To succeed in an intensifying competitive environment, financial service providers must look beyond product satisfaction and focusing on building a more "complete client experience" that prioritizes advice and service - CEB.

Findings from a recent study suggest that “proactive financial management” among the global high net worth is on the rise, as wealthy individuals are increasingly hands-on with their finances.

Just over half (51 per cent) of wealthy individuals surveyed for CEB's latest Consumer Financial Monitor Study were proactively managing their finances in the second half of 2014, up by 11 per cent since the firm began measuring this in 2011.

CEB, a member-based advisory firm, said it tracks three measures of “proactive financial management:” did the client keep a formal written budget to manage expenses; have a formal written financial plan to achieve long-term goals; and use a financial advisor.

The firm acknowledged that its use of the terms “formal” and “written” means its measure of “proactive financial management” is quite stringent, hence the seemingly low 51 per cent above-mentioned figure.

“It captures clients who are highly engaged in managing their personal finances,” CEB managing director Peter Aykens told Family Wealth Report. What is notable in the data, he said, is that all three measures hit two-year highs in 2014. 

“Clearly, high net worth clients are managing their finances in a more systematic and 'hands-on' fashion today than they did even two to three years ago,” Aykens said.

CEB's global survey of over 18,000 consumers measured sentiment on issues using a net rating score reflecting degrees of satisfaction/dissatisfaction to produce a possible score of 100 (completely satisfied) to -100 (completely unsatisfied), with 0 representing a neutral score.

Client confidence

Although respondents reported strong satisfaction with financial products (+34 per cent net rating) and continued comfort with their personal financial situations (+27 per cent net rating), they expressed a decidedly negative view (-16 per cent net rating) when it comes to confidence in their providers.

Aykens linked this to the fact that many investors were exposed to product and provider opacity in the lead-up to the financial crisis.

“They oftentimes didn’t know exactly where their money was invested (complex structured products for example) or who actually managed it,” he said. “Rather, they tended to trust their advisors and provider brands.”

The steady stream of negative headlines attributed to financial providers since the crisis (LIBOR and FOREX price manipulation, weak stress tests, settlements for product mis-selling, for example), therefore appears to have kept high net worth clients more aware and wary of provider activities, Aykens said.

“This has translated into a slowly improving but still stubbornly negative view of providers despite clients' overall gains in personal finances,” he added.

Wealth management

The implications for the wealth management sector include that, in order to win new and retain current business, organizations must emphasize the value of the advice and service they can provide.

“Even as it [the financial services industry] receives high marks on product satisfaction and benefits from a healing economy, particularly for the wealthiest, distrust has also prompted clients to spread their wealth more widely among providers and to invest in more conservative - and lower margin - products,” CEB said on its findings.

When asked what we can we infer from these key findings in terms of how the wealth management sector has evolved in recent time, Aykens believes the primary change is that competition based on beating a benchmark is “no longer sustainable.”

“Clients are demanding advisory strategies that give them confidence they will hit their primary financial goals [and] not just a short-term benchmark,” he said.

Indeed, there has been a raft of industry research in recent time suggesting that client satisfaction improves significantly when investment advisors collaborate to set personal financial goals, and then develop an investment strategy and performance review process around these.

CEB said other research it has carried out suggests that providers will “struggle to differentiate themselves with products that can now be easily replicated by non-traditional entrants at low cost.”

They will need to win on a “comprehensive approach” to advisory support as – although most wealthy clients are comfortable with their balance sheets and are satisfied with the product offerings available – this is “not enough.”