Today, high-net-worth clients widely range between tech-savvy and tech-novice, risk-averse and risk-hungry, localized and globalized, credit-hungry and debt-weary. With the growing impact of technology, the continued effects of market volatility and the increasing effects of globalization, firms are trying to determine how to differentiate from their peers while efficiently and effectively serving and advising today’s complex client base.

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As many of you know, each year The VIP Forum presents its outlook on the wealth management industry by uncovering five emerging trends that will shape the upcoming years of the business and identifying strategies that will position wealth managers for success in the future.

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From social media to recruiting top candidates, we’ve encountered a wide variety of top-of-mind topics on The VIP Forum’s discussions board.

In case you missed them, here are the top questions asked by you and your peers over the past couple of months along with The VIP Forum’s recommendations:

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The News: According to a recent report, 78% of surveyed advisors now maintain an optimistic outlook on capital markets over the next three years. However, only 18% of advisors said their clients share the same optimistic outlook.

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The News: According to a recent Morgan Stanley report, high-net-worth individuals lost an estimated $8.9 trillion over the three year period from 2007 to 2010, with some losing as much as 20% to 40% of their total wealth.

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The News: With the oldest baby boomers turning 66 this year, many worry about the rising costs of health care when thinking about retirement. In fact, 70% of affluent Americans cite the rising cost of health care as their top financial concern.

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Summer, for most of us, is a time to recharge our batteries, to relax, to enjoy some calm before the demands of life pick up again.  Unfortunately, investors have made that a good deal harder recently as they collectively removed over a trillion dollars in value from financial markets over the course of a few days.

Why the sudden volatility?  Consumers haven’t suddenly changed spending behaviors, nor have business customers. And suppliers look healthier than in some time, beating earnings estimates and sitting on plenty of cash. Credit availability has drastically improved. Inflation is hardly threatening.

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In 2008, households with $1 million or more in investable assets sustained an average loss of 30% of their investments, according to Spectrem Group. Last week, the S&P 500 index careened up and down more than 4% a day for four days straight, conjuring distressing memories of the gut-wrenching volatility last seen at the height of the financial crisis. Read More »

Last week brought numerous blows to the investor psyche, including a near U.S. government default, a 500-point market drop and the first-ever downgrade of United States debt by Standard & Poor’s, taking the U.S. from a long-standing triple-A rating to AA+.

With the global economy still reeling from last week’s events, the wealth management industry faces a daunting challenge. Such extreme market volatility will undoubtedly cause high-net-worth clients, still scarred from the last economic crisis, to reconsider what constitutes a safe vehicle for their investments. Wealth management firms once again face clients’ rising risk aversion and growing insecurity about where to put their money.

To calm clients’ fears and combat clients’ emotional responses to recent market and economic unrest, consider the VIP Forum’s four recommendations:

• Proactively reach out to clients and give them confidence you are looking out for their best interest. While a proactive call to check-in provides a nice service touch, firms should use these conversations as an opportunity to engage clients in deeper discussions on their true risk tolerance.

• Conduct market-related role play exercises with advisors to identify where they struggle in communicating effectively with clients about economic and market uncertainty.

• Educate advisors on the basics of behavioral finance to help them understand, identify and overcome clients’ irrational biases and innate emotional responses to market uncertainty.

• Engage clients’ in goal-based planning to reframe advisory conversations around achieving life goals rather than short-term investment returns.

The News: Sallie Krawcheck, President of Global Wealth and Investment Management at Bank of America, believes that the industry is unprepared for the mounting shift in firms’ client base toward younger and more risk-averse clients.

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