The good news—wealth management firms have moved to asset management fees and away from transaction revenues—better aligning their services with client needs. The bad news—revenue tied to assets will be challenging in bear markets and the new Covid-19 world.
According to McKinsey’s report released last week, “The State of North American Retail Wealth Management”, financial advice has never been more important with 69 percent of wealth management revenues coming from asset-based fees, compared to 49 percent just ten years ago. With digital entrants challenging the traditional core wealth management tasks of portfolio construction and monitoring, advisors have responded by refocusing on value proposition for their clients in customized planning and “netflixing” of advice.
The new report comes from McKinsey’s PriceMetrix proprietary database, sourced from 25 wealth management firms in North America. The data is built from detailed client holdings and transaction information from 65,000 financial advisors.
The year 2019 capped off a long bull run for clients as well as for wealth managers. Median assets per advisor ended 2019 at $120 million, up 8 percent per year since 2015, while revenues per advisor grew by 5 percent per year to $717,000 in 2019.
The winners in retail wealth management will be those firms whose advisors demonstrate strength, stability and customized perspective to their clients in this complicated time.
Sourced from Forbes - Contributed by Carrie McCabe