In the post-retail distribution review environment, increased regulatory presence and greater transparency has led to advisers considering numerous responses to the changing wealth management landscape.
There is a growing feeling in some circles that lower service charges are almost an inevitability, but Sherlock, believes that the answer lies in improving the quality of service.
“I don’t think that costs are necessarily going to get lower,” Sherlock said. “But the world is changing. Clients are far savvier than they used to be; they’ve got more information and their demands and needs are changing.
“There is pressure on the industry to add value. Clients will no longer accept having a passive relationship – performance and transparency are far more important than ever before. There is demand from clients to have a closer relationship with their wealth managers.”
Sherlock cited lower returns across the board combined with better access to information as one of the key factors in evolving client demands.
He explained: “Because cash in the industry now and base rates are so low, clients want more for what they are paying their advisor. When portfolios were generating 10-15% a year, no one really cared how much they were paying their advisor, but now returns are lower people are more challenging about what they pay for.
“The industry has to justify what it charges and remember that it relies on clients. The industry used to say ‘this is what we do, and you [clients] have to go along with it’. But the younger generation is more tech-savvy, and, with the increased information that is out there, better understands what it wants. Our job now is to add value.”
The former UBS Wealth director also issued a warning that there may be an increasing split in the services that differently-sized companies will be providing in the future.
“[An increasing] move to discretionary is driven by the big banks wanting to de-risk their business,” said Sherlock. “Advisory is costlier, but it is what clients want, and big banks struggle with that because they are concerned about keeping an eye on their staff, which obviously costs more. Whereas smaller firms are able to give that advisory service.”
