Expert: Matthew Lonsdale, Director, Davies Group Facilitator: Matt Lonsdale
Headlines:
- In order to capture 'untapped potential' there is a need to explore different perspectives on attracting the next cohort of clients, particularly those from different socioeconomic backgrounds or generations
- Leveraging technology, offering tailored services, rethinking traditional business models and the potential impact of artificial intelligence on financial advice are all innovative approaches to expand the client base and achieve sustainable growth in the wealth management sector
Discussion:
Consumer duty regulations and client needs
The consumer duty regulations were discussed along with their significance as a powerful catalyst for change in the industry. The interplay between client needs, good outcomes, and value for money were then explored, along with the extent to which high fees and service models are aligned with delivering the best outcomes for clients.
This raised thought-provoking questions about the industry's focus on high-touch service models and the potential trade-offs between fees and client outcomes.
Untapped potential and expanding the client base
Data on the potential client base beyond the current wealth management clientele, including individuals with bank accounts, ISAs, life insurance products, mortgages, and pensions is essential, given there is a significant untapped potential in reaching out to these adjacent segments, which could lead to a substantial increase in assets under management (AUM) for wealth management firms.
The Nike analogy and differentiation strategies
Using the example of Nike, parallels were drawn between the sportswear brand's success and potential strategies for the wealth management industry. It was discussed how Nike started by targeting a niche market (athletes) and gradually expanded to capture a broader audience by creating an inclusive 'in-group' of Nike users. The financial services industry could focus on finding similarities among potential clients rather than emphasising differences, and differentiate at the point of sale rather than creating niche products too early through building a strong brand identity and creating a sense of belonging for clients.
Cost of service and distribution models
The discussion shifted to the challenges of cost of service and distribution models. Participants shared their perspectives on fixed fees versus percentage-based fees, the impact of technology on reducing costs, and the potential for self-service options. The conversation also touched on the role of financial education and literacy in enabling clients to take a more active role in managing their finances, highlighting the importance of finding cost-effective solutions to serve a broader client base while maintaining profitability.
Key takeaways:
- Explore innovative distribution models and leverage technology to reduce the cost of service, enabling the industry to reach a wider range of potential clients across different socioeconomic backgrounds
- Develop strategies to create a sense of belonging and inclusivity for clients, fostering a strong brand identity that resonates with diverse segments of the population
- Evaluate the alignment between existing service models, fee structures, and the delivery of good outcomes and value for money, considering the impact of consumer duty regulations
- Investigate opportunities to expand the client base by targeting adjacent segments, such as individuals with bank accounts, ISAs, life insurance products, mortgages, and pensions, who may have untapped wealth management needs
- Assess the potential of artificial intelligence and digital solutions to provide cost-effective financial advice and education, empowering clients to take a more active role in managing their finances
- Continuously review and adapt business models to accommodate changing client needs and preferences, particularly those of younger generations or emerging affluent segments
