Financial Advisor Magazine
How High-Value Clients Are Revolutionizing Your Business

It's time for a better valuation method for wealth management.

Steve Gresham
January 1, 2019

It’s time for a better valuation method for wealth management. Most criteria today rely on objective data points — AUM, number of accounts, product mix, fee-based revenue, et al. Important measures for sure, but limited in their ability to accurately predict the potential challenges and opportunities facing the practice.

Savvy buyers of advisory firms have learned to scrutinize the story behind the numbers, such as the demography. A client list dominated by seniors in their 70s and 80s has different service costs and revenue implications than a practice built of mid-range Baby Boomers 10-20 years younger. Likewise, a product lens may reveal healthy fee revenue from managed accounts but can mask a lack of estate planning and inter- generational relationships needed to preserve that income. Where valuation leads, management must follow…so let’s follow the clients and the advisors most focused on serving them well.

It’s a (Different) Numbers Game

The weakness of any empirical valuation is the presumption of persistence - that the clients are happy and loyal. An important perspective to test, given that the median high value client today is a mid-late stage Boomer, 63-65 and on the cusp of “retirement”. This is the Moment of Truth for wealth managers, since this is the time clients begin to get truly serious about planning - often triggered by a life event involving aged parents or looming retirement. The resulting awareness and willingness to take action favors pro-active planners who drive consolidation of assets from among the 4-5 firms typical of Baby Boomer households. The consolidation process has winners and losers and it is remarkably easy to be a winner if you are actively engaged with clients. Scale is the adversary here - and most advisors simply do not maintain the level of communication and connection needed to be seen by clients as their primary advisor in this most important of life stage transitions. To be fair, most clients are unpredictable with their timing for getting serious, but preparation improves your chances of success.

Be Client Driven

For an ongoing wealth management concern, the most valuable success metrics reflect how well the practice drives asset consolidation and new wins (referrals). But how best to earn those rewards? Ask the clients. Consolidation “winners” are offering something the clients want and are not receiving from their current array of “relationships”. The two most common reasons for clients leaving advisors remain “planning” and “relationship”. Both are as much perception as fact, too often surprising advisors who assume all clients know what the advisors can do for them and that indeed they are truly concerned, just thought the clients were “all set”. Which they were — until they weren’t. If you want to beat yourself up some more on this topic, read this artifact and ignore the date - it still tells the story! (see Appendix: “Three Things Baby Boomers Won’t Tell You”, Investment News, July 23, 2007)


Client-Driven Valuation 

A better test of a wealth management offering’s future value is how well it meets the expectations of future clients. Pause here to absorb the meaning of “future clients”.  Even a current, long-term client who has not yet consolidated accounts with you is also considered a “client” by 3-4 other firms. Someone is mistaken – in the future state. Likewise, happily, there are clients you might not know who are looking for you but have not yet found you and will become available if they remain ignored by the firms they work with today. It isn’t far-fetched to imagine your client list to be radically different in just a few years based on the timing of the demographic. You win consolidation and new clients from your current base while other advisors lose - and other advisors snag clients you’ve ignored. This process is evidence of why the demography of wealth management is the biggest industry disruptor of all. To win this battle, you need a compelling and dependable system built of high quality parts.

Wealth Management is an “Eco-System” of Integrated Elements

Wikipedia says “an ecosystem…is a community made up of living organisms and nonliving components”. A digital ecosystem is a “distributed, adaptive, open socio-technical system with properties of self-organization, scalability and sustainability”. Welcome to the cutting edge of wealth management.

Creating the optimal wealth management experience is all about improving the advisor/client experience. To do their best work together, advisors and clients should have a frictionless environment where clients are free to dream, fear and evaluate trade-offs among a constantly changing set of real life challenges. In the ideal state, advisors are able to prioritize their precious time, attending to the most pressing needs of the most valuable clients. In the most efficient practices, clients can self-actualize mundane needs like money movement with a few simple clicks of the mouse and their advisors are alerted when more complex issues arise – before the clients are aware. Above all, this perfect world is a partnership based on transparency, objectivity and trust. New prospects arrive regularly based on ravings of the clientele. The bad apple seeking only to beat the market (every quarter) is politely shown the door. Best of all, the client service team can’t imagine a better place to work and passes their jobs along to younger recruits drawn from a robust talent pool.

The essence of wealth management is developing superior client solutions while creating an environment worthy of both our advisors’ and associates’ best efforts. We know we are making progress only when both parties to the effort – the clients and their advisors – can together focus on the highest value issues. But no single element can carry all the water. The eco-system provides the interplay between “living” and “non-living” elements -- the dual and complementary roles of technological efficiency and human touch. FinTech is not a replacement for advisors, it is a toolset that creates capacity and better service. The second Wikipedia definition – the digital ecosystem – goes further: “ self-organization.. scalability ..sustainability”. The ecosystem is less a collection of parts than it is a dynamic combination of elements that evolve with changed conditions. Competitive wealth management offerings should have the same flexibility. Managing a top wealth advisory practice is a noble calling – a desire to help people and a commitment to improve.

We can debate the key parts of a wealth management ecosystem, so I will start the dialogue with my Nine Essential Elements of Wealth Management. Committed as I am to the eco-system view, I have the luxury of starting from scratch – no small advantage in a practical business world where the status quo is the most powerful adversary. I base my list on the importance to the advisor/client relationship and the seamless partnership implied:

The Nine Elements of Wealth Management

1. Whealthcare – Client surveys consistently reveal the importance of health care, fears of cost and the implications of longevity. Perhaps the oldest principle in financial planning is the tension between health and wealth. Wealth without health – or health without wealth – has profound implications for effective financial planning. So how to manage the convergence of health care planning and financial planning? In addition, planning for health and wealth realities increasingly needs to span generations as families cope with the impact of aging and longevity relative to each group’s level of preparation. Ask aging Boomers about their parents….or adult children.



Elements for Evaluation


  • Methodology for longevity planning

  • Methodology for evaluating health care costs

  • What is the assessment method for determining capability in decision-making – and how is this capability made available to the clients?

  • How are aging relatives included in the planning process?

  • What is the role of long term care in the planning process?


2. Tax Efficient Investing – and Planning – Wealth management without tax-smart household management is an incomplete solution. Tax efficiency should be embedded in financial planning recommendations across multiple accounts, products and models to improve asset location. Asset location improvement can be quantified and demonstrates significant investor advantage. And tax-optimal management should be included as part of the prioritization of retirement distributions from multiple sources including Social Security and conversions of traditional IRAs to Roths.  Tax management across the household from accumulation, ongoing management through to withdrawal and bequest is a significant opportunity to earn, retain and grow relationship fees as well as give cause for asset consolidation.

  • Client Account Information Aggregation

    • What is the process for aggregating client information?

    • Does the client aggregation system have a client portal?

    • Does the aggregation program provide householding?

    • Does the aggregation program optimize asset location?

  • Tax Efficiency

3. Regulation and its Impact on Client Engagement and Risk – A challenge to wealth management firms is how to balance a highly customized client solution within appropriate risk parameters, and also support effective advisors while complying with industry regulation. Regulation and risk are disruptors, including the establishment of a fiduciary standard with revised definitions of conflicts. There is also a fast-growing trend of consumer protection legislation and regulation at the state level. Irrespective of final dispensation of rules proposed by the SEC, a heightened standard of care is in demand by clients with increased transparency and attuned to potential conflicts of interest. Increased regulation is tracking with increased marketplace forces.

  • Client Suitability

    • How do you review suitability in the context of client experience?

  • Trusted Contact

    • How do you collect trusted contact information?

    • How is trusted contact used in the client experience?

  • Fiduciary

    • How do you manage your role as a fiduciary?

    • How do you describe your role as a fiduciary?


4. Digital Investment Services – Have you fully embraced the rise of digital investment and planning services? Not just “robo” advisors, digital services represent a distinct and growing consumer preference for engagement. Successful wealth management firms are learning to provide more services through digital avenues to first meet client expectations and then to reduce demand on service staff. Though human advisors will always provide essential contact and behavior modification that benefits their clients, wealth management firms will increasingly leverage digital tools for service, investment management and even advice with benefits that include reduced variation in the solutions provided and increased time for human advisors to work directly with clients.

  • How do you incorporate digital investment services in the practice?

  • How do you incorporate digital capabilities in your customer service?


5. Automation of Client Data and Adoption of Centralized Data Management – The fundamental issue is client data is not seamlessly connected. Clients assume their important personal data is well known to their financial partner and across the firm. Full adoption of CRM and complete client profiles is needed to support better and more personalized engagement. CRM allows engagement of the client at scale – maintaining key data points and tracking activities to feed ongoing client service needs and proactive communications. Clients can help customize their experience by making choices about offers presented by centralized communication channels. These choices feed an ongoing client “journey” using artificial intelligence to refine and enhance the client experience. Most important – client data feeds pro-active communications and reveals the best opportunities for advisors.

  • The CRM capability

    • Describe your CRM capability and how it is used in the practice


6. Communications – How easy is communication with your company and with your advisors? Table stakes in the wealth management industry is the seamless communication among advisors, clients and the host firm across channels of live interaction -- telephone, web, and mobile devices that include text and video. The most basic standard by which to retain a wealth management firm – or any professional service – is the ease of communication. Data dependent and increasingly data-driven, effective routing strategies, messaging and CRM input are among the necessary capabilities for the firm serious about wealth management. The acid test? If a client calls, emails or texts ANYONE at your company, does that person know the client’s last action?

  • Communications systems

    • Describe communication choices for clients

7. Security – The most critical element in wealth management and in financial services overall. Clients expect the security of their assets, information and communications from the threats of identity theft, asset theft and data manipulation. Increasingly important is the proactivity of the wealth manager to help clients protect themselves from new threats to identity and assets entering through social media.

  • Current cybersecurity solution(s)

    • Two factor authentication

  • Client records for sharing in the planning process

    • Client “vault” for documents and important information

    • Document sharing capability for electronic management and updates

  • Security offerings for clients including credit surveillance


8. The Risks of an Aging Investor Population – How will you manage the implications of an aging clientele? There is both a business opportunity presented by the demographic shift and the need for significant de-risking of the wealth management firm. Opportunity is well documented with forecasts of intergenerational wealth transfer. Less energy has been devoted to the risks of aging, including financial exploitation, diminished capacity to make financial decisions, the shift from a self-directed client to a level of dependency, how to engage with clients and families when diminished capacity is suspected. In addition to internal business risk issues, companies and advisors will need to comply with federal regulations governing the relationship with clients as well as state consumer protection laws relative to financial services, elder financial abuse, discrimination and fraud.

  • Assessment of aging client competency

    • Family tools for assessment

    • Client self-evaluation

  • Remediation process for diminished capacity clients

    • Role of trusted contact and procedures, POA protocols

    • Remediation of clients with and without available family members

    • Asset and account transfers due to diminished capacity

  • Re-registration procedures for deceased clients

  • Inter-generational wealth management strategy and procedures

  • Estate planning

9. Advisor Hiring, Training and Retention – For all the focus on digital tools and capabilities, the foundation for all successful wealth managers is a commitment to hiring, training and retaining trusted professionals – whether as managers of eco-system elements, or as financial advisors and client service providers. Financial advisors have a median age older than 55 and the industry is challenged to bring young people into advisor roles. Process innovators are attracted to other industries that appear more interesting. Altogether, leadership in wealth management will ultimately be taken by companies able to create an environment worthy of the industry’s best people. And the best people may have children, aging parents and other responsibilities. Arguably, these employees have the highest “EQ” – an important need for high touch wealth management.

  • Recruiting philosophy, strategy and process

    • Management

    • Advisors

    • Client service and other professional roles

  • Talent pool sourcing and maintenance

Evaluation Methodology

Each of the nine elements is evaluated based on a blend of adoption and proficiency, scores 0-10. Adoption is a critical concept because simply having a capability does not mean the capability is known to the clients or that it is offered proactively by the advisors. A good example is estate planning, which many advisors say they do but most of the clients say otherwise. Gresham Company practice management surveys of top advisors have revealed that many top advisors believe they offer critical services – like estate planning – but do so for only a portion of their clientele.  With respect to proficiency, how effective is the service provided? For example, asset allocation advice is not optimal if it does not solve for tax efficiency using asset location. So there is both a qualitative and quantitative perspective to be joined in each score for each of the nine elements of wealth management. These combinations seek to reflect the offering’s total effectiveness - both the quality and pervasiveness of the solutions for clients. (See Appendix for The Top Twenty Client Analysis)

The second key benefit of the Client Experience approach to valuation is prioritization of investment in the practice. Until your firm scores a 90 (for the nine elements overall), there is potential for improvement. Selecting where and how much to invest among the nine elements is a very important consideration for every practice. It’s not all about hard dollar costs - the decision of what to do and when is very much dependent on individual firms and their personnel, time horizon and ambition. To quote one advisory firm ceo, “there are aspects we could incorporate now and others to make an objective” – an elegant understatement of the challenges inherent in change.  

Investments in the remediation of each element are made easier when there is more precision about the current state. One of the great organizational challenges of a wealth management eco-system is the number of distinct elements. There is complexity inherent within each element — complicating the process of investment prioritization. Given the complexity of each element, there are likely many different organizational “owners” — especially in bigger firms - making investment in each element a competition for resources. Across nine wealth management elements, how does an organization decide which element is most deserving of investment? Very few firms will have the managerial bandwidth and financial resources to invest across the spectrum of nine elements, setting up an inevitable need for leadership to set priorities from among competing, dissimilar options.

This leadership challenge highlights another aspect of the wealth management eco-system — it requires an owner. It is easier to optimize a successful wealth management client/advisor experience at small scale than to achieve high levels of customization and personalization across a large enterprise with many advisors. Most clients know and appreciate the trade-offs, and firm size certainly plays a role when high value clients choose their primary advisors. But there are many advantages of size, and larger firms can compete well (in the current environment) when their resources and scale are applied against big ticket items like cyber security packages, sophisticated portfolio management tools, inter-generational planning expertise, and — increasingly — cutting edge digital client engagement systems. Smaller firms can typically win with higher touch — accessibility of key professionals, personal service and continuity of personnel.

Technology is proving to be the equalizer in the “size” competition, led by better CRMs with embedded artificial intelligence to better manage client data, discern opportunities and alert the humans to specific action steps — e.g. “next best call”. As these systems develop, they support customer service “journeys” that enable clients to self-actualize their basic service needs without human contact. Money movement was once a tremendous drag on service professionals and has become mostly client self-directed at big firms and on large scale service platforms. More opportunities for service innovation include account opening, onboarding, account supervision including monitoring for suspicious activity and diminished capacity, as well as re-registrations associated with deceased clients. But who in the org is deciding what to do and where to invest? Big firms have “technology” experts but do they know and truly understand the requirements of advisors interacting with clients? And if we ask “the business” – the client-facing team, will anyone there take the time to help translate client engagement needs into a punch list for the CRM techworks?

To help in this process, we first evaluate each wealth management element utilizing questions based on the advisor/client experience. This process is part objective, part subjective, testing first if a solution is offered by the practice, then how that solution compares with client expectations for simplicity and effectiveness. Finally, how broadly is the solution applied across the firm’s advisors - providing a sense of its ease of use and relative importance in client engagement. Again, a mix of qual and quant measures combined to render a score of overall effectiveness.

Wealth Management Leadership

Now consider the leadership team itself. While developing the questions used to evaluate each wealth management element, several professional colleagues and industry leaders admitted they were not familiar enough with all of the elements to know the most important questions to ask, let alone how to answer on behalf of their firms. One trust company ceo asked for the list as an educational exercise for his board. So there is a second level in wealth management optimization - that of preparing senior leadership for better strategic thinking, investment prioritization, selection of remediation efforts and the regular review of ongoing operations. Take a deep breath before entering this arena — known in many orgs as The Black Hole of Decisionmaking, the Innovators Graveyard or the “DNZ” (the Do-Nothing Zone).

Wealth management is a full contact sport, so client and advisor preferences are usually pretty well known and have historically kept most offerings crisp and responsive – but vigilance is critical. In the current state, a combination of record markets and record profits have created a complacency in wealth management. Ironically, it is that record success that helps draw competition — and disruption. As Jeff Bezos famously quipped, “Your margin is my opportunity”. Amazon’s entry into financial services is more a question of “how” and “when” than just “if”. So get ready.. Savvy leaders invest regularly in innovation and financial services/wealth management has enough friction points and dysfunctional protocols to engage ambitious entrepreneurs for years to come. Some client service elements are so awkward they actually inspire entrepreneurs to act purely out of self-interest! Leadership of wealth management today MUST be looking forward, testing the client experience, talking to clients, increasing the ease of doing business for advisors, streamlining the workflow for client service professionals. Those efforts will reveal the opportunities for improvement, which then can be individually researched and proposed for investment. Senior leadership has to be both engaged and knowledgeable to be effective. Long gone are the days when the boss could remain aloof from the inner workings of systems so closely tied to the quality of the client experience. I remember from years ago the words of a Wall Street veteran ceo, who boasted about not being online or using email, “My kids do that”, he said. The board sacked him and his company ended up spending hundreds of millions in technology catch-up costs.

Walk the Talk

The most successful business leaders of the Digital Age — the Second Industrial Era — are intense personalities who are relentless advocates for the customer experience. Jobs, Bezos, Musk, Howard Schwartz of Starbucks all immersed themselves in the smallest details. No fear of “getting too deep in the weeds” here. Ned Johnson of Fidelity Investments exuded a constant and intense curiosity that led to countless innovations that to him just seemed to make sense. Client centricity is a mindset, a passion — and what my former marketing colleague and Fidelity CMO, David Dintenfass describes as, “an act of extreme humility”. In the world of the consumer champion, there is no fear of being wrong - there is only fear of not understanding the clients.

Financial services overall and wealth management in particular have been spoiled by success - and overconfidence is common. In any business, it requires vision, energy and persistence to reduce current results and invest in the future. Add to that operational reality the demographic perspective that many financial industry leaders are on the cusp of their own retirements and lack both the drive and the financial incentive to rock their boats. It is interesting to see how many younger employees pick up on this inertia and depart the industry as well as the company. Many financial companies report losing more than half of their entry level recruits within two years of hire. There is nothing more lame to the ears of an ambitious and idealistic young person than hearing from a senior leader that the company will be “transforming the industry” even though that same employee cannot imagine opening an account. By the way, does YOUR firm track the ages of the children of top clients and proactively engage with them to help convert their UGMA and UTMA accounts into relationships of their own?

The Tenth Element

So important is the engagement of management, it has a second level of participation in the TOS. Each of the nine functional elements of course reflects “management”, but we now add a separate perspective on the function and contribution of senior leadership. Are leaders knowledgeable, engaged? How do they champion the client experience? How do they inspire client centricity among their associates? Who is on the board — and why? How is the board engaged with the business? How often does senior leadership meet with clients? Client facing professionals? How is leadership updated about innovation? How does the firm engage with technology vendors and service providers?

Successful innovative management teams make it possible to be objective when scoring the Tenth Element. Robust “best practices” exhibit both a structure and frequency that drive innovation and constantly improving client-advisor experience.

Wealth Management Optimization - Total Optimization Score

Scoring a wealth management offering is achieved by combining a perspective on each of the individual elements with a perspective of the eco-system and leadership:

​Again, there is both a quantitative, objective view and a more qualitative, subjective view. The important job is to represent the advisor-client experience – the ease of doing business together in the current and future state so we can better evaluate a wealth management offering’s current and future value. The entire purpose of this paper is to present a better way to value the offering by adopting a more direct client and advisor perspective. The analytical squishiness of “qualitative” and “subjective” perspectives are minimized by a rigorous, detailed view of the offering. First, we separate the offering into nine distinct elements, then break down each element into smaller parts based on the needs of clients and their advisors – and of industry best practices. This more detailed view then reduces the remaining exercise to a serious of yes/no questions about whether a particular practice or feature is in place, augmented by a view of how well it has been adopted across the firm. Finally, with the Tenth Element, we get a perspective about management using another set of practices gleaned from top firms and reflecting principles supportive of exceptional client service and advisor ease of doing business. 

Armed with the specificity of scoring, the wealth management practice has a better, more objective analysis to support its strategic planning and spending priorities. Prioritizing investments is a challenge for wealth managers of every size and the choices are hard to compare and quantify for impact. This paper proposes an approach to creating more transparency into the current offering relative to the marketplace and help leaders make more informed and objective decisions. Remediation efforts of specific elements can follow the outlines, but will always be most effective when first embraced by the organization and customized for its clientele and professional team. In addition, the original analysis provides a baseline from which to evaluate the impact of future investments. The Wealth Management Optimization exercise then becomes a management tool to help keep the practice client focused and advisor centric as the inevitable changes evolve in the dynamic market for wealth management.