What Makes a Top Performing Wealth Management Firm
Even with all the upheaval and unrest brought by the COVID-19 pandemic throughout 2020 and 2021, financial services firms have emerged stronger than ever, with higher profitability and productivity. The top 25% of firms in a recent survey raked in an average of $6.7 million in 2020, compared to their less-profitable peers that earned an average of $5.7 million. Here’s what they’re doing to get ahead of the competition.
Client Relationships Come First
Despite the growing prevalence of AI tools and robo-advisors, wealth management is still a relationship-driven business. Clients depend upon their financial advisors to understand their long- and short-term financial goals, and tailor their portfolios accordingly. Yet a majority of advisors say the account-opening paperwork cuts into the critical trust-building phase of client relationships, and one survey found advisors spend less than 20% of their time meeting with clients. How can advisors maintain productivity while ensuring their clients get enough individual attention?
One tool high-performing firms leverage is paperless onboarding. Advisors can auto-populate fields with data imported from a CRM tool, automatically catch errors and inconsistencies, and capture signatures digitally, reducing processing time and lowering NIGO bounceback rates. And, most importantly, advisors can reclaim more face-to-face time with their clients.
Investing in client relationships isn’t just about short-term gains, either — with more than $68 trillion expected to transfer to Millennials over the next decades, having a strong connection with a client can lead to a continued relationship with their heirs in the future. Top firms understand that trust is paramount, and they invest accordingly.
Advisor Revenue is Higher, Overhead is Lower
In what might seem like an incongruent finding, top firms spend significantly less on overhead. They put 27% of their revenue back into administrative and support employees, technology, and office occupancy, while their lower-performing competitors spend 43% of revenue on the same things. And yet, the same firms report much higher productivity, with median revenue per staff at $354,000 compared to $264,000.
The secret here lies in talent retention: firms who retain productive advisors make more money than those who constantly deal with employee churn. Having a consistent stable of advisors offers clients stability and continuity, which in turn grows client relationships and advisor compensation.
Additionally, the lower spend on office occupancy points to allowing their advisors more flexibility in working from home, something roughly 40% of financial professionals are still doing. Top firms understand that the best advisors want competitive salaries and flexibility, and that keeping those advisors saves money in the long run.
They Invest in the Right Tech
It might seem like top firms would be the first to splash out on expensive new technology, but that’s not the case: they spend only 2.5% of their revenue on tech, compared to 4.2% of all other firms. How can they spend less money on technology, but make more money and retain more talent in a tech-driven environment?
The answer could have something to do with integration. Over 54% of advisors cite a lack of integration between their firm’s tech tools as a big impediment to their work. If key systems can’t communicate efficiently with each other, then they’re not saving time or money. On the other hand, a fully integrated tech stack includes the tools that firms actually need, and uses them to their full capabilities. Top firms cultivate an intentional digital strategy, and spend money on tech that will augment their work, not hinder it.
Docupace helps financial firms automate client onboarding, lower back office costs, and achieve a fully integrated tech stack. Schedule a demo today to learn more.