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October 08, 2010 at 07:43 AM
Editor’s note: Today we introduce a new blog on risk management for wealth managers and their clients by SunGard risk expert Blaine Maxfield. Maxfield, executive vice president of SunGard’s wealth management business, will be a regular contributor to AdvisorOne.com/Wealth.
Today’s wealth manager is dealing with two main challenges: keeping risk in check by consistently acting in the best interest of their clients, and strengthening service for increasingly demanding clients. These challenges are inextricably linked as wealth managers look to provide superior service in order to compete.
The financial crisis has resulted in many investors becoming more engaged in the financial planning process. However, the perception of full-service firms remains low, according to a recent J.D. Power study. Deepening client relationships is still a key challenge for wealth managers. There are fewer high-net-worth individuals today, and many of them will move their money from one firm to another based on lack of confidence they have with their advisor.
At the same time, the SEC continues discussions around new fiduciary standards. In addition to managing risk for their clients, wealth managers must also manage their own risk. They may need to prove to authorities the integrity of their financial planning activities and advice, and their ability to manage risk effectively throughout the process—creating another level of scrutiny around an advisor’s level of service.
