Friday 19 October 2012

Mind the Gap: Bridging the divide between client interests and advisor perceptions

Trust, Credibility and the Future of the Investment Industry

Trust is like a reputation, which as Warren Buffett states “takes 20 years to build and five minutes to ruin”. To rebuild trust and the credibility of the investment sector will take time, but facilitating a dialogue between clients and wealth advisers is a step in the right direction. This was the premise of WHEB Asset Management (WAM) and Social Finance’s event hosted by Abchurch on 16 October as part of National Ethical Investment Week.

Moderator, Anthony Hilton, Financial Editor of the Evening Standard, panellists -  Catherine Tillotson, MD Scorpio Partnership, Richard Brass, Director, Berenberg Private Bank and Alexander Hoare, Partner, Hoares Bank and the packed audience of wealth and asset managers started with the breakdown in trust within the industry and what could be done to rebuild it. In addressing that question, it emerged that this lack of trust has led to a breakdown of dialogue between clients and their advisors and what the former really want.

A report on Responsibility in Wealth, undertaken by Scorpio for Kaiser Partners,  questioned 250 multi-millionaires in four of the worlds leading wealth creating economies: Russia, USA, Germany and the UK. The results identified a serious gulf between the ultra High Net Worth (HNW) clients’ desires and what wealth advisors expect these desires to be.

In response to the series of questions posed to them, the ultra HNWs naturally placed family financial future as the number one interest, followed closely, on an almost equal footing, by civic duty and a desire to give something back to society.

However, when a selection of wealth advisors were asked similar questions, they overestimated the importance of family financial future and hugely underestimated the desire of clients towards wider altruism. Clients’ desires are not being met and something needs to be done about it.

Why the disconnect?

This problem is occurring due to a lack of conversation surrounding the desires of clients beyond those of financial return; furthered by a presumption that social investments are viewed as a non-starter and therefore create minimal demand.  There is also a lack of understanding of the difference between traditional philanthropy and social investment.

What can be done?

Richard Brass suggested that the best route to solving this problem is to “walk clients along the road of investment,” identifying the investments options, whilst understanding clients aims and desires for their wealth.

Taking a more holistic approach to dialogue with clients will not only grow trust directly, but will have a knock on effect in boosting the credibility and trust of the investment sector as a whole. Then there is the sustainability and social finance sector which provides the products in which to facilitate this interest in social investment. As Alexander Hoare mentioned it will take time to bring these into the mainstream and measure their success. Check back for the next post on how this is done and what conclusions were drawn from the debate.


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1 comment:

  1. Ethical investments allow investors to gain competitive advantage through ethical ways of investment. Ethical investments are socially responsible investments which provide sustainable benefits to the local communities and are also environmentally friendly.