What Does Wealth Stewardship Really Look Like?

The difference between a wealth manager and a wealth steward might sound to some people like nothing more than a semantic word choice. But here at First Rate, we take the idea of stewardship seriously.

Wealth stewardship is the standard to which every wealth manager should aspire. It begins with understanding—and committing to—every aspect of the Fiduciary Standard, and it goes even further in almost every aspect.


Beating the Benchmarks

In new client relationships, it’s easy to fall into the habit of talking about your past performance against arbitrary markets, indices, or benchmarks. Talking about being able to pick the best stocks, or deliver the best returns in the marketplace is selling your own ability to make a generic return. That conversation is about how you’re better than other wealth managers.

Many clients will think that information is the best way to measure your ability to advise them in their own unique investment situation. But you haven’t talked about the amount of risk involved in that performance at all. Most investors do not understand that the talk about market performance without risk will not give them a full picture of how the relationship might play out over time.

Adding the Risk Layer

When beginning new relationships, wealth stewards should focus on understanding the goals of their clients. Talking about delivering excellent results against the market should end when the client commits to engage in a relationship. At that point, understanding the client’s needs and goals becomes the primary focus of every conversation. Each client is different, and every client wants to feel like their own personal wealth advisor has a solid and unwavering commitment to accomplish what they have set out to do.

Part of understanding client goals involves knowing the client’s level of comfort with risk. Risk is the single factor that can make or break a client/manager relationship. If you fail to understand your client’s aversion to risk and undertake an investment strategy involving high risk, your relationship is doomed to be short-lived.

If, however, you have an in-depth client conversation about risk, the activities you perform on behalf of your client will be in harmony with both client goals, AND the client’s preferred risk profile. That’s a lot closer to true wealth stewardship.

Stewardship at the Compliance Level

The Department of Labor’s recent Fiduciary Standards ruling shows how important it is to standardize any firm’s operations around compliance issues. Compliance departments are tasked with maintaining compliance to this and all other rules and laws, and it’s in the best interest of investors, advisors, and firms for compliance managers to educate and enforce their own standard rules.

Many wealth managers view their firm’s compliance department as “the principal’s office.” They never want a call from the compliance department and they would be happy to never think of compliance. However, compliance managers can foster a wealth stewardship environment across a firm of any size—from a few wealth managers all the way up to firms with hundreds of managers.

Compliance managers should have the attitude and orientation of being in a unique position to protect the assets of entire groups of advisory clients. Instilling that orientation in a firm fosters an attitude of stewardship—and helps position compliance as a value-adding function, rather than a hindrance.

When firms are managed in a manner that emphasizes compliance as part of the overall high standards of conduct, wealth stewardship is accomplished more easily.

The ExecView Solution

First Rate ExecView, a powerful wealth management solution provides an oversight window into your firm’s investment processes by identifying outliers based on your unique business rules and strategies.

ExecView allows managers to easily spot exceptions and outliers while reviewing summarized data for groups of accounts. These summary views allow managers to quickly see top assets held, top gains/losses, fees collected and more across an unlimited number of accounts. They can look for areas where AUM may be increasing or decreasing, as well as keep a record of accounts violating rules around risk, cash management, or diversification. ExecView enhances the manager’s performance overview experience by allowing quick access to key data points and statistics.

First Rate’s ExecView is a component of the CORE suite of solutions. CORE is a multilayered solution for performance measurement and client reporting. It provides multiple user access levels and highly customizable investment analytics, portfolio oversight, GIPS compliance and client reporting capabilities. With CORE, firms can quickly conduct enterprise-wide account analyses and comparisons based on their own mandates to inform management, advisors and investment decision-makers.

Compliance departments use ExecView to manage all compliance needs as well – with management and compliance reports built-in, any firm can foster an environment where wealth stewardship is the focus, every day.


Banner - White Paper 2 - Wealth Stewardship for Today's Advisor - v2

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