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The wealth management industry exists because the economy needs capital for investment and because the individual needs a return on their capital.

Today’s financial services industry has grown up around these two mutually dependent needs. 

The problem that exists is how to distribute products and investments to the consumer and how to manage the capital invested.

As discussed throughout this site, the problem of distributing products and investments and of managing products and investments is not managed efficiently by the industry.  There is insufficient expertise and resources to manage wealth effectively under traditional asset management techniques.

While the industry has developed tools to deliver portfolios and wealth management solutions, these tend to be very expensive, do not relate to financial needs, cannot effectively manage risk or return and are primarily concerned with product distribution.

At the present moment in time the product providers and product managers and the sellers of wealth management products and solutions are too closely related.  While the industry does not efficiently manage wealth for the average individual, it does quite nicely for itself.  Indeed, financial services in most developed economies is either the single biggest or one of the biggest components of the economy. 

Think of the financial service's industry as an old water pipe, leaking water and in need of repair.  The water company is not losing any money because it is charging you for the privilege, but you are!

Many say that the industry is in a transition from a transaction led services industry to an advice led financial services industry.  This is not really the case.  While the development of advice based solutions may be happening at the margin, the product and transaction structure of the industry remains firmly intact, protected by statute, minimum standards and regulation that limits competition and, by the limited application of the technological advances of our age. 

Most of the software developed in the financial services industry to date has been focused on how to sell more products and transactions, in other words, how to sell more of the same.

All that has happened to date, for the vast majority of individuals, is that the name of the game has changed, but the game remains the same.

The image of the industry and the sophistication of its product offerings may be in transition, but the fundamentals underlying the industry itself are not. 

The transition when it finally happens will not be a transition but a revolution and will therefore not be without problems.  This very fact underlines clarifies the problems experienced by the Ontario Securities Commission in trying to push its fair dealing model between 2002 and 2005.  No vested interest is going to voluntarily change the rules of the game.

Why will it be a revolution?

The next stage of the development of the financial services industry will be the integration of the management of financial assets and financial needs. 

These systems would be capable of delivering portfolio constructs built from the basic investment elements, without the need for complex, awkward, expensive products and without the need for a labour intensive work force.  More importantly these centralised services structures can be run by much lower labour input, will source the cheapest and the best quality asset management, and wealth management products, separating the relationship between the consumer and the transaction.

An entire way of life, product sales and transaction remuneration, would be removed in a very short space of time and there will be considerable upheaval when this happens.  Product sales will be relegated to selling to central investment services companies and while individuals will be able to buy products on their own, they will be from virtual financial services supermarkets.   

In Canada the structure of the industry and the regulation of the industry places further barriers preventing the necessary transition.  

Insurance, mutual funds, stock selection and management and product transactions are treated as four separate wealth management functions and are separately regulated.  The current status quo favours the product sellers and not the consumers.

The industry of the future will be different.  As discussed in the TAMRIS March 2006 Report on magic numbers and safe withdrawal rates, technology will allow highly personalized advanced wealth management solutions to be delivered at a fraction of the current costs of wealth management.



"TAMRIS" - Setting standards

Independent, Impartial, Objective



In Search of the Truth

Magic Numbers & Safe Withdrawal Rates

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