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Please provide us with Operating models of financial advisory in leading banks / non-banks o Operating models should take into account: relationship nature with the client, interaction between client, financial adviser and banker, key activities and responsibilities of the financial adviser, profile of financial adviser (background, education, focus,..) and compensation schemes)
Hello,
Thank you for your question about operating models of financial advisory in leading banks/non-banks. The short version is that the primary responsibility of the financial advisor is to analyse the present financial portfolio, understand their financial goals and form a plan and implement it to help them achieve their goals such as education, retirement, buying house and so on.
Below you can find a deep dive in to my findings.
METHODOLOGY
I have approached this question by identifying the top banks and the top financial advisory firms by the assets under their management. Then, I profiled five of them namely JP Mogran Chase, Bank of America, Citigroup, Wells Fargo and Vanguard ( a non-bank) to find their operating model.
VANGUARD
With $3 trillion in total assets under management, Vanguard is the largest financial advisory firm in the US. The company boasts of a low expense ratio to the fund under management thus allowing investors to keep major portion of their returns.
RELATIONSHIP WITH CLIENT
Vanguard's financial advisor will closely work with the client to understand their financial goals and help develop a customised plan in order to achieve them. The client can at any time log in to their web portal in order to know where they stand in terms of achieving their financial goals. The adviser doesn't have any conflict of interest to recommend any of their products as they are salaried and not incentivised for recommending any of their products.
ACTIVITIES AND RESPONSIBILITIES
The responsibilities of the financial advisor includes developing financial plan by considering the client's goals and taking in to account their risk appetite, be an investing coach to the client and "conduct periodic review of portfolio and provide appropriate report addressing client's ongoing advisory needs." He/she will also implement investment strategy complying with Vanguard methodology and investment guidelines.
BACKGROUND AND COMPENSATION
A financial advisor in Vanguard has an undergraduate degree, Certified Financial Planner designation and FINRA Series 7, 65 and 63 licenses.He/she also has a minimum of three years experience in financial planning and client relationship management.
Vanguard charges 0.30% of assets under management as their advisor fee.
JP MORGAN CHASE
Considered as the most important financial institution in the history of the US, JP Morgan Chase is the largest bank in US and one of the biggest financial conglomerates in the world.
RELATIONSHIP WITH CLIENT
A financial advisor at JP Morgan Chase will understand a client's needs, goals and lifestyles and recommend financial products including investments and debt management. The client will have to part with current investment portfolio, debts, monthly payments,IRA and 401k statement in the first meeting itself so that the advisor can provide his recommendations.
ACTIVITIES AND RESPONSIBILITIES
After analysing all the present investment portfolio of the client, the advisor will provide recommendations on a customised investment strategy suitable for the client and implement them to help the client achieve his long-term goals ensuring broad asset diversification and will make required short-term adjustment. There will also be periodic review of the portfolio and modification of strategy depending on the market situation and change in lifestyle.
BACKGROUND AND COMPENSATION
A financial advisor at JP Morgan Chase will have a bachelors degree and at least 3 years "customer-facing investment, insurance and financial profiling and sales experience." He/she will also hold license in 7,63 and 65 series or 7 and 66 series in "addition to meeting FINRA continuing education requirements and the appropriate state Group 1 - Life and Variable Annuity License."
Information on advisor fee charged by JP Morgan wasn't found.
The average compensation of a financial advisor at Morgan Chase is $63,640 with a base salary of $42,242.
BANK OF AMERICA
Bank of America has a total of $2.15 trillion as assets under management. They offer financial advisory through Merrill Edge.
RELATIONSHIP WITH THE CLIENT
With Merril Edge, an investor can start an account with a minimum of $20,000/- The client will discuss about his life priorities and investing goals with the advisor and receive a personalised action plan with an investment strategy to build a balanced portfolio in alignment with the client's risk tolerance, liquidity needs and investment time horizon. The client meets with the advisor semi-annually to review the portfolio and make necessary adjustments if needed. Monthly statements and quarterly reports are sent to the clients too.
ACTIVITIES AND RESPONSIBILITIES
The financial advisor at Merril Edge will help clients to address their "life priorities such as retirement planning, buying a house, or saving for a child’s education. " He will work towards deepening banking and investment relationships with Mass Affluent customers. The financial advisor will also "prepare presentations for the client to recommend products such as stocks, bonds, mutual funds, annuities, banking, and managed money solutions."
The financial advisor is supported by a team experienced in banking, credit, retirement, insurance and investments. The team together works on helping clients achieve their financial goals.
A financial solutions advisor typically deals with clients with investable assets less than $250k and refers clients with investable wealth more than $250k to the Merrill Lynch Wealth Advisory Complex.
BACKGROUND AND COMPENSATION
A financial advisor at Merril Edge will have a 4 years degree in a business related field with Certified Financial Planner (CFP) and/or Chartered Retirement Planning Counselor (CRCP) Designations and insurance licenses. He/she will also have at least 3 years relevant experience in business development and investment training. Licenses in series 7 and 63 are also required.
They charge a management fee of 0.85% of the asset under management.
CITIBANK
RELATIONSHIP WITH CLIENT
A financial advisor at Citi Personal Wealth Management helps a client plan retirement, children'e education and manage day-to-day finances. The advisor identifies the client's financial goals and backed by their wealth planning process and global product and research capabilities helps the client meet those goals.
ACTIVITIES AND RESPONSIBILITIES
A financial advisor helps in financial planning for retirement, education, trust and estate planning needs, wealth accumulation, preservation and transfer. He also advices clients on capital markets, alternative investment and international investments. They also takes care of "investment advisory programs such as managed accounts and portfolio management programs." The advisors also help business owners with "services like cash management, business retirement, insurance and succession plans."
BACKGROUND AND COMPENSATION
A financial advisor at Citibank has at least a bachelors degree and a minimum of 5 years experience in sales and service in financial service industry. He/she will also have an active Series 7, (63 and 65) or 66 license and Group 1 Insurance license.
WELLS FARGO
With $1.75 trillion worth asset under management, Well Fargo is close behind Citi group as the fourth largest bank in the US.
RELATIONSHIP WITH CLIENT
Wells Fargo advisors typically deal with clients with over $250k investable wealth. A client has a one-on-one relationship with an advisor at Wells Fargo and works in partnership with the client's team of legal and tax professionals. He/she makes a comprehensive analysis of the client's financial health and goals and creates an investment plan and modifies it with time to help the client achieve those goals.
ACTIVITIES AND RESPONSIBILITIES
A financial advisor will help clients to build a holistic financial picture and create an individualized plan to help the client reach his financial goals. The advisor also helps clients stay on track with the financial plan with a "Client Financial Review" that includes "financial planning benchmarks, asset allocation, account performance, and risk tolerance."
BACKGROUND AND COMPENSATION
A financial advisor at Wells Fargo will have a minimum Bachelor's degree and 2 years experience in customer service in financial industry. He/she undergoes their internal training to serve as an advisor to the client and provide sound financial advice and counsel. He/she would have passed the series 7, series 66 ( or 63 and 65) exams and compliance exams on their products and its suitability. He/she would also have Financial Industry Regulatory Authority (FINRA) license and insurance license.
CONCLUSION
Analysing the above information, it can be concluded that the roles, responsibilities, activities and educational background of financial advisors in leading bank and non-banks in the US more or less remains the same. The primary responsibility of the advisor is to understand financial goal of the client and prepare and implement a financial plan that helps the client achieve it. Education wise, they are mostly graduates with a minimum of 3 years relevant experience and with insurance license and have passed series 7, series 66( or 63 and 65) exams.
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