Track 2: Industry trends and tech driving the future of wealth management

Join this session to learn where tech works - and where it doesn't. 

Hear from wealth experts on industry trends and learn where advisors can get the most bang for their buck out of the tech they can use, and where it makes the most sense to do things the old-fashioned way.

Transcript :

Hannah Schoenberger (00:07):

We are going to get started even though people are still checking in. So I'm Hannah Schoenberger, the Editor-in-Chief of American Banker, which is the sister publication of financial planning, all part of Arizent. And I'm, we're going to talk today about industry trends and tech driving the future of wealth management. So this is a deliberately broad session topic because literally anything could be the future of wealth management. So we're, we're going to range widely on this and I have two experts here with me today. We have Wilber Swan, who is the CEO and Co-founder of Catch Light, which is part of Fidelity now. And we also have Samuel Dean who's the president and CEO of Dean Wealth Management. He's the dean in Dean Wealth Management. Yes. So let's just kick this off by talking about the coolest thing you've seen in Wealth Check recently.

Samuel Deane (01:09):

Hey guys, so I guess I want to preface my answer by saying that over, I started my RIA in 2018 and I'm an independent firm owner. I'm a solo advisor. And when my experience has been as a business owner trying to identify the technology that's going to move my firm forward and be innovative and have a business model that can serve my clients and have the technology to support that, I take pride in being sort of an early user in a lot of the platforms that I use, if you guys are familiar with wealth management technology, a lot of them are private companies, early stage companies. And so most of the times I'm giving feedback on how the product should be well, features that I would find useful. I think other advisors will find useful. Anytime clients give me feedback, I'm giving the service providers feedback from how they can just make the product more valuable for all stakeholders. And over the last two years, because I've been sort of doing this for a while, I recently started investing in private wealth tech startups because again, if it's something that I think will help me move my firm further, then I also want to be a part of that growth to be able to benefit financially as well. And so one of the really cool things, and I know we're probably going to talk about AI in a little bit, but one of the really cool products that I've been seeing is pretty much seeing how founders are leveraging artificial intelligence to make RIA firms and advisors and wealth managers and so forth more efficient. One of the, and it sounds really basic, but one of a product that I came across was basically if you know anything about long-term care, we don't really have much data on long-term care costs other than national averages. And so a founder that I came across, what they're doing is they're using artificial intelligence to better predict an individual's long-term care costs, right? Because yeah, national average is what it is, but on individual basis, those numbers, there's lots of variance between those numbers. And so being able to collect data, collect family health history and all those things from a client from the age of let's say 40, when they actually start getting serious about thinking about some of these things to when they progress later in life, like that's years of information that that platform is collecting to better help the financial advisor determine what that person's long term care costs may be and to be able to develop recommendations and planning opportunities around that. And so that's one of the areas that I've seen so far that I think is pretty cool. That makes me excited about the future of wealth management as far as technology is concerned.

Hannah Schoenberger (04:06):

And what's that startup called?

Samuel Deane (04:09):

Water Lilly is the name of the startup. Yeah, I think in, the founder, they're VC backed, actually, I believe the same VCs that backed Altruist is also funding them. And the founder has a really cool story where she's had personal experience with long-term care costs with her mom. And so I think, I believe she was a data scientist at NASA and completely shifted her career trajectory as these personal experiences came up. And so it's again, pretty cool to hear about these stories and learn about these products and see how it can make us more efficient and valuable to our clients.

Hannah Schoenberger (04:48):

That is really cool. We'll talk more about how that intersects with the whole empathy idea in a second. But Wilbur, tell us what you've seen.

Wilbur Swan (04:56):

So I'm part of Fidelity Labs. Fidelity Labs is the full stack startup incubator within Fidelity. So we look across the landscape and try to pick out trends that we think are interesting. I think this conference nicely surfaced, right? The beginning, the big shift that's going on over the next 20 years, 84 trillion is going to change hands due to generational wealth transfer, something obviously the Fidelity's focused on heavily. It's something that Fidelity Labs is focused on. So we took that thesis and then we also looked at, talked to a lot of advisors about what their top priorities are. Again and again, not surprisingly as surfaced in the main room, growth and organic growth are more and more a top area of focus for advisors on the organic growth front. I think particularly these days, a lot of the conferences you'll go around and hear people talking about the key importance of it driven by in part generational wealth transfer. In part, more and more firms I think are feeling pressure on the m and a front because it's just more expensive to acquire firms now, obviously interest rates are up and they're also now more and more often private equity backed. So people are looking hard at their numbers and saying, what actually is your actual core organic growth? So that's really what we're focused on in catch light and not, that's the startup that I'm put in motion within Fidelity Labs that we started in late in 2019, basically similar to prior comments, we're taking data and AI and helping advisors apply it very practically to the topic of organic growth. Thinking about which of your prospects are best to call at any point in time using basically AI methodologies around propensity scoring and then thinking about, how AI can inform, similar to what RID was talking about in the prior session, which I thought was fantastic at Savvy Wealth, how you can use AI to make the complex world of what is the suggested next best action with any of your prospects, more practical and easier for advisors to implement. Interestingly, we've been in market now for over a year. We work with over a couple hundred firms now, the age distribution, we thought our users would be all in their thirties to you, but not actually. I mean, we have many of our, it's very bell-shaped distribution of users. We have advisors using our solution all the way up into their seventies. I don't know if they're any eighties, but it definitely into their seventies. And I think the prior session nicely summarized that AI can be a little bit of black box, a little bit of hype cycle, but I think the interesting startups will be looking for very practical application of it. I'll wrap up and just say, I think the space to watch is two areas. So you have the big firms like Microsoft, like Google, Amazon, that'll be applying AI and enabling it on very core functionality. Let's common to all industries. They go after very, very big moves. So how things can be used by all professionals or all people in the workspace, for example, and is trained on data that really is applied to everybody. You need huge amounts of data to train these models. So it's training it largely off the web. I think that's one play. And then I think you'll see increasingly verticalized plays because to really tune AI to a specific space, you need to have data from that space. So that in particular is why I pitched this to Fidelity senior management team, Abby Johnson and that and her folks that Fidelity and organizations like Fidelity has such great, you can train AI on. So I think you'll see companies like Fidelity more and more putting startups or initiatives in motion to help people take advantage of this broadly across their industries.

Hannah Schoenberger (08:54):

It is interesting too, because there's a compliance angle, and this is a panel I'm doing later in the day, but banks and wealth management firms really don't have the ability to just use whatever on the internet in their regulated environment. They really have to make sure that they're following the rules and not letting customer information go out and not using other people's customer information to come in. So it can be difficult.

Wilbur Swan (09:20):

I think when you think about applications that advisors can use, we partner super closely with the legal risk and compliance folks in developing these solutions. So yes, they're usable right out of the box and not going to, people won't go off the guardrails with it. I think that's one of the nicer things about doing a startup with infidelity is leveraging those types of partnerships to make sure that it's practically applicable in the role versus even in the prior session, I think they were bringing up interesting that a lot of firms are concerned about putting all of their data into, for example, the Google Cloud for barred to analyze. Yeah, it's a good question. It'd be interesting to see what happens there.

Hannah Schoenberger (10:07):

Which is funny because their data's probably in the cloud anyway. It's in some cloud somewhere.

Wilbur Swan (10:12):

But generally, I mean generally there's a lot of, they're in their own cloud as part of  AWS not for the world to analyze for. Yes, the improvement of Google's engines.

Hannah Schoenberger (10:24):

Although I would argue that a W S or Google Cloud is only as private as Amazon or Google as private and that they are, but they might not be. It's very possible.

Samuel Deane (10:35):

But I think a lot of the, again, going back to my point earlier, a lot of the products and the software that we use are early stage startups. And I think about Wealth Box when I think about right capital, like those CRM and financial planning platforms, when you read through the privacy policy of those documents, they all say that they're powered by AWS, right? Sure. So we're already using software that's powered by AWS, and we're kind of dependent on them to keep things safe and secure. And so I don't know if much changes if let's say we do, if a firm does decide to use AI that's powered by AWS, of course AI probably has a little bit more risk, but I don't know how much more risky it could be from a security perspective of if you ignore client data, obviously.

Wilbur Swan (11:26):

It is super interesting when big transformation happens, where does the transformation come from? Does it come from the small to midsize businesses who are more willing to lean on the big players or from the big players who are more reluctant to lean on big players often? It'll be interesting, see how it plays out.

Hannah Schoenberger (11:43):

So it was interesting what you were saying also about angel investing. So you're doing that on behalf of your company or are you putting together SPVs to do that for your clients.

Samuel Deane (11:51):

Well, so we're putting that SPVs together to do that for pretty much anyone who wants to invest. Most of the times it'll be, it wasn't really originally for clients. The idea was that I pretty much have an angel syndicate of myself and other RIA's and firm leaders where if we're already using a product that we can tell is going to be beneficial for our firm and for our clients, and we have the ability to invest. I think from a founder's perspective, being able to have 30 to 50 of your ideal clients also investing in a platform, number one, that sends a really strong message to VCs and other investors, but you have your ideal users that you can get feedback from. And so the idea was to kind of pull together money to be able to make those investments. But because my RIA works exclusively with folks in the tech space, so a lot of my clients are engineers, designers and so forth, they already have the appetite for startup investing. And so there are times where I'll have a client say, Hey, if you're investing in anything, cool, feel free to send it over to me. I'd love to take a look. And we have had a handful of clients invest, but it wasn't, that wasn't the intent of the syndicate, it was more so for RIAs and founders to kind of have that community where we can support the technology that we're using because venture capital VC money does didn't traditionally flow into the wealth tech space. Now, FinTech IB was very different than WealthTech. When you look at FinTech, you have banking, you have payments, there's mobile payments, there's InsureTech, there's all these different things that fall under FinTech. So I like to be really specific and refer to it as WealthTech, like wealth management technology and VCs don't traditionally fund that space. When you look at that particular sector, I think the biggest exit in that sector has been 500 million. And nothing has come close to that in a while. And so I think ultimately that gave me the idea of maybe we don't need millions of dollars to build a good wealth tech tool and maybe angel investing money is all a company really needs to be successful. If you look at hidden Levers, which just sold to Orion, I don't remember the exact dollar amount, but they're completely bootstrapped. I mean, granted, the founder is a software engineer, so they put in a lot of sweat equity, but they probably didn't need much money to get things going. And so I think that's a really cool value add that we can add where we're building our own community in a sense.

Hannah Schoenberger (14:34):

Very cool. That's exciting. Another thing that, what you were mentioning while we're just now about ages, so the American population obviously is zero to a hundred, but the advisory industry tends to center around fifties and sixties. They're almost entirely men, almost entirely white men. It's not super representative. And there have been a lot of things, a lot of movements trying to address this, but it hasn't been very successful on an overarching level, how do you get advisors to adopt technology that might scare them, but that their clients both need and are more interested in.

Wilbur Swan (15:20):

But I think those are great questions. I think we work with a lot of larger firms now that are thinking very intentionally about longer term growth strategy and how they set up their, how many folks are here are actual advisors, so are the rest what technologists? So they'll set up initiatives to actually train and develop what they call their G two. The next generation of advisor a lot of times are the older advisors will be right exactly in their sixties. The younger ones will be in maybe their thirties up and comers. And I think what we hear over and over again is that what they find most intimidating about the career path is the sales aspect of it. Actually going out and developing a book of clients, building a book of clients. So what we're trying to do with our program as well and our business is make it easier and more analogous to what they've already been doing. Think about, this is a generation that grew up on social media, on social networking. LinkedIn used to using data, used to using the internet. What we've done, we did research piece, a survey recently 300 advisors and found that these advisors were spending five, six hours a week looking people up on the internet doing research. A lot of that can be automated. We can help you do this faster, get to these insights faster, and then think about how do you use, we've basically begun to leverage some of the generative AI technologies in very simple practical ways, similar to what Ridic was talking about, where you can use that data from light to generate emails that you can send out to prospects. It sound very much like you've handwritten them or you can tweak them just a little bit. So again, you can do it more at scale and play the numbers game versus relying just on one or two prospects that you're talking to actively to become your next big client. So I think we're actually added another layer of training to catch light, which is basically the advisor growth program, which is basically masterclass five minute sessions on how do you do this as an advisor, how do you build your brand? How do you market, how do you sell? How do you build relationships? How do you capture more share of all these types of things? So I think it's speaking to them in their language and giving them tools that they're used to and hopefully taking out the hard parts. So basically they could play, again, more of a numbers game versus a I've got to close you or I am I'm out of business.

Hannah Schoenberger (17:59):

Right. One of the interesting things that happened during the pandemic relates to this, which is everybody went virtual. And so there was no longer a reason why you really had to use a financial advisor in your town. It didn't matter if they had an office on Main Street and were a member of the Rotary, they could just be anybody. And so that, I have this hypothesis that will really, in the long term, it will accelerate the careers of advisors who are amazing at what they do, and it will drive out of the business people who are just not very good at what they do, and everyone in the middle is going to have to fight for their lives.

Wilbur Swan (18:34):

Yes. So we're now looking at across data of many, many, many advisors across the country. And we definitely have seen that trend over the last few years where there are more and more clients across the country that they're servicing because why not even some are now pitching themselves as that. I'm not somebody. I have clients that are around the country and I service them very well. I'm not somebody who just services people within a 20 minute radius meet.

Hannah Schoenberger (18:58):

You said you're fully virtual. Right?

Samuel Deane (18:59):

Yeah. So I was actually going to say that that's pretty interesting. I will definitely agree with you that the sales aspect of being an advisor is probably the worst. I think that's the worst function that we have. And that's not necessarily my personality. And so as I had a track yesterday kind of talking about how I grew my firm, it wasn't from any type of outbound outreach. I actually did zero outbound outreach to grow my firm. It was more so about content marketing. And so I figure because I work with such a niche group of folks, I put my brain on the internet and who it resonates with, they'll reach out to me. I have a very specific clientele. And so if you go on my website, you won't see any Roth IRA articles or anything about retirement or budgeting or anything like that. If you work in tech, most of the times you have equity compensation and that equity compensation could be life changing. At least that's what they tell you when they hire you. And so because of that, all of my articles, all of my blogs, my newsletters, everything, I talk about my entire brand. I've positioned myself as an expert in equity compensation. So when that person in tech, their company's going public and they're thinking they need a financial advisor, I'm more than likely the first person they're going to think of if I'm in their inbox consistently and so on and so forth. And so that was my way of growing my firm, sort of eliminating me, have to go out and do sales. If I had that, well, if I was working with light maybe five years ago, I probably would've had an easier time growing my firm because content marketing is something that takes a while. It takes a while to compound. And I like to share this with people because I think it's important. My first year I started my firm from scratch. No revenue, no clients, no AUM, no anything.

Hannah Schoenberger (20:53):

And importantly, you did not inherit your firm from your parents.

Samuel Deane (20:56):

No, I did not.

Hannah Schoenberger (20:58):

This is a really common way to get started.

Samuel Deane (20:59):

Yeah, I did not. So my first year I made five grand. That was my firm's revenue. Year one, year two was 15 grand, year three was over a hundred grand. And I'm in year five now doing pretty well. And so I think that there isn't any one thing that I did. I was just consistent with my messaging. And so I think that was the sales aspect. And to tie on to the virtual part, I've been virtual from day one. And so hearing advisors and firms say that, and of course I'm a solo advisor, so I'm nimble. I have the ability to pivot and do different things relatively quickly than a larger advisory firm. And so I've been virtual from day one. And to hear advisors say that they had to switch to be virtual during covid and those sorts of things and how beneficial it was, I'm like, man, was I ahead of the curve? And quite honestly, I think, I'm not quite sure why advisors kind of back themselves into a corner and say, Hey, I'm only going to be an advisor in Pennsylvania or in Philadelphia as an investment advisor, you have the ability to work with clients all over the country. And so I'm not quite sure why Covid was the thing that pushed advisors to focus on that. And I think part of it is because I'm 31, I started my company at 25 and so, or 26. And so I think it was just a natural reaction for me to go virtual, for me to try to leverage technology as much as possible. Again, I'm a solo advisor, but I think it took me maybe 15 grand to start my company. I don't know if that would've been possible 10, 15 years ago without the technology we have today. And so my idea was to really lean into technology to eliminate salaries and back office functions and those sorts of things as best as I can. And I don't know if that has to do with me just being a digital native or if I was just trying to figure out the best way to do it. And I think it could be a combination of both. But I agree with everything. You mentioned Wilbur.

Hannah Schoenberger (23:03):

So we have a few minutes left. If there are any questions, we can take those now or I'm happy to keep talking. Yes.

Audience Member 1 (23:11):

So one thing a lot of people have talked about with the efficiencies that you get from implementing AI and other technologies is the time saving aspect of it, but not a lot of talk has been given to what advisors are actually going to do with that extra time. Is the idea that you're leaning more into the human aspect of it or what is ultimately going to come with that extra?

Samuel Deane (23:35):

I think it depends on the advisor, and it depends on the type of firm that they want to build. If you're an advisor that is looking to build a large enterprise type of firm, then with that time you're probably going to try to speak with more people and maybe put out more content or whatever the case may be. If you're someone that's looking to maybe stay small, serve a very niche market at a high premium, which I think folks are willing to pay if you're solving complex problems for them, maybe it's them having the ability to spend more time with their family. Maybe it's them wanting to put out more content or grow the firm. I think that is definitely dependent on who that advisor is and what that firm's goals are. But yeah, there's no doubt that implementing technology saves time and money. If I were to hire someone to do all the back office stuff that I'm doing right now, it's definitely more than five grand a month with, which is probably my most, I mean, five grand a year, which is probably my most expensive software tech. And so I think that there's no better way to do that and leaning into the human aspect of it makes sense. And to that point, I think I was in the session recently and they were talking about, I think it was yesterday, they were talking about entering meeting notes after the meeting versus doing it during the meeting and how disruptive that can be. And I think that's another place where technology and potentially AI shines. I use a platform called fireflies where it is AI and I'm having a meeting with a client. By the time that meeting is over, I get a full transcription of that meeting. But I also get highlights, a summary of highlights of if money is an important keyword for me, anywhere that has money related is going to be highlighted in that summary. And that helps me be more active in terms of list listening to what the client is saying, paying attention to body language. It's already hard enough that we're doing this on Zoom, and so to be able to have to pause and type something I think is a little disruptive. I'm not the best at entering notes after the meeting like, all right, what needs to be done if you're running a business? And so I definitely think leaning into the human aspect is a huge value add. And I would say I feel more like a therapist more than I do a financial advisor. And 90% of my meetings, I can promise you that. And so I think that clients feel that, and it's a huge value add to them. Every meeting I get off of the client, they're like, thank you so much. I feel so much more better. I feel more, I have more clarity in where I'm going. I can sleep comfortably at night. And I think that that's what all advisors want to hear from their clients.

Audience Member 2 (26:28):

So I'll ask Wilbur, what are the things that we saw was our aging population advisors, advisors are older. It's good to see young advisors coming in. Do you guys do the generational transfer? Also population perspective?

Wilbur Swan (26:52):

On my end with the bigger firms we work with, they're just trying to think really intentionally and advance about what succession will look like there. I'm sure many of mean, their entire practices set up around succession management of these firms and how they're going to train that next generation and try to retain as many clients as possible and pass on the expertise that these folks have accumulated over the years. I think again, it's another opportunity for AI. I mean, to your point, the more systems and technology can help capture the intellectual property of the firm, the easier it is to transition on. It's my take on things.

Samuel Deane (27:34):

Yeah. I'm not really proximate to that as I'm 30. You're not there because I'm 31, so I'm not exactly sure.

Hannah Schoenberger (27:42):

Yes. One last question.

Audience Member 3 (27:43):

I have a question. A lot of the emphasis of the technologies that we've talked about here and this program has been folks around marketing, client support, and perhaps are there developments within asset allocation models and using AI to help improve the strategies that are being put in front of clients?

Hannah Schoenberger (28:13):

So it's interesting because I think the stat I saw is advisors spend something like 80% of their time prospecting and 20% of their time actually managing the money. So obviously I'm a journalist, I'm not an advisor, but the way that we cover this, the firms that we cover, typically what you hear is the actual management of the money is not the hard part that you're getting a ton of things like direct indexing. There have been a number of very interesting innovations in the industry in the last decade that have really made it easier to bring high net worth strategies to regular people. Is this what you guys are seeing?

Samuel Deane (28:52):

100%, we've actually recently implemented a direct indexing strategy for some of our clients as well. I don't know, I think there could be some major regulation issues with AI generated investment recommendations. I think there might be one or two platforms out there that are doing that. But I think maybe instead of investment recommendations, maybe we'll see something like an AI driven rebalance or more. I think we'll see that sooner. If it's not already here, then we would see sort of like a recommendation generator. Yeah, I'll leave that there.

Hannah Schoenberger (29:37):

Great. That's all we have time for. Thank you very much, Sam and Wilbur. Appreciate it.

Samuel Deane (29:41):

Thanks for having me.