wealth management Articles

Further Ramifications of New DOL Fiduciary Ruling on FA Training

In addition to the compensation implications discussed previously, another area demanding firms' attention will be roles and training. Compliance departments will require additional staffing, including new roles dedicated to all things fiduciary.

Implications of New FLSA Minimum Salaries and DOL Fiduciary Ruling

It's certainly not a stretch to call 2016 a very challenging year for HR / Compensation professionals in the financial services industry as they respond to two sweeping regulatory changes: the Department of Labor's new fiduciary standard for Financial Advisors and new FLSA minimum salary rate for exempt employees.

The Great Fall of China - No Monkey Business

In October 2015, McLagan published an alert titled "The Great Fall of China?", where we discussed the slowdown in the Chinese economy, the steep fall in the Shanghai Composite and their potential impacts on pay in China and the Asia Pacific region. At the end of the year, and as we enter the Year of the Monkey, we've taken a fresh look at how that has played out in 2015 and what it could mean for 2016.

Regulatory Update: Solvency II – Remuneration Requirements

Our consultants have summarized the Supervisory Statement (SS) on Solvency II remuneration requirements, released today by the Prudential Regulation Authority (PRA), and what it means for insurance firms in the UK.

The Great Fall of China?

Impacts on compensation and talent management in China and Asia Pacific after the Recent Chinese Stock Market Correction and Renminbi Devaluation

Exams, elephants, and advisor performance: Dealing with the disconnect between client satisfaction and advisor performance

When polled to give their wealth manager an exam score, US HNW investors levied a score of 72.7%, which would equate to a C- grade. This score would likely result in dire consequences in most households with children. Yet at the same time, net new money inflows – which averaged USD 1.8 billion (or 1.7% of assets) across the industry in 2013 – seem to affirm the health of global wealth managers.

Client Experience: The drive to put clients at the heart of wealth management

“Put the customer at the heart of the service experience” – that’s the gauntlet that one global wealth management firm intends to throw at the feet of its new executive and head of client experience (CX).  Challenged to “drive transformational change in customer journeys” and deliver “sustainable competitive advantage through best-in-market customer experience”, the optimism of all would-be candidates must be applauded.

Re-thinking the link between client satisfaction and advisor pay

It is hard to believe, but in wealth management today one of the most controversial statements you can make is that client satisfaction is at the heart of the business. This seems counterintuitive, especially in a business that prides itself on building lifetime relationships with clients who have complex financial needs.

Undervalued Private Bankers

Private bank margins have been squeezed from all sides of late. Low federal fund rates and high deposit insurance costs have lowered spreads on banking products; defensively inclined clients, holding high levels of cash, are reluctant to become more aggressive which is driving down fees and commissions; and private banker compensation has been rising faster than the revenue they bring in.

Improving Wealth Management Margins Requires HR Led Change

Steady growth, high margins relative to other segments of financial services, and low capital requirements makes wealth management an attractive sector in a low growth, capital constrained post-Basel III world. However, the influx of investment has kept demand for Relationship Managers high and caused Relationship Manager pay to rise faster than productivity (see Exhibit 1 below). This has exacerbated the margin pressure caused by historically low spreads on banking revenue and weak equity markets. As a result, U.S. private bank margins have declined 25% since hitting a peak of 40% (pre-tax) in 2006. These lower margins have resisted dramatic improvement despite reduced loan loss provisioning in recent years.

Impact on Brokerage Firms of a Fiduciary Standard

The Dodd‐Frank Wall Street Reform and Consumer Protection Act is likely to usher in a transformation of the wealth management industry with implications not only for the brokerage firms that will be most affected by new regulations, but also for private banks and investment advisors who already operate under a fiduciary standard of care.  Congress has charged the SEC with the responsibility and authority to create a single fiduciary standard covering brokers, who were previously only held to a suitability standard, and investment advisors who already work to a fiduciary standard of care.  While the final shape of this SEC rule‐making will determine how brokers and investment advisors will be impacted, we can be sure that the changes will be far reaching and impact almost every element of brokerage firms’ business models, from product management, client management, execution and FA compensation.

Where Human Meets Capital

Where Human Meets Capital explores the evolution of human capital in wealth management. In this week’s article Peter Keuls, McLagan’s Global Head of Wealth Management, explores how technology continues to change the wealth management workforce, and considers how firms can best position themselves for tech-enabled success.

Success in Succession Planning

While all eyes have been watching the DOL / fiduciary developments, another risk continues to loom over the industry: the dual trends of a rapidly aging FA force and their aging clients.

Repairing the Wealth Management Client Team Engagement Crisis

The wealth management industry looks a lot different today than it did ten, five, or even just two years ago. Disruption has become the norm. Financial advisors and relationship managers are on the front lines of these added pressures, squeezed by new regulations that add work to their desks, and forced by new entrants to reduce costs. Increasingly more advisors are choosing to set out as independents or even leave the industry entirely. Without this critical talent, firms are left with a big gap and risk in effectively meeting and exceeding client and firm needs.

Agile Working and What Makes a Great Advisor

Increasingly firms must be tuned in to the changing needs of clients. During his 2009 TED talk, Marketer Richard St. Curtis argued that we must stop discussing ‘success’ as though it is a ‘one-way street’. Too often, he explained, we focus on everything that will lead us to success and, when ‘we figure we’ve made it, we sit back in our comfort zone’ and stop trying.

Infographic: The Path to Financial Advisor Success

With rising pressure to grow profit margins, continuous improvement within the ranks of financial advisors has never been more important. But, what are the key building blocks and tools proven to drive financial advisor success? This week we explore and share with you ways in which implementation of a performance improvement strategy can make a BIG difference, how market intelligence sets the foundation, and ways to build an action plan for performance improvement. 

Into the Wilderness: Shifting the Digital Discourse from Protection to Progression

“We are releasing the computer into the wilderness,” announced Hendrik Leber of Acatis Asset Management in March. He was, of course, referring to the recent launch of the first global equity fund to be fully controlled by artificial intelligence. Computer-based research and trading solutions may have been around for some time, but Leber’s technology is particularly smart. It is able to discern patterns of non-linear developments; it is capable of deep learning.

Aon Names Ray Everett Global President of McLagan

Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today announced it has named Raymond Everett as global president of McLagan. In this role, Everett is responsible for leading a team of experts who provide compensation, performance and talent intelligence to companies in the financial services and insurance industries. He leads the McLagan executive committee and is a member of Aon’s Talent, Rewards & Performance executive committee.

Managing Compensation in a Downturn

It seems like we are in for a rocky ride in 2016. While underlying economies of many countries and the financial performance of many companies still appear solid, numerous firms are preparing for a tough year ahead.

Will Artificial Intelligence Take Over Your Banking Job?

Digitisation has changed banking forever. Cashless transactions, mobile and online communications, paperless submissions, and automated teller machines (ATMs) have changed the face of banking. Disruption is a norm and organisations, both large incumbents and financial technology start-ups, are creating new markets and controlling consumer experience like never before.  

Infographic: Elevate People Performance in Financial Services

It's no secret that times have changed for the financial services industry. When times were good, soaring revenue and profits covered up human capital challenges and issues lurking beneath the surface. Today, firms are emerging from the human capital bubble and need to position themselves to select, engage, and develop their most critical resource - people. In our latest infographic, get key insights and actionable tips your firm needs to rise above.

A Fully Satisfied Client Doesn’t Always Translate into Capturing a Growing Share of Wallet – Don’t Let High Scores Fool You

Your client satisfaction scores are in and they are up strongly! Cause for celebration? Not so soon. The bad news is that our research shows that scores are up across the industry (overall satisfaction amongst $1 million plus investors are up 9%). Strong markets have left clients feeling good about their investment performance, which translates through to better client satisfaction. However, we will likely find this gain to be ephemeral when markets soften again.

What Are the Future Talent Needs of Wealth Management Firms?

A recent McLagan Wealth Management study, Future Talent Needs (December 2017), indicated a number of significant shifts to the type of talent and desirable skills that firms will be hiring over the next five years. These new, in-demand skill sets will evolve to become the standard advisor profile, given today’s technological advancements, automation, and current changes to advisor role responsibilities.

Fiduciary Rule Update

The roller coaster ride that has been the controversial Fiduciary Rule recently took a couple more hairpin turns. First came the news that the U.S. Department of Labor (DOL) officially delayed full implementation of its version of the rule. The DOL was quoted in an article published on March 16th by Bloomberg Law as saying, “Pending further review, the Department will not be enforcing the 2016 Fiduciary Rule.” Then on April 18th, the U.S. Securities and Exchange Commission (SEC) announced its proposed version of the rule, which, to nobody’s surprise, is not as strict as the DOL version. Below we provide our point of view, as well as responses from some of our clients on what we might expect to see happen in the near-term.