Investment Professional


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Investment Professional

  1. 1. marketing services / asset gathering Meet the New Virtual Client-Facing F E A T UR E D A R T I CL E Investment Professional BY ALLAN STARKIE, Ph.D. FIGURE 1 The New Client-Facing Investment Professional. The investment advisor of the near future needs to be proficient in a formidable number of D emographic and market forces have converged to create a growing demand for investment professionals who have the technical products and services to orchestrate the holistic delivery of comprehensive wealth management. Alternative Investment Tax Preparation and sales skills necessary to succeed. Management Investments and Planning I estimate that this demand will grow an additional 50,000 such “client- facing” professionals to augment the current national sales force of 400,000 investment sales profession- Banking Services Trust and ADVISOR Estate Planning als1 within just the next three years. I don’t believe, however, that the in- dustry has the human capital to meet that demand. I predict that the new Risk Management client-facing investment professional Financial Planning of the future may be a very different and Insurance Brokerage Services creature than the investment consul- tant or private banker of the past. In fact, technology rapidly is evolving to the point where this new profes- possibilities. The result is that asset According to McLaughlin and sional may not even be human. management has become commod- Harvey,2 the new client-facing pro- itized. And as a result of that com- fessional—whom they call an “om- Background moditization, the advisor’s battle for budsman”—must be the following: For some time now individual inves- market share will be fought in great • an empathetic listener to whom tors have had access to managers part based on the quality of each others reveal themselves and products that once were avail- financial institution’s client-facing • emotionally intelligent and have able only to institutional investors. professionals. common sense We also see that individual inves- • intellectually curious about tors’ appetites are growing in so- The New Client-Facing professional as well as nonprofes- phistication in a 10-year cycle, with Investment Professional sional interests demands of the ultra-high-net-worth An emerging and formidable set of • able to ferret out information investor migrating within a decade skills is needed to accommodate this from even the most inarticulate to become demands of the high-net- shift. The new client-facing invest- • satisfied in the role of coordinator worth segment, cascading in a spiral ment professionals need to be deep or “knowledge contact” toward the mass affluent. generalists, not specialists. In addi- • a nurturer In short, information technology tion, the industry must become far • conscientious—one who sweats has created unprecedented trans- more sophisticated in screening for the details parency and open architecture has personality traits suited for sales and • dependable—one who follows offered accessibility to a universe of client service. through beyond expectations 20 The Monitor The Voice of the Investment Management Consultants Association © 2007 Investment Management Consultants Association Inc. Reprint with permission only.
  2. 2. • part teacher, coach, mentor, advo- cate, minister, and friend • self-confident and not intimidated FIGURE 2 Growth of High-Net-Worth Assets by wealth • filled with conviction and able to assert a professional opinion even if it’s unpopular • unswerving in sound judgment; someone who does the right thing first But extensive personality screen- ing within the investment industry reveals that one out of 10 profes- sionals possess the necessary skill-set to be a successful acquirer of assets and one in every two have the skills to be a successful relationship manager.3 Thus only one out of 20 has what it takes to be successful within the private banking models in which one person is responsible for client acquisition as well as Source: Capgemini and Merrill Lynch, World Wealth Report 2006 client service. FIGURE 3 The Virtual Ombudsman Source: Microsoft May / June 2007 Marketing Services / Asset Gathering The Monitor 21 © 2007 Investment Management Consultants Association Inc. Reprint with permission only.
  3. 3. >> “VIRTUAL PROFESSIONAL” CONTINUED egories in which a human might be Indeed, financial institutions rely lacking capacity.5 on a very small pool of sales talent for In a national sales force where fewer In this way the investment indus- a highly skilled client service force, try can use technology to virtually which thus in many cases merely than 5 percent are capable of meet the growing demands of the comprises retread portfolio managers high-net-worth sector and close the transformed into “trusted advisors.” consistently generating $1 million in client-facing professional gap. Firms innovative enough to integrate The Ombudsman Gap new annual-fee revenue, the battle comprehensive technology with so- As an executive recruiter, I associ- phisticated candidate screening and ate a job description with someone for talent quickly will exhaust the training will dominate the market. I know. I then use that person as a prototype to develop a slate of quali- talent pool. In other words, we are Allan Starkie, Ph.D., is a partner fied candidates. But when I combine at Knightsbridge Advisors, Inc., an the ombudsman’s technical and facing an ombudsman—or client- executive search firm in New York, NY, interpersonal skills with sales skills, where he specializes in wealth man- I am describing someone whom I facing investment professional—gap. agement and provides management have never met. consulting and merger and acquisition This becomes a real problem when support. He earned a B.S. from West you consider that we need 50,000 Point, an M.S. in strategic intelligence additional ombudsmen (that is, client- forced to pay for recurring revenues from the Defense Intelligence College, facing investment professionals on a formulaic basis and wire houses and a Ph.D. in business from American or high-net-worth sales people) in will morph into quasi-banks. World University in conjunction with North America by the end of 2010. But all these institutions simply Templeton College, Oxford University. Figure 2 shows the projected will be playing an expensive game Contact him at astarkie@knightsbridge growth of high-net-worth assets in of musical chairs with the same top North America between 2005 and producers unless we devise a means 2010. This projection calls for an of either expanding the talent pool Endnotes increase of more than $3.4 trillion or augmenting it with technological 1. Chip Roame, Tiburon Strategic in these assets.4 Assuming that this innovation. Advisors, “The State of the Advice $3.4 trillion generates $17 billion in Industry” (presentation, Commonwealth new recurring fee revenues (using 50 The Virtual Ombudsman Financial Network Wealth Management basis points), and that the average Just as someone who is deaf uses Symposium, San Diego, CA, June 5, high-net-worth sales professional sight, smell, and touch to compen- 2007). acquires $350,000 in new fee reve- sate for lack of hearing, the invest- 2. Dr. Myron Harvey and Jamie nues, then we need 50,000 addition- ment industry must take advantage McLaughlin, personal communica- al high-net-worth sales professionals of technology to compensate for the tion (2006). Dr. Harvey is an indus- over the next five years. This figure lack of client-facing professionals. trial psychologist, working with Mr. does not include replacements or For example, Commerce Bank McLaughlin, Convergent Wealth the growth in demand due to baby recently acquired E-Money and Advisors, New York, NY. boomers’ wealth transfer. is setting up account aggregation 3. Dr. J. Martin Haygood, personal In a national sales force where and asset allocation software using communication (2003). Dr. Haywood fewer than 5 percent are capable of technological solutions to augment is founder of Management Psychology consistently generating $1 million in human capital limitations as well as Group in Atlanta, GA, where he con- new annual-fee revenue, the battle provide a form of branding. And sults with business leaders on selection, for talent quickly will exhaust the Microsoft is about to enter the team development, and organizational talent pool. In other words, we are wealth-management scene in a big effectiveness issues. facing an ombudsman—or client- way, as its Advisor Portal becomes 4. Capgemini and Merrill Lynch, facing investment professional—gap. another way of leveraging technol- World Wealth Report 2006, available Top compensation will continue ogy to supplement human capacity for registered users at http://www. to rise, with million-dollar revenue (see figure 3). Microsoft has built an producers exceeding $500,000 in initiative around wealth manage- requestfile.asp?ID=508. total compensation. Smaller, more ment, leveraging its own software 5. Craig Saint-Amour, personal com- nimble firms will attract top profes- and capabilities from specialty firms munication (2007). Mr. Saint-Amour is sionals by offering equity and creative to create an offering that augments head of wealth management and capital compensation. Larger firms will be any of the wealth-management cat- markets for the U.S., Microsoft. 22 The Monitor The Voice of the Investment Management Consultants Association © 2007 Investment Management Consultants Association Inc. Reprint with permission only.