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New-Age Wealth Management Models Set to Make an Impact!

Nilesh Vaidya
21 Feb 2023

The wealth management industry is embarking on its next evolution. For a long time, the focus of the wealth management industry has been on UHNW and HNWI. This focus is now shifting towards the lower end of HNWI and the higher end of mass affluents. The race is on to acquire customers from these segments. Financial firms are now looking within their businesses to cross-sell to these groups. JPMC has launched a wealth plan for its over 60 million retail bank customers in the US to provide access to investment advisors.

The advisors will guide them to a personalized financial plan and provide investment recommendations with access to a pre-built investment portfolio. Cross-selling to one’s own customers is not new – but cross-selling to own customers at such scale is.

Models That Change the Game

The challenge is to acquire new wealth management customers in large numbers and serve them effectively at a lower cost. To overcome this, three service models have been introduced: In Person, Digital, and Hybrid.

  • ‘In Person’ Model: Wealth advisors identify customers, create financial plans, decide investment allocation, and onboard them.
  • ‘Digital’ Model: Also known as Robo-advisory.
  • ‘Hybrid’ Model: A combination of “In Person” and “Digital”

Customers are looking for different levels of support for financial planning, portfolio construction, portfolio tracking, and rebalancing. Wealth Management firms have typically responded with cost-efficient models categorized below.

Going Beyond “Business as Usual”

Besides these core areas, there are a few critical adjacent areas – customer reporting, on-demand advice, tax, and estate planning. Wealth management firms are now modularizing where customers can choose the services they want. Initial digital services were limited to the customer experience layer. New services are fully digital through process re-design and automation of manual handoffs. The next wave of customer experience transformation will go beyond customer profiling, customer onboarding, and reporting.

Investment Planning, Investment Analysis, And Portfolio Management Will Become More Sophisticated in The Hybrid Model

While the hybrid model already exists, the Do-It-Yourself tools are often rudimentary. The sophisticated tools are only available in the advisor-guided model. The new customer experience transformation will provide these tools to the customers with built-in investment guardrails and a spectrum of advisor oversight.

  • Mapping financial goals to investment options: Brokerage firms and retail banks offer some tools for defining financial goals and sophisticated tools for investment options. The connection between these two is often lacking. The new customer experience will strengthen this connection and enable much more sophisticated self-planning by the mass market. The next wave of sophistication will build on the current foundational tools.
  • Guided portfolio construction: In the current hybrid model, mass-market customers get pre-built portfolios with a few reviews by advisors each year. The next wave of customer experience can enhance the portfolio options themselves. It is conceivable to have many more options for stocks and bonds and present a what-if analysis beyond the limited advisor review. It will open more value-added services from the advisors for complex portfolios of alternate assets, commodities, and real estate at higher fees.

AUM-based pricing is not flexible enough for this à la carte service model. Neither are clients willing to pay significantly higher fees for bundled services. Wealth management firms should realize that there is no such thing as a perfect pricing model and should focus on smart pricing, which is clear, comprehensible, and reasonable.

The main aim must be to match propositions to the client’s needs and charge a fair price for the same to build a strong client-customer relationship in the long run. Hence, clear cost attribution and transparent pricing are needed in the new model. This will also help firms adjust to dynamic commercial environments.


Nilesh Vaidya

Global Industry Head – Retail Banking & Wealth Management