Wealth Management 2025

Technology Will Matter, But Not As Much As Creativity, Expertise And Personalized Service

As technology advances and the wealth management industry consolidates, wealth managers will become increasingly focused on the standardization of offerings delivered through digital means.

“The wealth management industry is consolidating,” says Whittier Trust Chairman of the Board Michael J. Casey. And with this trend, “more and more players will be focusing on technology, standardizing and streamlining processes as a means of improving margins.” “Invariably,” he continues, “this leads to much more of a cookie-cutter approach.” Instead, “what high-net-worth (HNW) investors with their intergenerational, multi-beneficiary and multi-objective portfolios need is greater creativity, customization and personalization.”

Unquestionably, HNW clients want more access to enhanced technology: digital performance reporting, telepresence, interactive data visualization, remote transaction initiation, etc. However, technologies of this nature are already becoming ubiquitous across nearly all industries, making them table stakes.

Within wealth management, “HNW investors are looking for technology not for technology’s sake, but in the context of wanting to make their financial lives easier,” says Whittier Trust President and CEO David Dahl. “You will not be able to succeed as a wealth manager unless you can transact, communicate performance, run meetings online or otherwise conduct business digitally.”

The true differentiator for HNW clients, Dahl continues, “is, and always will be, the degree of customization, specialist expertise and personalized service.” The interests and goals of HNW clients tend to extend beyond a single matriarch or patriarch to include a wide range of family members and other intergenerational beneficiaries. This means, by default, their wealth portfolios feature “a wide array of specialized risk, tax, growth, cash-flow and other investment needs,” says Dahl.

Owing to scale, “these investors also have access to a spectrum of opportunities that others cannot pursue, including specialized trusts and customized structures that make a [massive] difference in terms of enhancing performance and transferring wealth.” For these reasons, says Dahl, “technology enhances, but does not replace, personalized attention and focus.”

Customization is essential

Indeed, HNW clients “are looking for a mix of creativity, simplicity and effectiveness–an approach that takes into account their specific needs and objectives and is not just a mass-market approach,” says Caleb Silsby, Chief Portfolio Manager at Whittier Trust.

Many wealth managers and investment houses have a tendency to steer clients into products and funds. A key problem here, says Silsby, “is that investment strategies built around products don’t take into account individual needs.” For example, “a fund manager is evaluated based on performance gross of taxes and may be buying or selling securities without considering the impact of taxes on wealth creation.” However, a HNW investor tends to hold the vast majority of their wealth in fully taxable accounts, “which means all that churn managers need to drive fund performance leads to unnecessary tax expense for HNW investors.”

Attention to detail can also lead to a variety of creative investment strategies. As Silsby explains, “We can look at a direct investment in real estate and then borrow against that so that the investor defers capital gains while maintaining liquidity.” It is also important to consider the advantages that come from scale. “We can build portfolios using the core components, from scratch, in ways that address unique liquidity needs, tax strategies or existing concentrations,” he says.

Customization is essentialcreatively charitable

Creativity and personal attention can extend beyond what is expected from traditional investment strategies. Consider some of the options available in charitable giving. “Say we have a client holding a very low basis asset and at the same time, they’re charitably inclined,” says Silsby. “One thing we can do is create a charitable remainder trust (CRT).”

In a CRT, a donor or group of donors place specific assets in a trust on behalf of their chosen charity. Donors receive a current tax deduction for the present value of the assets placed in trust. From there, over a stated period of years, the trust makes annual distributions back to the donor. In essence, the donated assets become a source of income until finally, at the end of a specified period, the assets are left to the charity.

The benefit of such a structure, says Silsby, “is that a CRT takes a highly appreciated asset, such as a long-held stock or real estate holding, and converts it into a source of income.” With the upfront tax deduction, “it can be a good idea to establish these in a year where you have an above-average tax bill.” In short, he says, “it’s a creative means of helping a charity, but at the same time, reducing taxes from both capital gains and future estate taxes.

The need for personal service

Owing to scale along with what tends to be a wider net of family members and other beneficiaries, HNW portfolios benefit from attention to detail. Even minor adjustments in terms of transaction costs or tax attributes can significantly improve performance. Casey maintains that “the most effective wealth management strategies require intimacy and a personal touch.” While more and more communication and interaction will take place digitally, he says, “there will never be a substitute for personal service.”

Written in partnership with Forbes Insights.