Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

Practice Management: The ‘Value Levers’ Of Success

By Monica Gutschi

  • Firms can improve relationships with high net-worth investors by improving four key ‘value levers’ across the organization.
  • Full-service brokerages and multifamily offices may be in best position to do so.
  • Some small boutique firms have found ways to serve HNW investors through outside networks.

Canada’s high-net-worth investors have regained the wealth they had lost during the 2008 financial crisis, and they’ve started trusting their advisers again. But as this group frets about the uncertain economic outlook and market volatility, their concerns are changing.

Meeting their evolving needs takes far more than just protecting and growing their capital.  “There’s a huge opportunity” for organizations to gain market share if they focus on the issues that most concern HNW clients, says Petrina Dolby, Canadian vice-president of consultancy Capgemini.

In a recent survey, Capgemini identified the four ‘value levers’ that are becoming increasingly important to attract and retain affluent investors.  It found that investors want a team of specialists to handle their tax and estate planning, investment and other wealth management needs, rather than with one sole adviser who may want to ‘cross-sell’ products.  They also want access to ‘unique’ investment opportunities, preferred financing if they are entrepreneurs, and guidance as they build their wealth.

A crucial finding: Investors are dissatisfied with how those services are currently being provided, and are migrating to the multifamily offices, boutique firms and full-service investment banks that focus on these levers.

“If you are serving the average investor, it’s not important to meet all (these needs) at the same level,” Dolby says. But “as you go up the wealth scale, it becomes more important.”

Earlier this year, Capgemini’s annual survey revealed that Canada’s HNW segment rose by 12.3% between 2009 and 2010 to 282,000 individuals.

While Dolby says full-service brokerages are best-positioned to meet the growing needs of the HNW segment, John Nicola believes boutique firms can also find ways to pull those ‘value levers.’

Nicola Wealth Management of Vancouver works mainly with such affluent investors and has taken Capgemini’s recommendations to heart. “I actually think it’s easier for smaller groups to give that level of specialization,” he says.

As a boutique firm, Nicola has been able to build a referral network with the top tax lawyers, accountants and other professionals in the city.

These specialists “are not going to work for a large bank, they’re not going to work for a large asset manager,” Nicola says. “We tell our clients ‘we know who these people are, and we find them for you.'”

As for access to ‘unique investments’ and preferred financing, Nicola says having a strong working relationship with banks, business development corporations and private equity firms can give his clients those opportunities.

He also believes small firms can provide expertise during wealth creation, one of the key ‘value levers,’ by taking on clients long before they become highly affluent.

For example, about one-quarter of Nicola’s clients have assets well below the minimum C$500,000 that boutique firms generally require.

Indeed, some have no assets to speak of at all.  “We want to work with them as advisers because we know where they are going,” Nicola says.

“They don’t meet the definition of ‘high net worth’ but they meet our definition of what has potential.”

He believes that many advisers might ignore clients “who at first blush do not appear to have any wealth to manage” but what they don’t recognize is that “they are making an investment in their own future as well as the client’s future.”

For Dolby, this is where independent advisers can have the most success.  Advisers working for full-service brokerages might be challenged to get these clients to meet the appropriate risk levels needed to access certain products.