🇺🇸United States

Missed cross-sell/upsell due to simplistic or static risk profiling

2 verified sources

Definition

Firms using coarse risk buckets (e.g., only low/medium/high) and not updating risk profiles regularly fail to identify clients whose capacity and willingness to take risk have increased, leaving higher-margin solutions unsold. MiFID II and NASAA both emphasise ongoing updates to client information, implying that static profiles underuse available data and reduce product penetration.

Key Findings

  • Financial Impact: Internal benchmarking by large wealth managers cited in KPMG’s MiFID II suitability review shows revenue uplifts of 5–10% of advised assets when moving from basic to robust, data‑driven suitability processes; the pre‑improvement state therefore reflects equivalent revenue leakage.
  • Frequency: Daily – affects every new client fact‑find and every advisory review meeting where profiles are not refreshed or leveraged for targeted recommendations
  • Root Cause: Overly manual and form‑driven risk assessments, failure to capture granular preferences (e.g., time horizon, liquidity segments, ESG preferences), and weak integration of suitability data into product recommendation engines, causing advisors to default to generic, lower-margin solutions.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Investment Advice.

Affected Stakeholders

Financial advisors, Product specialists, Heads of distribution, Chief revenue officers

Deep Analysis (Premium)

Financial Impact

$100K-$500K per sponsor in retirement plan advisory fees • $1M-$4M plan-level revenue leakage • $1M-$5M per client in forgone fees on upsell products

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Current Workarounds

Ad-hoc notes in CRM and Excel trackers shared via WhatsApp • Analyst compiles participant data in Excel for manual risk review • Analyst tracks vesting schedule in shared Excel, manually updates profile

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Unsuitable advice leading to client redress, reimbursements, and lost ongoing revenue

£34.2m redress and costs for suitability/poor advice failings at UK wealth firm Charles Stanley in 2014 (pre‑MiFID II), with similar multi‑million remediation programs repeatedly cited by the FCA in later portfolio reviews; US state regulators also report suitability-based restitution orders in the tens of millions annually across advisers

Manual, duplicative suitability documentation driving compliance overhead

$100–$300 of advisor/compliance time per advice event in many European wealth firms (estimated from KPMG MiFID II survey benchmarks) and significant additional FTEs devoted to suitability file remediation during regulatory reviews, equating to millions per year for mid‑ to large‑size firms

Poor suitability documentation causing rework, file remediation, and rejected advice

Regulatory-mandated remediation reviews can cost multi-millions in project spend (consultants, overtime) for mid‑sized advisers; additionally, a typical advisory firm can see 5–15% of advice cases flagged for missing documentation in internal QA, requiring 1–2 extra hours of advisor/back‑office time per case.

Delayed onboarding and investment due to slow suitability and risk profiling

For a typical advised client with £250k–£500k in assets and a 1% advisory fee, each month of delayed investment due to suitability onboarding issues represents £200–£400 in lost revenue; scaled across thousands of new clients annually, delays can cost hundreds of thousands to millions per year.

Advisor capacity consumed by repetitive, low-value suitability tasks

If advisors spend 20–30% of their time on data collection and suitability admin for an average book generating $800k in annual revenue, this represents $160k–$240k equivalent productivity lost per advisor per year; across a 50‑advisor firm this is $8–$12m of potential capacity not monetised.

Fines and sanctions for inadequate suitability assessments and risk profiling

Suitability and mis‑selling enforcement actions frequently run into the tens of millions in fines and client redress for larger firms; even smaller advisers can face six‑ or seven‑figure penalties plus mandated remediation, as seen in repeated FCA and US state enforcement reports for unsuitable advice cases.

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