The study revealed that although 73 percent of private clients believe independence is of high or medium importance, only 32 percent feel it is achievable in a wealth advisory relationship
London, APRIL 26, 2010 –SEI (NASDAQ:SEIC) today released the second in their series of special interest papers, which looks at the changing relationship between private clients and their wealth managers.
The paper, entitled ‘Independence: The New Gold Standard?’, is the result of a series of in-depth interviews carried out in conjunction with the Scorpio Partnership, which compare the views of 25 private clients and 25 wealth management firms. Findings highlight just how important independence is to both, and more specifically, what it means in the context of a financial advisory relationship.
Interestingly, the study revealed that although 73 percent of private clients believe independence is of high or medium importance, only 32 percent feel it is achievable in a wealth advisory relationship. This minority also shared the common view of independence being more of a hope than an expectation. The remaining 68 percent believe that it is not achievable at all or through a single adviser. (See Figure 1).
Joseph P. Ujobai, Executive Vice President, SEI’s Private Banks segment, comments:
“Whilst it is clear from these survey results that both private clients and wealth managers put independence high on the agenda, their assumptions on how this is attained and the likelihood of achieving full independence are quite different. Interestingly, when clients were asked to compare financial services with other industries, the majority not regard independence as a principle to which any profession can consistently adhere.
“What this seems to tell us, very simply, is that clients recognise that it is important to access the best investment solutions for their circumstances, but most view that this kind of independence is not so simple for wealth advisers – or anyone – to deliver.
“Though previously the issues of independence and fees have been closely intertwined, the FSA is looking to introduce a clear separation between independence and adviser charging. Interestingly, our findings show that as yet advice-based fees are rarely mentioned as a way to demonstrate to clients that advisers are acting independently. Furthermore, private clients do not like paying fees, so how do you make a fully fee-based model look more appealing than a commission-based or -offset model, where costs are not as transparent?
“Against a backdrop of major change, and with the challenges RDR pose, many wealth managers may be questioning if it will be practical in the short term to remain independent within the proposed regulatory framework, and whether the costs of achieving independence will really be worth it? We think that this research paper will be of great value to wealth managers making changes to their business, and to those seeking to understand how best to demonstrate independence to their clients.”