How advisers can play a trusted role in families’ ‘great wealth transfer’

WHAT does it take to become a “trusted” wealth adviser? This is potentially a multibillion-dollar question for financial institutions and wealth advisory firms in Singapore. Virtually all firms in the wealth management ecosystem want to participate in the “great wealth transfer” currently underway, where globally more than US$83 trillion is being handed over to the younger generations.

Having Singapore as a base for operations already puts wealth managers ahead, thanks to a strong governance system, rule of law and a well-regulated financial industry. But that backdrop alone is insufficient.

UBS’ Global Next Generation Report gives an inkling of what is needed to compete. The report draws from a survey of scions from below 21 to over 45 years of age – 49 per cent in Europe, 19 per cent in the US and 11 per cent in the Asia-Pacific. Of wealth managers’ desired attributes, experience and expertise were cited by the largest proportion of respondents (79 per cent), followed by a close relationship with the family.

While 41 per cent preferred to work with the same banker or wealth manager, 32 per cent were open to switching. What’s more, for Apac respondents in particular, 43 per cent saw wealth managers as the most important source of advice. That surely indicates an opportunity.

But what was unsaid is also worth noting: Breadth of product choices and investment returns were not mentioned, neither were AI-enabled systems. In fact, a mere 5 per cent cited “digital savviness”.

In investments, the asset classes most invested in were single stocks and bonds (79 per cent), and passive investment funds (51 per cent).

For full-service private banks, the ability to deliver a range of capabilities and options should be par for the course. But that’s not necessarily so for non-bank institutions such as insurance firms and smaller financial advisory (FA) firms, all of which are keen for a share of the wealth pie. Large insurers, for instance, tend to focus only on their own products, never mind about individual stocks or passive investment funds.

The survey focuses on wealth succession, a far larger challenge than investment portfolios alone. For some families, succession and wealth transfer issues may be complex and fraught. The survey sought to get a sense of where the respondents were in their wealth journeys, whether families were open about their succession plans, and how tensions are resolved.

The upshot is that to be a trusted wealth adviser, private banks and advisory firms have to extend themselves into areas not traditionally the domain of banking and investments. Those who have cultivated a long relationship with a family may be regarded as a trusted adviser as they are likely familiar with the challenges families grapple with, such as how to reconcile the conflicting desires and expectations of older and younger generations. Such discussions will be time consuming and may not generate any revenue.

So, what does it take to earn a seat at a family’s discussions? I believe an adviser must take on a stewardship role, just as families must themselves serve as stewards of their assets and legacy.

For advisers, stewardship sets a far higher bar of conduct than just portfolio management alone. It prioritises a family’s interests over the adviser’s; tempers advice with risk awareness and forgoes immediate profit for a longer-term good, among others. Those who are able to level up stand to reap long-term rewards.