Saturday, Nov 28, 2020
International Finance
Magazine Wealth management

Why wealth managers need accountability

Why wealth managers need accountability
Wealth managers must rise above the commission based approach to create value for investors

The wealth management industry provides the tools to preserve and steadily grow wealth, providing access to investment opportunity in financial markets, private businesses and real estate. For ultra-high net worth individuals, picking the right advisor to define suitable investment strategies and help manage their investments depends heavily on several factors, including diligence, alignment of interest and above all, trust.

In an area as sensitive as the management of an individual’s wealth, ensuring the highest ethical standards and accountability is now more critical than ever. Clients have to be certain at all times their advisor is working with their best interests at heart. At a time when public and government scrutiny of the financial services industry is high, it is important that the wealth management industry improve its reputation by increasing the standards of the way it operates and reversing negative stereotypes that have long been associated with it.

Unfortunately, many organisations that offer wealth management services have fallen into a formulaic way of working, whereby their clients are introduced to a network of traditional banks and asset managers, who, in turn, reward these introductions with commissions. This way of working, has led to an ‘auction culture,’ whereby wealth managers usher their clients’ assets to the highest bidder and collect a commission, instead of putting the client’s goals and suitability first. Clearly, this is not in the best interest of clients and does not lead to a sustainable wealth management relationship.

Let’s be honest, the industry as a whole has not done itself any favours when managing its own reputation. Whether it’s the questionable incentive schemes that lead to biased advice or an apparent obsession with profit generation, for many people the industry is not always seen as a force for good.

At the core of wealth management industries philosophy must be a culture of openness, transparency and accountability, which in turn helps clients understand how their wealth managers operate and deliver lasting results for them. Organisations should always go the extra mile to ensure all potential investment managers are only the most suitable for clients, rejecting the culture of financial kickbacks and commission that can cloud the judgement of advisors.

Developed on these lines, Spearvest was also founded with a promise to give 5 percent of our net profit to good causes, to prove that a wealth manager can make a difference. This means that Spearvest can have an impact with charities and community projects, giving our clients a sense of comfort that they are with a partner that cares about more than just the bottom line.

Spearvest’s drive for alignment of interest with investors explains our co-investment projects, whereby we invest alongside our clients in certain opportunities, such as real estate.

Additionally, technology can play an increasingly important role and giving clients the insights they need to see the status and performance of investments in real-time. That is why wealth managers must apply fintech to enable a truly holistic wealth management experience, putting the client in complete control of their journey. This also addresses the increasing demand of investors for transparency and connectivity.

Moving forward, without urgent reform and true accountability, the wealth management industry will struggle to secure the trust of clients in the future. The time has come for a new way of working, that comprises independent thinking, real collaboration and bias-free advice. Wealth managers that heed to the importance of change will thrive, those that fail to do so will struggle to survive.

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