Independent Wealth Managers: Clients’ New Expectations

The amount of valuable knowledge that is freely available on the Internet has expanded considerably. Technological breakthroughs and digitalization expand access to information; improved interaction and global connectedness help customers to compare offerings and be better informed about available products. Infor (2013) proposes a definition for this democratization of data: “…process of expanding business information and the tools to analyze it out to a much broader audience than traditionally has had access”. The consequence of this phenomenon on customers is that they can acquire financial knowledge more easily and as a result are able to challenge their advisor. It is even possible for individuals to become able to tap into all the financial information around them to learn what they need so that they can run their own investment operations. Acar and Puntoni (2016) state that “Armed with an abundance of information and opportunities, consumers no longer accept the role of passive recipients of marketing communication”. At the same time, individuals will be likely overwhelmed by information overflow. The gap between clients with financial skills and those without such skills is certainly growing. These parameters will not only have an effect on the type of advice provided by the wealth manager but also determine the complete investment framework.

The assertion of Barber and Odean (2013): “the majority of empirical evidence indicates that individual investors, in aggregate, earn poor long-run returns and would be better off had they invested in a low-cost index fund” could be contradicted in the near future at least in terms of “asymmetric information”. But, other than information, we should not forget that the Internet will have difficulties in educating the investor and other biases will remain, for example: overconfidence, sensation seeking and regret aversion (Byrne and Brooks, 2008). These biases will limit the opportunity for the private investor to make good decisions even if there is evidence that the investor can learn from his mistakes (Koestner et al., 2012). Bachmann and Hens (2013) found that: “the individuals who are most in need of financial advice are those who are least likely to seek it out and rely on it”. And Porto and Xiao (2016): “…when potential clients misestimate the extent of their actual financial knowledge, they might ignore the benefits of financial advice and fail to seek financial service professionals”.

Based on the above it can be concluded that the investor may be capable of better selecting an advisor by asking some crucial questions first: measure outcomes, know what the conflicts of interest are, and know your expectations. As Beyer emphasizes (2010): “once educated…, the individual is likely to be a far better client because he selects more appropriately”.

Until recently, advisors and their clients were focused primarily on investments; this approach is changing – Independent Wealth Managers (IWMs) are expecting to act as sparring partners in an open dialogue about their individual situations (for example estate planning, entrepreneurship, retirement planning and tax planning (Cocca, 2016)). Local clients seek tax-efficient solutions; an offering comprising tax attractive solutions is a crucial element. The demand for additional non-financial advice will develop, due to the fact that clients’ financial decision-making is more and more closely linked to their personal circumstances (Gallagher, 2004). Globalization has brought with it a high level of liberalization but it has also brought uncertainty, and so clients are aware that their life circumstances are becoming increasingly difficult to predict. Consequently, they will be requesting a highly flexible product offering that can be adapted to their changing situation. In addition, IWMs will have to allocate money not only across different regions but also across different asset classes.

Customers are looking for expertise, they are demanding greater professionalism, and they are expecting service providers to act with the highest ethical standards, possess in-depth investment knowledge, and of course, have the proper certification. They want their advisor’s expertise to be up-to-date not only in terms of financial markets but also with regards to regulatory knowledge. This will need an in-depth understanding of transborder regulations (Cocca, 2016) and the changes in tax compliance (Saad, 2014). At the same time, they want professionals to be highly responsive to their changing needs, and to be able to provide personalized advice oriented to both their financial and life goals (Dubofsky and Sussman, 2009). The skills-set of an advisor is changing considerably as the industry moves to more transparent and know-how driven paradigms. Birchler et al. (2016) have also found that the two main crucial factors in attracting “new money” are skill and reputation.

Due to competition between the players the number of services provided is increasing, and consequently clients expect to be offered a greater number of services. Clients expect results and wish to exercise tight control on the management of their assets. It is the responsibility of IWMs to devote more to economic cycles and to financial markets to optimize asset allocations and product selection. The real competition in private wealth management will be on the use of IT and the use of financial information to provide services. The ability to satisfy new clients’ expectations and to provide individual solutions could be a key challenge for Swiss IWMs in the coming years.

Yves Reichenbach (April 2018)


Acar, O., Puntoni, S. (2016) ‘Customer Empowerment in the Digital Age’, Journal of Advertising Research, 56(1), pp. 4-8.

Bachmann, K., Hens, T. (2013) ‘Investment Competence and Advice Seeking’, Journal of Behavioral and Experimental Finance, 6(3), pp. 27-41.

Barber B., Odean, T. (2013) ‘The Behavior of Individual Investor’, Handbook of the Economic of Finance chapter 22, 2(part B), pp. 1533-1570.

Beyer, C. (2010) ‘Investor Education: What’s Broken and How to Fix It’, The Journal of Wealth Management, 13(1), pp. 11-15.

Birchler, U., Hegglin, R., Reichenecher, M., Wagner, A. (2016) ‘Which Swiss Gnomes Attract Money? Efficiency and Reputation as Performance Drivers of Wealth Management Banks’. Swiss Finance Institute Research Paper, No 16-28, pp. 1-39.

Byrne, A., Brooks, M. (2008) ‘Behavioral Finance: Theories and Evidence’, The Research Foundation of CFA Institute Literature Reviews, 3(1), pp. 1-26.

Cocca, T. (2016) ‘Potential and Limitations of Virtual Advice in Wealth Management’, The Capco Institute Journal of Financial Transformation, 44(2016), pp. 45-57.

Dubofsky, D., Sussman, L. (2009) ‘The Changing Role of the Financial Planner Part 1: From Financial Analytics to Coaching and Life Planning’, Journal of Financial Planning, 22(8), pp. 48-57.

Gallagher, G. (2004) ‘Great Expectations: Challenge and Opportunity for Today’s Wealth Manager’, The Journal of Wealth Management, 7(2), pp. 87-91.

Infor (2013) White paper The democratization of data How information can give power to your people. New York: Infor.

Koestner, M., Meyer, S., Hackethal, A. (2012) ‘Do individual investors learn from their mistakes?, Journal of Business Economics, 87(5), pp. 669-703.

Porto, N., Xiao, J. (2016) ‘Financial Literacy Overconfidence and Financial Advice Seeking’, Journal of Financial Service Professionals, 70(4), pp. 78-88.

Saad, N. (2014) ‘Tax Knowledge, Tax Complexity and Tax Compliance: Taxpayers’ View’, Procedia – Social and Behavioral Sciences, 109(2014), pp. 1069-1075.

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