The investment advisory business is transforming from a transactions-driven sales function into a portfolio-based service approach that puts the needs and the preferences of customers to the forefront of the activities.
The objective was to generating transactions-driven revenues. Advice was paid for by sales. Often, banks had asset-class dedicated sales specialists who came up with trading ideas that promised a profit. The value proposition of such a sales specialist was her education, her experience in a special field and her network of other specialists. The most important competence, however, was her ability to keep relationships to active customers at a high level and build strong bonds with them. It can easily be seen that successful sales specialists spent most of their time with those customers who promised the highest possibility to trade on their advice. As a result, sales specialists did hardly consider whether their activities were systematic or scalable. This just wasn’t part of their DNA. They were too focused on their relationships and their daily business. This is what they were told to do and this is what they were good at.
The traditional advisory business is now adapting to new realities: transactional revenues are being replaced with advice-based flat fees. Significant differences in the service quality of Wealth Managers become apparent. With a systematic advisory approach, providers can now industrialize the way specialists produce and disseminate instrument level content with the ultimate aim of customizing investment ideas and improving the quality and the performance of individual portfolios. As a result of a clear segregation of duties, sales specialists become content specialists. Content specialists focus on KYP (“know your products”) aspects while relationship managers can fully concentrate on KYC (“know your customers”) requirements and bring the needs and preferences of their customers to the forefront of their services. Content specialists generate and select the best ideas. These ideas need to be mapped to an instrument and a story explaining their context. A successful content specialist must also possess (social-) media competencies – she is now “selling” digitally.
The purpose of this new role is to provide investment ideas, trading opportunities and the identification of risks much more systematically. The content specialist of an asset or instrument class will constantly watch and analyze financial markets, secondary trades and news flows. She is in constant touch with analysts. As a result, she will come up with and track product guidance and investment ideas. Her contribution is key to making specialists’ know-how available to a very broad audience in a timely manner. Standardized processes and systematic life-cycle management of both, instruments and ideas will be the basis and ensure regulatory compliance.
The perceived risk of a clearer segregation of duties is that specialists lose their original “sales”-oriented identity and it will be a challenge to keep their outstanding know-how and make it scalable. However, it seems clear to us that the financial incentives driven sales culture must change into a differentiating ethical culture with customer protection at the heart. Thus, the perceived risk is – in reality – an opportunity: specialists will get the required room to focus on how to give the investment advisory business a client-centric and compliant future.
Distinga Advisory Solutions LLC supports the transformation of the advisory business with its unique business approach. An approach that leads to enhanced sales support and improved after sales services.
For a smooth implementation of the Distinga Advisory business approach, we work hand in hand with Prometeia – a leading software solutions and data provider specializing in the digitalization, automation and compliance of advisory services. Prometeia was founded in 1974 as an independent institute for economic research by a group of university professors in Bologna. Most recently, a report by Forrester Research Inc. confirmed Prometeia as a leader in Digital Wealth Management Platforms.
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