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The past few decades have seen explosive growth in the number of wealthy individuals globally. By 2009, for example, The Economist announced that over half the world's population had become middle class, roughly defined as those who can use one-third or more of their income on discretionary spending. However you define it, this middle class is expanding particularly rapidly in Asia and, it now increasingly seems, Africa.
This trend created the need for a new type of financial manager, the wealth manager, to help clients create sensible investment and preservation strategies. Wealth managers also help implement the strategy by identifying the right products and vehicles.
Not surprisingly, the opportunity to work on holistic financial and investment strategies and to build close relationships with clients tends to attract a certain calibre of individual. To generalise, wealth managers are frequently big-picture thinkers who are able to integrate all the circumstances of a client's life into a financial strategy that takes advantage of the wide range of sophisticated investment vehicles on offer in today's global financial markets. Obviously, the wealthier the client is, the greater the degree of planning and sophistication that is warranted.
The trouble is that this type of approach differs quite significantly from the product focus of the typical large bank or insurance carrier. For that reason, many wealth managers find a niche in the private client divisions of such institutions. This can be a great way to begin a career in wealth management, but many wealth managers ultimately find that the inevitable corporate policies regarding investment strategy, and restrictions on the nature of investments, become irksome.
In fact, those with a more entrepreneurial approach and who have reached a certain level of experience can find the corporate scene rather a straightjacket.
Perhaps for this reason, many wealth managers set themselves up as independent consultants. This option has decided advantages from the point of view of freedom, but, in time, the lack of stimulation from like-minded colleagues can start to tell-not to forget the lack of back up in the event of illness or simply the need to go on holiday!
Another factor is the time-consuming distraction and financial drain of maintaining offices, the day-to-day running of the business, managing clients, doing marketing and so on. Compliance with financial regulations alone is onerous for anyone, but for a sole operator it can be devastating.
It's often observed that the French seem to be very good at coming up with practical, yet elegant, solutions to many of life's challenges. One such solution has always been the boutique-the small, specialised shop where one can count on finding salespeople who know their onions (or oignons, if you prefer) and who take a pride in delivering the best service. The boutique is the proud alternative to the lowest common denominator of the megastore, whether one is looking for artisanal bread, clothes that really fit or rare books.
The boutique concept is emerging in other industry sectors as sufficient demand for something more than the mass-market solution emerges. This is particularly true in financial services, and I believe that the time of the boutique wealth management firm is upon us.
I believe that a boutique wealth management firm offers experienced, entrepreneurial wealth managers the logical next step in taking their careers to the next level, whether they currently work within the corporate environment or operate independently.
For independents, such a step removes all the distraction and some of the expense of the administrative and compliance functions. It also provides continuity for one's clients, something that's integral to wealth management and particularly important for independent wealth managers in sight of retirement.
For corporate wealth managers, joining a boutique operation means a much more flexible approach to investment strategies and vehicles, and a much closer connection between individual performance and reward-no more desk fees and other deductions , and no obligation either to take on unsuitable new clients or see existing ones being assigned elsewhere. At the same time, though, this new freedom and flexibility is not paid for in isolation-in fact, the quality and depth of collaboration with colleagues is usually substantially better in a specialist wealth management firm.
Wealth management, in the end, is all about harnessing the managers' experience and creativity to the benefit of the client. One key success element is getting the right clients-one of the big strengths of a boutique firm. Because succession planning is such a focus, younger wealth managers benefit from taking on the clients of older colleagues, and also such firms make a point of cultivating close relationships with accountants, lawyers and large companies, thus providing a good basis for generating profitable leads.
All in all, wealth managers who have established themselves either within a large financial services company or as independents should be considering a move to a boutique firm as a way to take their careers to the next level. It could just be the way to have the best of both worlds!
If you think you might be at the right stage of your career to move to a boutique wealth-management firm, GCI Wealth would like to hear from you.
