The Indepedent Wealth Advisor business model is set to thrive as financial services firms adapt to the harsher economic environment.

Three challenging forces have created a “perfect storm” within the UK wealth management industry that is forcing intermediaries to review their business models: new regulatory demands, global market and economic woes, and changing expectations of end-clients.

However, it is plain that wealth managers within banks, private client investment managers and independent financial advisors are struggling to respond to mounting pressures. 

This is a seminal opportunity for wealth management organisations serving the needs of private clients to transform their business model to ensure they can compete in the future, and amid the turmoil a new business model is emerging: that of the Independent Wealth Advisor.

While new regulations receive much attention, the real catalyst for the focus on the IWA comes from client expectations. IFAs who dedicate themselves solely to checking the regulatory boxes miss a significant market opportunity: to attract dissatisfied end-clients by filling the demand for objective advice and solutions to achieve life goals, not just financial ones. IFAs willing to re-focus their business model around the end-client will gain the competitive advantage. 

While most IFAs will exit or undertake the minimum regulatory requirements, IWAs will distinguish themselves from the traditional IFA model by the embracing the following six characteristics:

A clear value proposition: IWAs adopt a new value proposition in which differentiation is achieved through delivery of a richer client experience that revolves around achieving a client’s life goals. Transparency, consistency and trust are critical elements.

Consistent client process: A consistent client process is a scalable approach to enabling IWAs to deliver wealth advice while creating highly personal relationships. 

Consistent and scalable wealth process: A centralised investment approach with a model-portfolio implementation is used for all clients, providing scale and flexibility.  The client and wealth management processes are fully integrated on a single platform.

Redefined role of the advisor: Once freed from the demands of portfolio management, advisors can focus on those aspects of the relationship that end clients value most: advice, guidance, integrating information, and co-ordinating experts and solutions. 

Uniform processing capabilities: Operating on a single technology platform reduces risk, creates operational scale and alleviates problems that arise from managing disparate systems.

Commitment to transform: IWAs demonstrate their commitment to this transformation through strong leadership and constant communication aimed at creating a sense of urgency throughout the firm.

IWAs recognise that they must make maximum use of technology to enable this transformation. As good as many platforms are at providing access to products, they have not helped advisors to more efficiently manage their clients’ portfolios, consolidate advisory and discretionary business or access a wider range of asset classes that clients demand

Firms that embrace the IWA model will distinguish themselves in a number of ways. They will enhance the capital value of the firm by establishing a recurring revenue model and strengthening client loyalty to the firm. They will also create a truly differentiated client experience that fulfills both consumer and regulatory demands; advance from product provider to trusted adviser, make their business more efficient, redeploy capital to drive growth and become more responsive to client needs.

We fundamentally believe that the future of UK wealth management lies in what we have defined as the Independent Wealth Advisor segment, and that banks and private client managers will also seek to inhabit this space.

Undertaking change of this magnitude will be hard, but IWAs are fully aware of the benefits associated with achieving the goal, and understand that change will need to be approached as a revolution, not an evolution.