From personalization to hyper-specialization
Personalized investing is a crucial driver of client satisfaction and a top factor for clients selecting financial advisors. That’s why 80% of investors believe that personalized advice is important, and 70% would be willing to pay more for it.1 In addition, many advisors are expanding into specialized client segments or niches to differentiate themselves.
In response to the need for personalized investment management, wealth managers are catering to this demand by offering tailored, tax-efficient managed accounts. Historically, these products were primarily available to high-net-worth clients due to their intricate operational nature.
Apart from the potential for improved investment results, customized wealth management solutions can also offer investors an enhanced experience. Through personalized strategies, investors can become engaged in the investment journey, potentially increasing their likelihood of staying committed and reaching their long-term financial objectives. Personalized solutions also give investors a heightened sense of command, enabling them to gain a deeper understanding of their investments while fostering greater confidence in their decision-making.
80%
of investors believe that personalized advice is important1
70%
of investors would be willing to pay more for personalized advice1
Financial advisors and wealth managers now have several ways to provide more value through tailored products, digital advice services, and human advisors:
- target-date funds which offer a form of personalized investing plan based on age
- direct indexing to provide products that can be closely tied to a particular investor’s preferences and circumstances
- digital services to offer engaging investors experiences to help define goals and objective, and monitor their portfolio performance
- human advisors listen and uncover needs that clients may have trouble expressing, offer emotional support when needed, and pursue courses of action that are in the clients’ best interest
Personalized wealth management solutions can also be beneficial for financial advisors and wealth manager since they help to build stronger relationships with their clients, which can lead to increased client retention, more referrals, and stronger differentiation from their competitors—making it easier to attract new clients and distinguish themselves in a growing and competitive market. Personalization can improve customer satisfaction by up to 30% and increase revenue by up to 15%.3
Hyper-specialization allows firms to focus on a more niche set of clients who share a set of common needs. Financial advisors who hyper-specialize can target smaller populations seeking more nuanced service, such as families with members who have special needs, military families, veterans, or divorced or widowed people.
However, in trying to keep up with the nuances of each client—and often already juggling a full portfolio—these advisors are constrained by time and other resources. Offering advice targeted to a specific area of a clients’ needs versus to the overall financial picture—that is, scaling advice—is already a challenge for wealth managers; hyper-personalization at scale seems impossible.
1 2021 EY Global Wealth Research Report.
2 The value of getting personalization right—or wrong—is multiplying, McKinsey & Company, November 21, 2021.