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Competition in the financial advice industry

June 6, 2013

Ideas and core content from the Accenture report at http://www.accenture.com/Microsites/financial-services-innovation-center/Documents/pdf/Accenture-Changing-the-Client-Advisor-Relationship.pdf. Presumption: The wealth management landscape is becoming more crowded as players from adjacent industries enter the space. Accenture: “All financial institutions are trying to create a competitive offering within the context of ‘holistic financial services’ and ‘leading with advice’. They seek to leverage significant capabilities and extensive existing relationships, built-in private banking, brokerage and asset management, insurance, and retail and commercial banking”. (I notice that the most clearly marked differentiation in the segmented market is that middle income clients do not wish to engage in an advisory relationship that leads with advice; ie. OnlineNavigator). Universal banks (BOA and all of the Philly Banks and even big credit unions) are taking advantage of their existing distribution channels, breaking down business lines and pursuing integrated wealth management strategies. (This is an old strategy with no evidence that it is working more effectively now than in the past. I’ve not seen anything looking at how customer attitudes and response to bank-based advisors have changed over time). Many are looking to tap the potential within the in-branch planning business and to coordinate the go-to-market strategy for wealth across traditionally siloed business units. Insurance companies are focusing on wealth management by leveraging their brand and presence, using new distribution channels (?) to gain a greater share of wallet, and retraining and repositioning their agent forces to sell higher-margin (commission based life insurance and annuities) wealth management products. Pure-play direct companies (Vanguard, Bryn Mawr Trust) are increasing the sophistication of their offerings, increasing the role of licensed advisors, and introducing advice-based services to a new generation of investors with different expectations. Non-financial firms (Balance, Intuit) are moving into the wealth management space by focusing on pure product distribution and content aggregation. This allows clients, especially those interested in simple packaged products, to skip the advised relationship. (Is it even worth pursuing those who initially skip the professional relationship vs. those who have outgrown their existing relationship? The latter is likely a better target market). Conclusion: Creating an exceptional digital and integrated multi-channel experience will give additional advantages.

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