Skip to content
7 min read

Four Reasons to Rethink Your Service Model

Four strategic initiatives powered by automated rebalancing 

Four Reasons to Rethink Your Wealth Management Service Model

It’s always easier to do nothing rather than something. Yet the firms we deal with are not just “doing something,” they’re rethinking fundamental aspects of their service models. Why? Because they’ve deemed it necessary to achieve strategic initiatives. What strategic initiatives? We see four types:


1. Upping their game to move upmarket — or just stay competitive

It’s a competitive market. We hear a lot about fee compression, but, interestingly, we’re not actually seeing wealth managers reduce fees. (Asset managers are another story.) Instead, wealth managers are under pressure to upgrade the quality of their offerings. Optimized tax management and high levels of customization may once have been nice-to-haves, even “luxury goods.” Now, they’re table stakes. Similarly, it’s not enough to just offer mutual fund and ETF portfolios. If a prospect walks in with low-basis equity holdings, you need to be able to transition them in a tax-sensitive way to a direct index or other equity strategy. You also need to offer social investing options. 


2. Moving downmarket profitably

There are three reasons for serving lower net worth investors. First, cumulatively, smaller investors own a lot of assets. Second, most large investors start out as small investors, and it’s easier to keep an existing client than win a new one. Third, every firm has smaller “accommodation” accounts (e.g. small accounts belonging to the nephew or niece of a large client) that they feel obligated to serve. 

The challenge is to serve lower net worth investors profitably. For most firms, this requires some pretty fundamental changes to their service model, everything from onboarding to reporting to portfolio management. Implementing automated rebalancing is a critical component.

The extreme case of going downmarket is launching a robo-advisor. It’s sometimes treated as a separate case, but it’s really just one end of a spectrum.

{Side note: we think it’s interesting that our system is used both to go upmarket (Strategic Initiative #1) and downmarket (Strategic Initiative #2). It pleases us that the largest account on our system is a taxable $500MM account, and the smallest is a $5 all-equity fractional share account.}


3. Bringing sophisticated outsourced services back in-house

There are specialist sub-advisory services designed to handle portfolios with hard-to-provide services, such as tax-sensitive transition, social screens, etc. These sub-advisory services do a good job, but they have limited flexibility. When you hand over trading authority, you lose control over the account, and that limits your ability to serve your clients. With technology, these specialist functions can be taken back in house, resulting in both greater control and substantially lower costs.


4. Scaling a fast-growing business 

Fast-growing firms eventually face a scaling problem. At that point, if the firm wants to continue to grow, they need to rethink their service model. If their growth was premised on high levels of customization and tax management, they face the particular challenge of scaling without compromising quality. 


The common themes that link these four strategic initiatives are a belief in the critical necessity of 1) increasing efficiency, 2) improving services, and 3) growth — in both current and new markets. The three go hand in hand.  Done right, greater efficiency means better, not lower, service. And better service delivered at lower cost is what makes expanding into new markets possible.  



President, Co-Founder