Wealth managers in Los Angeles have seen some drastic changes in the industry during the past decade. From the constant stream of information to upgrades in technology, wealth advisors find they must adapt to rapid changes in the industry.

These advisors typically work with affluent individuals to offer all-encompassing financial planning – this includes estate planning, tax guidance, investment management, philanthropic endeavors, gifting, trusts and succession planning. Clients often have a net worth of $1 million or more.

“The way I described my role for clients is, yes, I am a financial adviser-wealth manager. But the way I really position myself is, I’m an advocate for clients,” said Kevin Philip, partner at Bel Air Investment Advisors in Century City.

The global wealth management market size was valued at $1.25 trillion in 2020, and is projected to reach $3.43 trillion by 2030, according to Allied Market Research. Wealth managers aid clients in growing and protecting their assets over time by producing investment plans that take into account investor goals and tolerance for risk.

Shifting roles

Several wealth managers noted that their role has evolved so that they’re just as much a psychologist as they are an investment advisor. Many noted that managing clients’ emotional connection to money was an important part of the job.  

“When the Fed (Federal Reserve Board) announced that they were not going to raise or lower interest rates, when you’re talking to your clients, you have to be able to translate that how that’s going to affect them,” said Jason Sands, managing director at Ameriprise Financial Services in Westlake Village. 

“Are they going to buy a house? Are they going to buy a car? Are they going to sell their house? What does that mean for selling their house right now? Before it was about investment ideas. Now it’s how you translate information and how does it affect the client?” 

Some wealth managers said that they spend many hours helping clients make sense of the overwhelming amount of available data.  

“I would always much rather have a very sophisticated client than an unsophisticated client,” said Andrew Palmer, managing partner at Westwood-based Evoke Advisors. “My proclivity would be towards someone who really understands the different asset classes, understands the different pricing, understands illiquidity versus liquidity. But (clients) run the gamut. Just because someone created $500 million selling a widget company doesn’t mean they know the first thing about what we do.”

Other wealth managers have found clients reluctant to bring up their past investment strategies.  

“People are very intimidated by finances. They’re nervous to admit what they don’t know,” said Philip. “They’re scared to ask a dumb question, which I believe there shouldn’t be any dumb questions when you’re paying someone to give you advice.

And for some wealth managers, the standard investment advice has become antiquated. 

“The industry continues to operate the way we did 40 years ago,” said John Grace, founder and president of Investor’s Advantage Corp. based in Westlake Village. “What do we say? No matter what you’re trying to do, buy and hold, sit and take it. Buy the dips (and stay in) stocks for the long term. … The funny thing is we have better tools now, but we’re still speaking as though that’s all we can do.” 

Technology’s impact

Technology has rapidly altered the landscape for wealth managers, creating both challenges and benefits that have changed the way they do business. 

“I think operationally it’s changed dramatically,” said Sands. “It used to be that in my job we had access to information. Now with technology, everybody has access to information. That’s a big deal.”

Robo-advisors and other financial technology (fintech) solutions have had a large uptick in usage when compared to other wealth management providers worldwide last year, according to Statista. Use of fintech advisors was up 9% last year and is expected to increase up to 18% this year. 

“Having the information isn’t valuable. Everybody has it,” said Sands. “With technology, the business has changed to where value has to be translating that information and how it affects the client.” 

Robo-advisors are often backed by sophisticated artificial intelligence and can offer low-cost investment solutions and automated portfolio management. Philip believes that the technology has provided a “tremendous democratization of information for clients.”

“They are more likely to be protected by that information and that knowledge from some of the abuses that can happen in their investment endeavors,” said Philip.

While fintech is useful to both wealth managers and clients, managers like Sands aren’t concerned that his job is in jeopardy. 

“You have to be able to be a psychologist with people a lot of times because emotion is tied to their money,” said Sands. “Artificial intelligence can’t add the emotion that the clients need.”

In addition, the fintech tools at an investment firm may not be the best option for many to manage their money. Philip pointed out that the technology that powers financial firms tends to lag nonfinancial firms. 

“We can’t attract the top-tier talent to redesign our systems, it’s just the way the business model works,” said Philip. “The internal software I think could be better. Clients might experience wonky or clunky web portals that don’t quite feel as smooth and slick as their interfaces with nonfinancial firms versions of those types of apps.”

The uptick in millennial and female investors has also caused wealth managers to adjust their approaches. Per Nasdaq.com, Millennials and Gen Z already represent more than 42% of the U.S. population but represent only 14% of wealth advisory clients. 

“I think young people are more inclined to really believe that technology is the answer to everything,” said Philip. “They have not yet come to value paying human service providers. … But I think if they have a financial crisis, they’ll learn that it’s useful to have someone to talk to.”

According to Cerulli Associates, Millennials and Gen Z are about to inherit an estimated $84 trillion from older generations through 2045. They’ve even set some of the trends for older investors.

“I would have said five years ago the young tech people were the ones really focused on venture or and private equity,” said Palmer “But today most families are looking for diversification … I think they’ve been more educated through the press that you should have exposure to things like real estate and private equity, maybe not venture because it’s on the northern side of the risk parabola.”