SAM News

Old vs New Wealth Management

Posted by Gerard Michael on July 12, 2021


How and Why Wealth Management is Changing 



Wealth management is changing, affecting everything from the role of the advisor to the mechanics of rebalancing. Even core value propositions. So what, exactly, does the “new” wealth management look like and what is driving the change? Here’s a quick summary. 


Change in value proposition

Let’s start with the core value proposition of wealth management. Historically, the focus has been on performance. The advisor’s value proposition was that they were experts on stocks and bonds and, implicitly, that the client would benefit from the advisor’s security selection acumen and access to alternative investments.

This is changing. Firms are moving away from value propositions centered on the uncertain task of beating a benchmark and towards value propositions centered on services that the firm knows it can deliver, such as financial planning, coordinating financial service providers, education, etc. 

The old:
Value propositions centered on trades, products and performance.

Why it’s old: 
Most advisors and firms are not able to deliver performance superior to index investing, and virtually none can do so consistently. Moreover, involving clients in trade decision-making is inefficient. Worse, it’s counterproductive: it focuses clients on performance, which they can’t really control, and away from planning, which they can.

The new:
Value propositions centered on providing holistic guidance that helps clients meet their financial needs. This includes:

    • Delivering a customized, tax-optimized solution using low-cost products.
    • Acting as the client’s “general contractor”, coordinating efforts of the client’s accountants, trust & estate lawyers and insurance brokers.
    • Providing financial planning.
    • Acting as a “coach” and counselor, guiding clients to make wise financial decisions.
Change in who does security selection and tactical asset allocation

With old wealth management, the advisor picked stocks from a buy list created by the firm and guided tactical asset allocation, within bounds set by the firm. This is sometimes called “Advisor (or Rep) as PM.”

The preferred current approach is to replace buy lists with models selected by an internal investment policy committee (IPC) or a third-party firm.  

The old:
“Advisor (or Rep) as PM” — client-facing advisors selecting securities from firm-created buy lists, subject to firm-created asset allocation guidelines.

Why it’s old:
Constructing portfolios from buy lists is manual, expensive and error-prone. There’s little evidence that advisors add value through selecting securities or active asset allocation. More importantly, advisors have better ways to spend their time. Others can select securities. Advisors alone can best understand and guide their clients.

The new:
Delegation of security selection and basic asset allocation to third parties or internal IPCs who deliver their best thinking in the form of model portfolios.


Change in the who and the how of rebalancing, customization and tax management

Traditionally, advisors rebalanced their own accounts, and one of the main rationales for this was that it facilitated customization. It was believed that there was no other way to deliver customization other than to have advisors make per-account manual adjustments to trades. 

There’s a better way: set client-specific investment goals, values and taxes, and then outsource rebalancing and trading. 

The old:
Advisor (or Rep) as PM — client-facing advisors trading all accounts. Customization and tax management are “extras” that are implemented manually as “on the fly” adjustments to trades.

Why it’s old:
Manual customization and tax management by client-facing advisors is inefficient, expensive and error-prone, and this resulted in customization and tax management being kept to a minimum. And, as with security selection, advisors have better ways to spend their time than manually rebalancing accounts.

The new:
Parameterized customization, with implementation delegated to specialists who oversee a largely automated process. When customization preferences are captured as settings (e.g. “never buy tobacco”), their implementation can be automated and efficiently and compliantly handled by in-house or third-party specialists, which enables firms to make high levels of customization and tax management standard offerings.



The new wealth management is better than the old. It’s better for clients, who benefit from greater customization, superior tax management and more time with their advisors. And it’s better for most advisors, many of whom have struggled uncomfortably with the traditional industry norm of having to project that they add value through superior performance. The new wealth management replaces the search for performance with a steadier, more certain value proposition based on guiding clients to meet their financial needs.


SAM and the new wealth management: supporting the new wealth management is central to SAM’s mission. We aim to enable wealth managers to focus on higher value propositions, while still providing investors with high levels of customization and tax management.

Gerard Michael
Gerard Michael

President, Co-Founder