Wealth management’s future as an industry could depend on attracting new and diverse talent and convincing the current and next generations of financial advisors to adopt technology tools.
Executives from J.P. Morgan Chase, Envestnet, Northwestern Mutual and RIA-backing private investors Wealth Partners Capital Group speaking this week at Financial Planning’s
“It is incumbent upon us and our firms to be able to push the envelope,” said J.P. Morgan Wealth Management Head of Product Kelli Keough. “We focus on our employees and our clients. And so our goal with our employees is how do we make sure that they can bring their authentic self, that they are as representative of our client base as they should be? So how do we recruit more diverse advisors, train folks so that they can speak to everybody? And then as we think about our clients, our focus is, how do we bring more folks into investing who historically may not have thought it was for them, or may have actually been prohibited in other ways or didn't feel like they were welcome to it?”
Industry succession represents a $10.4 trillion question, in terms of the fact that 37% of advisors managing that many client assets are expected to retire over the next decade,
“There are a series of headwinds and tailwinds in the RIA space,” said Mark Tibergien, the former CEO of Pershing Advisor Solutions who is now an independent director with fee-only RIA Pathstone and an advisor in residence to professional services firm EY.
“The first thing to remember is that we are now in the second generation of retail RIAs,” Tibergien said. “Obviously RIAs have been around since the 1940s, but the concept of what we see today is so much different. The good news is that there's an oversupply of clients and an undersupply of people to provide advice. So that probably is the biggest driver.”
RIAs have been grabbing market share
“The breakaways tend to be slower to adopt technology, which is definitely a challenge,” said Envestnet Head of Product Molly Weiss. “As they're trying to grow, not focusing on the operations of their business, but focusing on clients and client retention and grooming the next generation of clients really is where they should be focused.”
Planning software offers an interesting case study involving one of the largest wealth managers and insurance firms, Northwestern Mutual. Over the last several years, the firm has
“In the whole wealth management world, it's pretty well known that adoption is generally poor of any new technology and new platform,” Malhotra said. “And so considering that, how do you see the adoption at this point?”
That level of integration poses some complexity, according to Matlosz.
“If you're a financial planning provider, if you're thinking about migrating into a new platform, there's definitely a difficult period of time where you're going to doubt yourself and say, ‘What can we do to get people to adopt it?’” he said.
“And from an end user perspective, you're a financial planner,” Matlosz continued. “‘What's my payoff? I have a platform that I learned to use that's somewhat effective that I'm getting revenue from.’ Convincing folks to use them, to educate them, that's the first hump. And the second hump to get over if you're a financial planner is, ‘I'm used to using a system, and they're presenting that system in my script and talking to clients.’ So they have to overcome that as well by learning and investing their time.”
Advisors need to gain a handle on tech in order to adopt more new tools, according to Nicole Casperson, the author of the WTFintech newsletter. She cites the example of ESG criteria.
“That's been such a shift in the industry — this is kind of where technology steps in, right? — where we think we can leverage technology and create these, like, one-size-fits-all solutions,” Casperson said. “If we create one solution for ESG, then we can just pass it along to all of the ESG-interested folks and they can figure it out from there. But no, it's all about being so hyper-customized. That's where the technology steps in. But I think, for the everyday advisor or wealth manager, it can be intimidating.”
Besides the tech, then, the talent operating those new tools could hold the key to resolving those dilemmas. Investors in RIA acquirers and other wealth managers have already learned that lesson well, according to Wealth Partners Principal Nicholas Trepp, who said that a practice’s people often serve as an overlooked factor behind the industry’s
“It's just a way of growing AUM, revenue and EBITDA, but actually, there's a real benefit in acquiring talent,” Trepp said. “We can acquire a firm that has great talent, back office and staff. You can bring them on and not only have them focus on their highest and best use, but also specialization. That would just enhance the scalability of the firm, obviously the long-term success and longevity of the firm, too. You're building out that G2, and that deeper bench as a partner team.”
