The pace of change in Wealth Management is continuing to accelerate. Following a raft of regulatory initiatives, Wealth Managers are now increasing their focus on customer growth and the exploration of operational efficiencies. Intrinsically linked with these themes is the subject of pricing. This is an area that is naturally attracting greater attention as Wealth Managers look to improve their competitive positioning, and as customers demand new ways of engaging with their Wealth Manager; on their terms and with full transparency.
Historically, the overall cost of Wealth Management services has been opaque. Regardless of the customer segment, or the type of Wealth Management service required, it has been challenging to determine the true cost of engaging the services of a Wealth Manager. The challenges are well documented, including a complex supply chain of products and services, a lack of client transparency, difficulties in being able to compare services and organisations not having the data required to calculate the overall cost of investing.
These challenges have resulted in a stagnant approach to pricing, with most Wealth Managers not adjusting their pricing strategy for several years. Recent developments, including greater regulatory scrutiny and a more informed customer, are starting to drive fee and margin pressures across the industry. Wealth Management services have managed to retain their proportional cut of the industry’s investing pie, with the cost of investment solutions, product wrappers and platforms declining, and the cost of Wealth Management services (including Financial Planning) remaining relatively stable.
Following the introduction of Ex-post MiFID II costs and charges disclosures, there is now a greater degree of transparency, with clients beginning to have a clearer picture on who they are paying in the value chain. Despite greater transparency, undertaking pricing comparisons remains challenging. Given the complex menu of services available to clients, conducting comparisons and value assessments is an increasingly difficult exercise, not just for clients, but also Wealth Managers themselves.
As a result, Wealth Managers are looking to review their pricing to ensure they remain competitive whilst continuing to provide value to their clients. For the reasons outlined above, this is not an easy exercise, and Wealth Managers can’t just compare the headline tariffs. There are a range of areas to consider when assessing the overall ‘pricing’ of a Wealth Management service.
Although trust and client service remain important components, industry developments are bringing pricing to the fore. With the industry on the cusp of inter-generational wealth transfer, this will remain an important area of focus over the coming years, as clients start to review the value of their services in greater detail.
Wealth Managers looking to review or update their approach to pricing will need to undertake a comprehensive exercise to understand their current approach to pricing in-line with their peers and the wider industry. This analysis is challenging; looking at published pricing tariffs alone will not provide the detail required. Identifying and implementing a revised pricing strategy requires significant input and support from across the business and needs to be carefully managed as part of a robust change programme.
Please contact Alpha if you would like to have a conversation about how we are helping to support change in the Wealth Management industry and to talk about our pricing experience.