Custom-tailoring begins at the dinner table.

We’ve all grown used to being able to get any kind of coffee we want in Starbucks, so much choice that I’ve literally seen people freeze up when it comes to ordering. Yesterday, however, I realized that customer tailoring had even permeated the product-dominant world of McDonalds. All three people ahead of me special ordered – in one case even asking for three choices of toppings (in separate containers) for a basic ice cream sundae. Staff were happy to comply. They didn’t even raise an eyebrow. Special requests are expected, even in a business which depends on adhering to mass production and limited choice.

If customers expect to customise their food choices in a fast-food restaurant (and not pay extra), how much more will they expect when it comes to managing their money? The culture that is driving the demand for custom-tailored, highly transparent and lower-cost portfolio management begins with the most basic of human requirements.

The rise of consumer dominance is no longer a trend. The consumer - whether drawn from retail, mass affluent or high net worth segments - is dominant. Period.

An interesting recent perspective, emphasising current critical characteristics of successful wealth management firms, is included in the brief article attached.

http://luxuryinstitute.com/blog/?tag=rockefeller-wealth-management

Trends in the New World

Whenever I see a list of key trends in wealth management (and there are many trends, as well as many lists…), the same core imperatives stand out: increased transparency, increased consumer control, uncertain markets, greater value for money…

However, it's not the trend itself that's important so much as what you do with it that counts. Collaborative infrastructure allows the critical business drivers underlying these trends to be deployed in a way that's most appropriate for the clients of a wealth management practice.

If you're looking for effective ways to capitalise on trends (and you should be) make sure you pose a critical question: does the proposed solution support my business or control it? Truly collaborative infrastructure allows your business to evolve with the changing needs of your clients.

The new world demands that we are not paramount or superior to our customers. It’s all about them: Truly sustainable business management practices are those that allow the customer to collaborate in genuine partnership. That is the trend that integrates the rest.

The shifting nature of customer value in Portfolio Management

From my perch in the UK, I continue to observe an increase in the pace of change in the wealth management industry. We all know that the contemplation period for change is over - the future is no longer the future.

Speaking to clients in the past few days, it is clear that running a successful portfolio management is now about much more than designing and implementing individual portfolios.

A new era of customer proposition has emerged: one that is as much about transparency as it is about portfolio composition. The implications of this are enormous: genuine transparency suggests business processes that allow clients (in addition to wealth managers) to work intensively with their portfolios and in genuine collaboration with their wealth advisors. This has resulted in a new paradigm for customer value in wealth management today - value is received as a living entity as opposed to be sold like a commodity.

Clients as partners, expect to receive value in a multi-faceted, dynamic way as opposed to a linear deliverable. To achieve this in a sustainable manner, wealth managers must not only be responsible, they must be responsive. Responsiveness is a full-time, intensive proposition. This is not just the way of the future. The future is already in play.

Shoe Horning

There has been much discussion and concern by the FSA in the UK about caution in the appropriateness of developing centralised investment propositions (CIPs) and 'shoe horning' investors into such.

Whilst at face value this seems to be a reasonable concern to protect investors being put into CIP schemes largely set to meet the approximate needs of a customer segment, or investors with a category of risk profile, rather than the investor themselves, a number of questions come to mind:

Q1) how is this different from placing investor monies into specific investment products that are managed to a set mandate as opposed to an investor's specific situation (see earlier post on this BLOG about need for individual portfolios) ?

Q2) what if the CIP was flexible enough to accomodate the individual circumstances, needs and plans of the investor, resulting instead in a very personalised, but centralised investment process ?

In relation to Q2, should this be available and viable? (This is the core of the Financial Simplicity capabilities). Then wouldn't it be very much 'right' for the investor? It would also be a positive to encourage participation in the CIP and 'shoe horn' investors into it.

Advisors to increase passive exposure, Platforum study finds | News | Fundweb

http://www.fundweb.co.uk/uk/advisers-to-increase-passive-exposure-platforum-study-finds/1052155.article

How much threat is active management under?

Social media: the wild west of financial advice

Interesting article about some of the consumer / social media trends under way.

As I learned at the Social Media Summit in Sydney in 2011 - Assume full transparency!

http://www.professionalplanner.com.au/technology-2/social-media-where-the-eyeballs-are-going-for-financial-advice/

Wealth managers to face closer scrutiny as FSA unearths ‘widespread' failings

Article From Citywire....Emma Dunkley. Looks like systemisation and suitability are going to leave little room for error.

http://www.citywire.co.uk/wealth-manager/wealth-managers-to-face-closer-scrutiny-as-fsa-unearths-widespread-failings/a614420?re=20392&ea=314126&utm_source=BulkEmail_WM_Weekly&utm_medium=BulkEmail_WM_Weekly&utm_campaign=BulkEmail_WM_Weekly


The Financial Services Authority (FSA) is contacting firms offering wealth management services after identifying ‘significant widespread failings’ around record keeping and suitability and has said the sector may face tougher supervision as a result.

The watchdog wrote to all chief executive officers of wealth management firms in July, highlighting research that revealed major failings based on a sample of firms.

However, the FSA is concerned these failings stretch beyond this sample and are prevalent among other wealth managers.

The FSA said: ‘We have now commenced a new phase of thematic work and will, again, be making judgements on the suitability of client outcomes but also complementing this approach with a direct assessment of firms’ systems and controls.

‘We will be acutely interested in whether firms have heeded the warnings and concerns contained within our previous communications.  We will provide further updates on this work in 2013.’

The watchdog said it continues to work with firms from the first batch it assessed, in order to mitigate the risks and concerns that have already been identified.  In some cases these led to enforcement referrals, skilled person’s reports and remediation programmes.

The FSA said it will plans to interview key individuals from all these firms so it can understand the approach they have taken to remediate the problems revealed in their client portfolios and whether they have been ‘rigorous’ In dealing with previous issued that may have caused consumers to suffer.

Subsequent to these interviews, the FSA will consider whether to take further regulatory action, it said.

In the initial ‘Dear CEO’ letter the FSA said that its findings aired concerns there is an ‘unacceptable risk’of clients of wealth management firms experiencing unfavourable outcomes.

It said: ‘The failings may point to deficiencies in the management and control architecture of firms, so wealth management businesses can expect to see continuing and increasing supervisory focus.’