized, value-added services at scale while streamlining their workflows and enhancing client engagement. Now more than ever, firms must retain top advisor talent and stay ahead of the curve if they wish to remain competitive for years.
Tax Tools Turbocharge Advisor Transitions
Nothing is certain except death and taxes, Benjamin Franklin famously said. Advisors are aware that they can help their clients through careful planning to consider tax ramifications. Similarly, wealth management firms can provide tools to new advisors that can lead to a transfer of assets from existing clients that is both tax-aware and tax-efficient, potentially avoiding unnecessary tax burdens.
With broker-dealer firms and RIAs currently engaged in a significant battle to recruit and retain experienced advisors, these tools come in handy for several reasons. Before they make the leap to another firm, advisors with strong, long-term client connections will think twice about the decision because of client reluctance. Tax transition services are particularly valuable for clients with accounts that have embedded capital gains and could face the potential tax implications of closing their accounts. With tax transition services, an advisor can seamlessly move from one firm to another, bringing their clients along while mitigating the impact of the move from a tax perspective.
After the transition, a platform with active tax overlay features extends tax management across entire portfolios and continuously optimizes portfolios for tax efficiency. The right tax tools not only aid in the recruitment of advisors by offering a smooth transition for their client’s assets but also position the firm as a thoughtful and strategic choice for advisors looking for better opportunities.
Tailor Portfolio Management To The Advisor
Robust portfolio management functionality enhances an advisor’s capabilities. When it comes to wealthtech solutions, it’s common knowledge that your offering needs to be specific to your customer's needs. Differentiated products tend to win because customers feel the product was tailored to them.
Whether advisors seek greater control over portfolio management or prefer a more hands-off approach, the right platform accommodates varied preferences with ease. By automating tasks such as compliance oversight and portfolio rebalancing, advisors gain invaluable time and efficiency. Features like those within a tax-managed UMA (Unified Managed Account) framework, which allows client portfolios to include stocks, bonds, mutual funds, ETFs and separately managed accounts (SMAs) all in one place, also allow advisors to provide comprehensive wealth management solutions to their clients.
Empower Them With Flexibility
Rep-as-PM options are key to getting to a yes and a handshake, wealth managers tell me. Platforms that allow advisors to build diversified, multi-asset portfolios from a flexible open architecture of investment options are key to retaining top talent. The increased ability to be nimbler in response to market turbulence and increased customization in asset allocation choices are the biggest advantages.
Taken together, robust portfolio management options should include direct indexing, equity and fixed-income separately managed accounts (SMAs), and alternative investment sleeves that include non-traditional assets. Advisors should have an extensive list of third-party managers to choose from. This flexibility, in turn, empowers advisors to curate portfolios tailored to each client’s needs and preferences, a value proposition in today’s crowded market. Broker-dealers need this flexibility, but within the safety of a platform that minimizes compliance concerns, while advisors select investments for clients with confidence.
With changes in wealth management, firms must adapt to meet the evolving demands of advisors and clients. This necessitates a shift toward adaptable approaches that prioritize personalized tools and technologies. Tax transition services offer a seamless path for advisors to retain clients during firm transitions; robust portfolio management solutions not only cater to diverse advisor preferences but also empower them to deliver tailored services to their clients. By prioritizing advisor needs and providing the necessary support, firms can position themselves competitively and ensure sustainable growth in the years to come.
Corey Fiedler serves as the chief product officer at Vestmark, bringing over two decades of expertise in product management within the financial services sector. Her extensive experience has been pivotal in shaping innovative product strategies and solutions.