Skip to content
13 min read

Advisor Autonomy or a Consistent Client Experience?

The pros and cons of each and where the industry is headed.

advisor centric client centric

Which is better? Maximizing advisor autonomy or delivering a consistent client experience? Most people in the industry would probably say they’re both good things. But there’s a tension between the two, and, based on our conversations with heads of wealth management, firms are increasingly making conscious choices to focus on one or the other.  


Maximum Advisor Autonomy

Firms focused on maximum advisor autonomy give each advisor wide latitude to do what they think is best for each of their prospects and clients — within firm-set guidelines. The firm sees its main job as providing support for their advisors, consistent with the demands of the compliance department.

Because the advisor is given so much autonomy, there’s plenty of leeway to provide clients with a customized solution — custom asset allocations, custom product choices, restrictions, etc. Some advisors, even with discretionary accounts, will choose to consult with clients before trading. The result can be a very high-touch, customized client experience.

From an advisor’s perspective, there’s much to like about firms that aim to provide advisors maximum autonomy. Who, after all, doesn’t like autonomy? There is a downside, however. The advisor’s very freedom means that in a lot of ways they’re on their own. In particular, they end up spending a lot of time with the tiny details of managing and trading portfolios, which takes away from time they could spend with clients and prospects.

From a firm’s perspective, the upside of a focus on advisor autonomy is that it works well with a growth strategy based on attracting already successful advisors with large books of business. These seasoned advisors can join a firm and bring their clients with them. Precisely because the firm gives maximum leeway to each advisor to manage portfolios in their own way, it’s very easy for clients of newly hired advisors to follow along — they can continue to enjoy the same client experience they had before.

The downside, for the firm, is that because there is so much manual customization, it can be difficult to achieve significant economies of scale. In addition, the autonomy given to each advisor also means that the experience a client receives will very much depend on the advisor they work with. It may all be good, but it won’t be consistent. This makes it hard to promote and brand the service the firm provides.


A Consistent Client Experience

Firms focused on delivering a consistent client experience start by thinking carefully about what their firm stands for — what they believe about investing and what they believe about how clients should be served. What does the firm think about financial planning? Tax management? Product selection? ESG customization? Etc. The firm decides what client experience they want to offer, and then they set out to deliver it, efficiently and consistently.

Firms that aim to deliver a consistent client experience will typically create an investment policy committee (sometimes comprised of all the advisors) to establish capital market beliefs and high level recommendations. And in order to to deliver a consistent approach to portfolio management, these firms will typically centralize portfolio rebalancing. More precisely, they’ll divide responsibility for portfolio management between advisors and a central group. Advisors decide on the customized parameters for managing each account (e.g. “Aggressive growth, but no energy sector, include tax budget, and use ETFs only”), but hand over day-to-day rebalancing and trading to a central group that has the responsibility of implementing customization, transition, risk control and tax management.

From the firm’s perspective, consistency of service makes its easier to brand, promote and cross-sell the firm’s services. There’s more of a “there” there. This also makes it easier to systematically improve things over time. And it will be easier to provide clients with a richer digital experience. With advisor-centric approaches, desktop and mobile applications tend to be little more than document vaults and contact links. But with centralized implementation, you will be able to systematize executing client requests, like a cash withdrawal, that have been entered through a digital interface. And, rather importantly, centralized rebalancing, which lends itself to automation, is much more efficient than advisor-led rebalancing, which is typically fairly manual.

The downside for the firm is that, until recently, the demand for consistency was incompatible with delivering a highly customized or tax-optimized solution. As a result, the client-experience centric approach was at a disadvantage for serving high-net worth needs.

An open question is whether firms that focus on a consistent client experience can still attract high-performing “breakaway” advisors to join the firm — and bring their clients with them. Anecdotally, the answer seems to be yes. It really depends on what type of service the advisor provides. If, at heart, they’re traditional stock pickers or traders, it will be a difficult fit, since these functions will be handled by the firm. But if, at heart, they’re financial planners, it’s easy. They get to outsource to the firm the time-consuming task of rebalancing and spend more time on their clients.


The Trend: Towards Delivering a Consistent Client Experience

Both approaches have their advantages, but, judging by the conversations we have with clients and prospects, the trend is towards focusing on creating a consistent client experience.  Unavoidably, this is at the expense of some advisor autonomy, at least when it comes to the details of trading and rebalancing. There are two main drivers of this change: cost and the improvement of rebalancing technology.

1. Cost

The continued growth of low-cost, passive ETFs, as well as the spread of low-cost robo advisors, has put pressure on firms to cut costs and/or improve service. Centralized rebalancing is more cost efficient because it’s more automatable. And it fits in better with firms focused on delivering a consistent client experience.

2. Improvement of rebalancing technology

It used to be that the only way to deliver a customized, tax-sensitive solution was to have a client-facing advisor manually manage each account. That fit well with an advisor-centric approach, but was incompatible with a focus on consistency. No more. With improved automated rebalancing technology, the situation is reversed. A centralized rebalancing group can now deliver a higher level of tax management and more customization options than can be provided by almost any advisor managing portfolios manually. And centralized rebalancing groups can deliver the service at lower cost, which makes it economically feasible for firms to offer more customization and more tax management to more clients, including the mass affluent.

These are strong drivers, which is why we believe that the trend towards a focus on a consistent client experience will continue and accelerate.


Is This Trend Good or Bad?

For entirely understandable reasons, some advisors will look askance at this trend. It’s a threat to their, well, autonomy. But we think the trend towards focusing on a consistent client experience will be a win for all concerned — clients, firms AND advisors. For clients, it means lower costs, more customization, better tax management, a greater focus on financial planning and more time with their advisor. For firms, it means lower costs and a superior, more brandable service. For advisors, it means less time dealing with rebalancing minutiae and more time to focus on the long-term interests of their clients. This increases, not decreases, the need for advisors to develop long-term, trust-based relationships with their clients


All this being said, not every firm built around advisor autonomy will or should change. Firms built around advisor autonomy have hired advisors and attracted clients who like what they’re doing today. And that’s not easy — or even necessarily desirable — to change. So, expect to see both types of firms for a while.


For more on this topic, check out The Three Types of Wealth Management Firms.

President, Co-Founder