There is a breadth and width to the services offered by investment and financial providers and advisors offer. They include the basic services which investors can also now access through a discount broker, but also include the full extent of the industry skill set, which is offered by numerous firms whose names are familiar to almost all Americans.
But there is a problem the financial industry has not addressed, and that is the titles which advisors and providers adopt to describe the range of services they offer. Advisors and providers can effectively call themselves whatever they want. They can be Full Service Brokers or Financial Planners, or they can offer Investment Management or Investment Advice, or they can advertise with the granddaddy of them all, Wealth Management.
There is absolutely no single clear industry-accepted definition of what Wealth Management means, what a firm offering Wealth Management actually must offer, what that firm really does offer, and more importantly, what a Wealth Management firm does not offer. It’s a rabbit hole, and no one in the industry has shown any intention of putting language fences around any title terminology to make it clear to investors.
How confusing is it all? That’s the basis of the Spectrem study Defining Wealth Management, which asks investors what they think the term “wealth management” means in regard to services offered. The varied answers display the varied opinions and reactions investors have when they hear or read the term ”wealth management”.
Here is an example of the confusion created by the lack of definition in the industry. Thirty percent of investors surveyed for the study believe “wealth management is for someone wealthier than I am” and almost 50 percent of investors believe an investor must have a net worth of at least $1 million before Wealth Management services are a viable service to provide.
Is any of that true? Who knows? It’s all about perceptions, and the Spectrem study looks into how investors perceive the industry terminology, not how advisors or providers perceive the meaning of the terms.
Does you firm describe itself as offering “private client services”? How about “asset management” or “investment management”? Is one different from the other?
It may not matter to advisors what the business is called, but it matters to investors who are trying to find a first or new advisor and must wade through the morass of possible services to determine which advisor best fits their needs.
In previous Spectrem research, when investors are asked what type of advisor they employ, the most popular response is Full Service Broker. What does “full service’’ mean? Who knows?
The same conversation of confusion occurs when the SEC and the DOL try to regulate the fiduciary status of advisors, but at least “fiduciary’’’ has a definition. Investors rarely know for certain whether their advisor is a fiduciary, and the government is having the most difficult time regulating that title, even when there is a working definition to be employed. When it comes to terms like “wealth management", there is no definition, and thus no regulation, and thus endless amounts of confusion.
Is there a need to regulate the terminology of the industry, or are advisors and providers better off with the nebulous nature of the framework in which they work? How much time do advisors spend explaining their range of services to new clients simply because their job description or company brochure uses the word “holistic’’ to describe their approach to investing and advice?
For now, advisors and providers can, for the most part, call themselves whatever they want. But at some point, investors are going to end up asking “What does ‘Wealth Management’ mean?"
© 2019 Spectrem Group