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Wealth Management: How we might be unknowingly damaging clients’ trust in our banks

Anup Agrawalla, Head of Wealth Management & Private Banking highlights how investment planning and wealth management are arguably the trickiest among personal financial services. Proverbially, while rest of the banking services like deposits, loans etc. are about ‘one in the hand’; wealth management seems to be about ‘two in the bush’. Elucidating, as a customer of financial services one can clearly know the nature (i.e., inflow or outflow of interest) and the quantum (i.e., how much to receive or pay) of outcome while signing up for traditional banking products. Contrastingly, customers committing their funds to wealth management solutions will often have to settle for expected returns and volatility instead of a definitive outcome.

Still everyone is compelled to consider this necessary evil, irrespective of whether one wants to protect accumulated wealth, make their money work for them or have a corpus sufficient for future financial goals. Moreover, such consideration appears only appropriate, given the stratospheric emphasis on good lifestyle often derived from spends on work-life balance, growing disposable income and perennially rising cost of consumption particularly, education and healthcare.

What makes it further perplexing is the number of different functions (like the asset manager, advisor, broker, custodian and the list goes on) brought into the mix to finally deliver a wealth management solution. Of these various roles, the ones with supreme impact on outcome of investments are the asset managers and the advisors. It has long been an exception in the wealth management space that investors commence with the assumption that advisor is on their side. In practice, many advisors operate as extended distribution platforms for asset managers. In a classic ‘cart before the horse’ argument, one cites that clients pay fees to their advisors and hence the advisor is indeed on the client’s side.

The need and acceptance for investment solutions will become ubiquitous if advisors start with the client and not with the asset manager (often a related entity). Backed by tomes of writing and discussion about it, evolving industry practices like democratizing investment solutions, open architecture investments platform and regulatory enforcement meant to place investment advisor firmly on the side of clients, have already started to make their impact felt. Entities and professionals seeking sustainable growth in this space will have to embrace these quintessential practices to build clients’ trust and loyalty.

 

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