How wealth managers can plan for the future

The future is coming, whether we’re ready for it or not. We believe financial planning is all about preparing for what comes next. While our guidance is usually directed toward clients, many wealth managers may benefit from some self-reflection as well. We have seen that firms increasingly face challenges preparing for the future, be it career development, leadership planning, or business continuity. A plan for the inevitable may help chart a path forward.

Career development and advancement

The need to structure roles and responsibilities within a practice has never in our view been greater. According to PII respondents, top-performing practices recognize this and offer talent opportunities to contribute. Roles are well defined, often in a team-based structure that brings together different professionals with unique expertise to serve clients. Combining each team member’s experience may allow practices to leverage their individual strengths and offer clients a wider range of services. But distinguishing between roles and promoting collaboration across functions may help ensure that team members stay focused and efficient. Teams may also benefit from streamlined resources, processes, and services as a collective group and may operate more productively.

Practice Innovation Index (PII) respondents indicate that talent in top practices is encouraged to seek growth opportunities. That growth, if aligned with practice offerings and increasing client demands, will likely benefit everyone involved. The employee may take on more responsibilities, which may help the firm better serve its clients. According to recent Practice Innovation Index data, close to 90% of top-tier practices offer a career-development program, and over half of those programs include wealth managers and staff. In contrast, over 60% of bottom-quartile firms lack a formal career development program.

Developing staff often comes with challenges that might be exacerbated as scale grows. Intentional processes and procedures for promotion may help ease the strain. Establishing clear career paths and investing in staff development may help attract and retain talent. These efforts may also help equip teams to meet the evolving needs of clients. Firms have an opportunity to more readily innovate and adapt, potentially preparing future leaders for eventual succession.

Strategic leadership and business planning

Leaders come in all shapes and sizes, and no one style suits every environment. But leadership style may contribute to a wealth management practice’s long-term success. A collaborative approach is overwhelmingly favored by top-quartile practices (88%) and practices overall (74%), helping to strengthen the service that clients receive.

We have seen that collaborative leaders seek out input from the whole team, welcoming diverse expertise that may lead to more comprehensive strategies. Collaboration may enhance client service and outcomes with more timely responses, better communication, and ultimately more trust. Better client service in our observation tends to boost client satisfaction and client retention in general. We have likewise seen that employees, for their part, tend to be more engaged in an inclusive environment where they feel valued. Morale appears higher which may improve individual loyalty and overall team stability.

Senior leaders who build a collaborative culture have an opportunity to align it with a strategy of long-term growth. Wealth management is inherently in our view a long-term business built on relationships and resilience. Aligning leadership and strategic planning may equip a firm to navigate the challenges that will inevitably present themselves, be they internal, industry-specific, market-based, or economy-wide.

Change is a constant, even if the specifics of that change are currently unknown. PII data shows that 70% of top-quartile wealth management practices make a three or five-year timeline part of their business strategy planning. This approach has many potential benefits for dealing with change. A practice might orient itself toward market and economic resilience with diversified investment approaches and risk management frameworks in an effort to weather a storm. A proactive approach to innovation and adaptation could help a practice anticipate industry, regulatory, and technological developments. Scalable processes may help enable the practice to grow without sacrificing stability and quality of service.

Business continuity and succession planning

According to PII, one-third of wealth managers plan to retire in the next 10 years, and more than half (52%) have no succession plan in place. Fewer than half (48%) of survey respondents have even identified a successor. Practices that remain unprepared or delay planning until the last minute may face significant challenges that put them at risk.

Succession planning, in our view, doesn’t have to signal the end. As we see the succession situation unfold across the industry, leading firms are strategically building succession programs designed to help wealth managers transition their practice or sunset their book according to PII data . By identifying a potential successor and formalizing a succession plan earlier on, practices may create capacity, establish continuity, and prepare for the business’s future transition. However, we believe the process of vetting a potential successor should begin several years before a planned retirement. We have seen that building trust and transferring affinity and loyalty takes time, for both a wealth manager’s team and ultimately its clients.

A key step, in our experience, is integrating successors into existing client relationships. According to PII data, among top-quartile practices, 70% report that successors — internal or external — are frequently or fully integrated into these relationships. In contrast, just 7% of bottom-quartile practices report this level of integration with client relationships. The industry average is 31%. Integration may help ensure trust and continuity. Embedding successors into the client experience may not only promote retention but may also help preserve the legacy and long-term value of the business. We have seen it can even be a catalyst for growth when approached strategically.

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