Integrated Financial Services: The New Client Preference Model

By Christopher W. Tomecek

The past three years have been difficult ones for professionals and clients in almost every sector of the financial services industry.

The longest, strongest bull investment market in our history left many ill-prepared to deal with the financial and psychological strains of the deep correction that followed.

Now, it appears the nation is returning to a more stable financial environment. At the same time, some interesting, and I believe positive, trends in client preferences are starting to emerge. These changes are driven in large measure by the realization that lifetime financial planning and management is a complex, challenging process. For the high-net-worth individual, it virtually demands professional advice.

One important shift in attitude is that clients now recognize, as perhaps they never did before, that integrated long-term planning and implementation are crucial to effective financial management of their lives and their legacies. They no longer think that segmenting financial dealings among several providers is wise.

Instead, they recognize that such segmentation often results in redundancies and inefficiencies. Further, they realize that segmentation may result in individual decisions that can, when made in an informational vacuum, have a serious negative impact on overall net worth.

Simply put, a plan that optimizes the probability of achieving retirement, educational and philanthropic goals requires that there be someone knowledgeable in a supervisory role.

This “supervisor” monitors progress toward the goals across the continuum of the wealth accumulation, protection and dissemination process. The supervisor also adapts the plan to changing circumstances and emerging opportunities.

Affluent individuals have always placed a high priority on trustworthiness, independence and expertise when selecting their financial service providers. To this triad, they are now adding a preference for having all of their financial concerns serviced by one entity.

They are looking for an expert who can provide a “family office” level of service, integrating all their financial needs into a single comprehensive plan and implementing that plan.

This trend is both an opportunity and a challenge to independent financial advisors.

To fulfill this expanded role, advisors must make two commitments. The first is to broaden their knowledge base. For some, this will mean an individual effort to learn about financial products and services that they havent dealt with before.

A CPA may need to learn about equity investing, for instance, while an independent planner may need to learn about separately managed accounts. Others will partner with those whose expertise complements their own, creating alliances that enable them to offer integrated financial services as a group.

The second requirement of those who would embrace this new business model is to find providers that offer a comprehensive spectrum of products and services. This type of platform can accommodate investing needs for all clients and, if operationally effective, can introduce much needed efficiencies into practice management protocols.

On the investment side, the menu of products available to the advisor is broader than it has ever been.

No longer restricted to mutual funds and variable annuities, registered investment advisors and independent broker-dealer representatives, accountants and bank investment officers can now, through some platforms, access a more impressive array of products. These products may include registered hedge funds, separately managed accounts, exchange traded funds and even individual securities.

The challenge for financial professionals who want to compete and succeed in this newly defined financial services environment is, and will remain, a dual one.

First, build or buy a practice model that positions you to serve all of an affluent individuals financial planning and client service needs. Second, find and ally yourself with a platform that gives you access to the entire range of products and services you must have to implement a complex financial plan.

Armed with these two weapons, you can move forward confidently to compete in todays, and tomorrows, financial services marketplace.

Christopher W. Tomecek is president of Lockwood Advisors Inc., a Malvern, Pa., provider of financial services to independent financial advisors. The firm is a subsidiary of The Bank of New York Company Inc. To reach the author, send an e-mail to kmonaghan@bankofny.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.