Join this session to:
- Explore how the current economic uncertainties are impacting investors and shaping their expectations and needs from financial advisors.
- Understand how the landscape of investors is evolving today, including shifts in household decision-makers and opportunities to reach and support underserved populations and younger generations as they work to achieve their financial goals.
- Understand how technology is transforming wealth management and how to leverage it to gain actionable insights, make informed decisions and create better offerings for clients.
David Rosen (00:07):
It's there. Seats up appear. By the way, if anyone wants to sit, not to put anyone on the spot.
Justin Mack (00:12):
I know, I sitting in the back of the class is fun, but I'm not going to call on anybody. I promise he doesn't believe me. He's like, yeah you are. I might.
David Chubak (00:24):
It sounds smarter in the front row, I promise you that.
Justin Mack (00:29):
What these people in the back don't understand is that we're throwing out free money to the front row. So your loss, I can't get it back. Alright, just wanted to give a few more minutes for folks to file in. I know lunch was awesome. So I appreciate you guys coming on in and joining us. And again, thank everyone for joining us here at Invest 2023. Could have been anywhere else in the world, but you chose to be here with us and we will not forget that. So I think this is going to be the Crew Lights. Camera, action. Alright, well thanks everyone. I am Justin Mack. I'm the Wealth Tech Reporter here at Financial Planning. I'm also host and lead Editorial Producer of the Financial Planning podcast. And today we're going to talk about the future of wealth management. That is a really big subject and in 30 minutes, that's tough, but we're going to specify that quite a bit for you and really talk about the future, not in a far flung flying cars hypothetical way, but the future. Where are we going? Where's our current trajectory? And how are strategies evolving to kind of meet what is happening as far as the market itself and how that's impacting client expectations and the work that advisors do. And joining me, I have a wonderful crew, the Davids as I now call them. I have David Chubak, principal head of US Business Unit for Edward Jones. And at the end of the table, David Rosen, Managing Director for Morgan Stanley. Give them a round of applause for joining first and foremost, And to eliminate any potential confusion. We're going to go with DC and DR. When I'm calling on folks, if that's cool with you guys. That work? All right, awesome. So we know our players, we know the stage. Let's set some stakes, shall we? Like we mentioned, both managing industry is facing a lot of disruption, emerging technologies, the pursuit of whatever's next, whatever's best, and trying to make sure one that you don't miss the boat on what might be something that could transform your firm into a true powerhouse. But also spending is up in our studies here at Arizent, like the research we presented this morning, we're seeing folks lean into tech spending allocations going up at a time where so many other things are trending down unusual, but I think it speaks to the importance of this, I guess, aspect of the business right now. So firms are getting ready to make some investments. They're going to make it reign on wealth tech for lack of a better term. How do you not regret those spending decisions? And I'm going to poke the David's to make sure that you put your money right where it should be. So just to kind of set things off, and I'm going to kick off with, let's start with DC right here to my immediate left. And wealth management, like we said, more reliant on technology to deliver truly human first services. But I want to know, has your firm's approach strategy changed at all because of what we are seeing? Or is it more of a refinement of an approach you already have in place? How are you responding to the increased need and the increased demand for advice?
David Chubak (03:10):
Well, Thanks for that question. Thanks. Good to see you all. In some ways the answer to that is known. Not much has changed. We fundamentally believe in the power of advice driven wealth management model and we remain committed to that. Now that said, the brilliance of technology, we look at it as it's really a great enabler to powering the advice business. And in the last few years, the efficiency that's been created by technology, the enablement that's been created by technology, the breadth of what we're able to do with it is clearly getting better and better. But unlike some of our friends and peers who like to say, oh, their firm is a high tech and high touch kind of firm, we believe in one fundamental thing, which is wealth management's about trust and the technology is not the solution. It's really behind the scenes, the enablement of it. And so our philosophy hasn't changed and Edward Jones on that. And we've got 19,000 hearts and souls that are covering 8 million clients. And to that end, our question we're asking is how do we put technology to work to serve the need of our clients better and better? And to that end, as we think about what clients are telling us, they want more financial planning, they want more flexibility, they want more personalization. Well yeah, an advisor can do that with a scratch table, scratch pad, yellow sheets, everything. But they can't do that for a lot of clients. And in our industry, we're looking at the supply and demand of good advice into the future. We know there's a lot of retirements coming up and we look at our obligation at Edward Jones to serve Main Street America, and we recognize that there aren't enough advisors out there to serve the people who want advice. So we look at technology as a really important enabler and important partner with us to solving that supply and demand imbalance into the decade ahead. And so we tell all the technology providers, I know there are many here in the room, is we want to continue to be able to serve America and provide the great advice and better advice and more real realtime advice, more personal advice, but we need the technology to help us do that. Without it, we're going to be relying on our people to play super, super powers. And let's be honest, our advisors are already super humans. We want to make it better and smarter for them as well.
Justin Mack (05:02):
For sure. DR, same question to you. Any switch in the approach or just kind of if it ain't broke, don't fix it. What's going on over there?
David Rosen (05:08):
Yeah, look, I think we have a very similar approach to DC over here. Look, our approach has not changed. We continue to be focused on our modern wealth strategy as an organization. We've spent a ton of money providing best in class technology to our financial advisors. And whether we build it or we buy it, we want to be focused on really enabling them to be more efficient and proactive in how they engage with clients. One of the things that did change of late is really the formation around our or my organization, which is really a focus around innovation and modern wealth. Our modern wealth strategy was really the beginning stage of that and the transformation around that. Now we're focused around identifying new and emerging technology that can help our financial advisors clients focus in the home office as well. And so our role is around meeting with vendors, understanding their capabilities, identifying different business opportunities across the entire wealth management ecosystem of all three parts of our business, which is our digital direct e-trade business, full service FA channel and Morgan Stanley work business. And then thinking about how do we make the ability to integrate these technologies, a core competency of what we do. And for us, that is really the secret sauce of how you're going to drive engagement and activity around these new technologies. And so we've met with probably 200 vendors since we've started in this role. We've identified a number of ones that we've put in front of our senior leadership, including probably all of about our partnership with Open AI that was announced earlier this year. And we think, look, AI is going to be a true game changer in terms of our digital strategy moving forward.
Justin Mack (06:42):
Absolutely. You said the magic word AI, but actually that innovation piece it, it's so important. I want to stick with you on this a little bit more because it also, in our keynote this morning, Jason Wink mentioned that difference between all the invention versus innovation and how the innovation can lead to experiences that truly reshape how we do this. And as we know, as we get better, as our technology gets better, client expectations are going to change as well. I mean, frankly, we're all spoiled. All of the technology that I interact with every day is flawless. Everything is great. My phone's better than it's ever been. I can do my dry cleaning through an app. It's amazing. So we expect more because the best is all around us. Talk to me about finding balance a little bit when you're pursuing, providing an experience that is equal to what is in every other aspect of our lives, but also not losing what is really at the heart of this because the future of wealth management in this context, it's a practice management issue. At its core, it's about the future as far as what clients want and what clients need. It's not about what's coming out next year, it's about what clients want from you next year. So how do you balance staying bleeding edge but not losing sight of, well, what matters most? Your book of business?
David Rosen (07:47):
Yeah. Look for Morgan Stanley Wealth Management. I think, look, there's three things that to me are driving this change around client expectations. First is really the intergenerational wealth transfer that's occurring across the globe. Second is what you talked about relative to just how you engage with other technologies outside of financial services, what that experience feels like and clients' expectations being higher that they want to have that same experience with the financial services firm that they deal with. And then really the democratization of financial products, which we've been seeing for a long time, whether it's robo advisors, you've seen it with fractional share trading. We're seeing it now with democratization of alternative investments as an example, right? This whole concept around tokenization of alternatives as one example of that. And so for us, one of our core values as an organization is putting clients first. And we're going to listen to what our clients have to say and understand what are the gaps that we have, what are the capabilities we feel like we need to deliver while providing a consistent approach. And coming back to my earlier comment around integration, that to us is really the secret sauce around how we're going to provide a very seamless client engagement. And a lot of firms can't do it because it's really hard to do, right? There's a lot of different systems firms have, they're architected in different ways. There's different security requirements for different vendors that we work with. And so it's a all hands-on effort in terms of how do we integrate these technologies to provide that seamless experience, which ultimately will drive adoption around these technologies.
Justin Mack (09:14):
For sure. Same question to you sir. How do you find that balance?
David Chubak (09:16):
So I'd say two things. One is I do believe to your point that the best in class experience is no longer relevant. We have to think what's best in life. And our clients, our advisors are thinking more and more what's the experience they're getting with whatever app you just mentioned on dry cleaning or whatever it is, which by the way, I need to get, it's great. That's their baseline. And that baseline changing far more frequently. We like to say is the velocity of our business is changing at a far greater pace than we've ever seen in history and we'll only get faster. So to that end, as we think about that, how do we adapt? Well, we are not a technology company. We are an advice company, we're a trust company. And so as we think about that, we look, look to 2030, we want to be the best technology integrator in our industry. We have scale unlike any other firm in terms of covering more Americans, more values and the like. But we're not the best technology firm. And the good news is there are great technologies out there, the best in life experiences, sometimes faster. But if we can combine the scale that we have in terms of sheer human beings working through the platform, 8 million clients and by that time 20 plus thousand advisors across the continent working through it, and we can drive the velocity of adapting to the changing needs of our clients faster and faster, then we could integrate that in. So at 2030, I'd love to see us as we are all on cloud using a great ecosystem. No more mainframes, no more, there's none of that legacy baggage that we have. So that as client demands are changing, we are working at the speed of business. And I think that's where everyone will likely go because why wouldn't you, as we think of the next decade, think about your technology stacked differently, then the question is how do you keep your ear to the ground so you stay ahead or frankly you can create what those experiences are versus always adapting to them.
Justin Mack (10:57):
Absolutely. And you mentioned a 2030 is where you would like to see is now we know as we hit that time, as our first session of the day point, and now we're in the middle of a little bit of a wealth transfer, we're going to have some new people, some new potential clients and some first timers as well. But we're experiencing it right now. A lot of new younger investors or as we've recategorized them a future high net worth investors or inexperienced clients, clients who, because of what the heck is going on in the markets, the uncertainty, they realized they need some help. They thought they could handle it on their own. They've got some earnings, but they realized they might have fumbled a bag or two and they want to pick it up. So what kind of ways are you guys finding success in reaching out to that future group, that next generation is tech helping you find those connections, doing it in a way that's authentic and actually sticking? I'll stick with you. What's working for you and what's not?
David Chubak (11:46):
Sure. So actually a friend of ours, actually I'm going to quote someone from Morgan Stanley, buddy of ours, Jed Finn, who's the head of what is the COO of wealth these days. Yes. But ultimately the Uber Lord of wealth management in our industry, he used to have a line which I love, which he used to say is people think they don't need advice until they need advice. And I think in the last couple of years we've realized and people who thought that after a 12 year bull run cycle and everything going well, and all the apps and the cryptos and whatever, it's like, oh, I can do this. And then quickly you realize, well, you can't. I think the reality is the last few years have changed the nature of how we think of advice and people who need it. But the reality is when you need advice, 10 years ago, people would actually go down the branch, down the street to a branch or for us at Edward Edward Jones across the go and visit one of our 16,000 locations across the country. And they still do that. But the realities in the next decade, as we look at that transfer of wealth, more of those people who will ultimately receive that wealth will not think immediately, oh, I should go and see my father's advisor. And I say Father, because today it's still very male dominated. They will not think I'm going to go find someone in the Yellow Pages if that even exists anymore. They're going to be using the app, they're going to go online, they're going to digitally, they still will use referrals, but the nature of where the wealth journeys will begin will change. Where they will end I don't think will change, but where they will begin. Well, so to that end, we are leaning into technology as we have thinking, how do you onboard, how do you think of providing insight? How do you think of self-service? Doesn't mean to take away, it's not self-directed necessarily, but how you can do more of it. And I think that's the future of our industry is not necessarily where it's advice is all in one channel, but frankly where you as a client can choose how, where, how, when you can access advice when it's from a human being, from a technology, from an AI based solution, or frankly from some synthesis of all that, which is frankly where I think the industry will likely be in the coming years ahead.
Justin Mack (13:34):
For sure. I also want to point out great answer. And this is the only panel where you're here, the terms Uber, Lord of Wealth Management and Yellow Pages changing things up. DR. Kicking it over to you, same question. What's working for you as far as connecting with that next generation?
David Rosen (13:50):
For Morgan Stanley, it's really about connecting with the client where they are in their journey. We made an acquisition of E-Trade a few years ago. We made an acquisition of a firm called Soum, which is really about the corporate stock plan business. And for us it's, we want to engage with the clients where they want to be engaged and how they want to be engaged with. And so wherever you are in your financial journey, we'd expect over time, as David mentioned, complexity is going to take into account and you're going to want financial advice from a true advisor. And so we leverage technology as an accelerant to our financial advisors to allow them to engage in a more effective way. And AI machine learning, we've been using that for a long time. I know that's the buzzword you talked about, but we, it's not something new to us. We've been using that technology for a long time. In fact, we have a tool that's called Next Best Action or NBA for short, where we essentially provide insights and content at a client at a personalized client level where you can go in and select the type which clients you want to send it to, sends out personalized emails to the client in a super scalable way to engage with clients. And ultimately, again, we don't think AI is going to replace human beings. It's ultimately going to be an accelerant to their ability to engage in a more effective way and spend time on the things that is important to spend time on. Absolutely. We actually did a survey you don't want to mention real quick. Absolutely. We did a survey of Morgan Stanley clients and four out of five did not believe that AI would replace human beings. And nine out of 10 viewed the human to human engagement between an advisor and a client as being extremely important. So we don't expect that to replace advisors at all.
Justin Mack (15:24):
Absolutely. And if you want to read more about that Morgan Stanley wealth Management survey, you can find that in the pages of financial planning with my byline on it financial-planning.com. Anyway, as a follow-up question, instead of just the next generation, how are we tackling diving deeper with our existing book of business? We know that while there's a lot of new faces that are going to be coming in, there are current clients who want more, who crave more, who are looking for that. We hear it all the time, that holistic approach. But really finding an advisor that's going to be able to do more, provide more, it's a lot, but we're also seeing, which I think is really great, a trend in connecting with more parts of a household or more part of a client's life, not just talking to that primary financial point of contact, talking to children, spouses, business partners, people that were ignored in this process for a long time, which is really cool. So thoughts about going deeper, not just with your existing client, but maybe other members of the family. What are the benefits? How are you tackling that kind of thing? DR, keep with you?
David Rosen (16:20):
Alright, so we've got a number of services across our platform that allow us to go deeper with clients. The first one I'd highlight is our financial off, our family office resource team called four, where we've got a number of capabilities as our clients lives get more complex to help 'em around estate planning, trust services, philanthropy, management, right? Capabilities that we want to engage with our clients around, provide advice around and ultimately help them both leveraging technology and people to do that. Another example of how we're engaging with clients, especially newer clients, is around something we call genome, which is leverages our data and analytics to create customized insights based on where the client is, what the client's shown interest in, what they've read before, what they've transacted in before, and do it in a super scalable way where we can take that information back, feed it back into the machine, and really train it more to be better the next time we want to engage. And so it's this virtuous cycle of using technology and people to really go deeper with clients.
Justin Mack (17:23):
Alright, DC How are you guys going deeper?
David Chubak (17:25):
So the good news is we've been looking at this for a while and it's our value as a firm has always been in trying to provide that multi-generational wealth planning. And the way we look at it is our clients really look for the confluence of four factors. The first is wealth, second is health, the third is their families, and the fourth is their purpose. And I'll tell you in the last few years in particular, those last two aspects have picked up more and more as average client of the wealth management industry has been aging and now is in the mid fifties versus a couple years ago was in the lower fifties. And as that continues, recognizing that polarization is creating a lot more people who are candidly towards the end of their lives and are starting to think of succession management are starting to think of what they want their legacies to be and how they want their wealth to be represented in legacy. We are seeing those conversations change. And that's where the technology becomes important in not having those conversations, but ultimately it's helping provide greater insight, greater efficiency. And when you have this situation, what are some ways a client would deploy based on that insight? How can you help a client think through those difficult situations with heart but also with more content? And so the way we're working on that isn't very different. We continue to think those same four pillars are still as relevant. We're seeing career emerge as a possible fifth as the interlinking between career and purpose is becoming more and more in this great digitally connected world we're in. But if we think of those as still the right four pillars, it's how do we get sharper, smarter, wider and faster in being able to adopt or adapt to the realities of our clients.
Justin Mack (18:53):
Absolutely. And as we kind of wrap up our discussion here for the last question, I know we mentioned that this title, the Future of Wealth Management isn't all about next tech. What's coming out the cool new toy, however, let's talk about some cool new toys real quick. Just curious for the things that you're trying now using, thinking about implementing into the work you're doing, what tech tools are you most excited about when you think about the future, be it something big and buzzy like generative AI or something small that might just take a task off of an advisor's plate. What kinds of tools do you see now that you're going to say in five, 10 years from now that, boy, I'm so glad we have this. I don't know what we would do without this? DC I'll start with you.
David Chubak (19:31):
So look, two I'll talk about. One is big believer in the need for greater personalization and execution. So financial planning, there's great tools out there that allow you to do the discovery and execution, but the execution's still difficult. And so I think the more we're looking at capabilities like direct indexing capabilities like that, we're excited about them. We as a firm are spending a billion dollars a year now on technology, which is very new way we look at it, Edward Jones, which is very exciting, but we are trying to be very focused in how we deploy those capabilities. The second one I'll talk about is I do believe the power of AI will be transformative, but in my mind, the AI side isn't necessarily the exciting part. Everyone's like, oh, the chat GPT will answer everything for you. Well, the reality is all these tools are doing is synthesizing information and data that's out there. And yes, there's the Twitterverse and there's all the Google stuff, but candidly what we look at at Edward Jones is the fact that every day we've got 19,000 advisors having conversations with 8 million clients. The reality is the insight and information is not what's happening on Twitter, it's those conversations that are happening every moment. And when you have 19,000 times eight or so appointments a day, we are having there as touchpoints and data points from which if we can use that inside information to understand what the real pulse of America is like, what the worries, the opportunities, the business ideas, and we can responsibly turn that into synthesis that we in our home office can then push back to our field and say, Hey, here's what people are worried excited about. And by the way, here's what to do with it. It takes that concept of a next best action, but it turns it into a more proprietary, highly segmented, personalized output. We see that as our obligation at Edward Jones. We are not in a segment of one. We don't only serve high net worth, we don't only serve one town. We're in 3000 cities. We serve 8 million clients from $10,000 accounts to upwards of 10 million accounts. Our job is to look at how we can create that pulse and then put it back so that we can enrich and frankly enhance the lives of our clients and the communities that they live in.
Justin Mack (21:30):
Absolutely. And DR. Bring us home. What tools are you most excited about?
David Rosen (21:33):
I Mean, I got to talk about AI obviously because I have been talking about the entire time, so I got to continue on that Path. But obviously we've got to, as I mentioned, a relationship with Open AI. And listen, I'm new to technology. I was in investment products for 13 years prior to this. So this is a whole new world for me. But having seen the capability that AI and generative AI can do to me is going to be as transformative as what the internet did for our lives and what cell phones did for our lives, right? Wow. So I think it's going to be one of those things that you just becomes ingrained in everything that you do. And I think it's a lot of what David talked about, but it's three things. It's really the ability to access, analyze, process, and synthesize information and content. It's the ability to take all the insights from global capital markets, asset classes, things that are happening across our client's book and use that to educate what the model looks like and be able to come out with better outcomes after that. And then lastly, it's just around providing better insights for our advisors to be more proactive and really engage with clients, which to David's point, really builds trust overall. And of course we're going to do that with all of our legal risk and compliance partners alongside with us as we go through that. But look, I'm beyond amazed at what this technology's capable of doing, and I think the number of use cases for it is endless.
Justin Mack (22:51):
Fantastic. Wonderful. Well, if there's anything else that you've taken away from this topic, the future of Wealth management, know that we have all moved way, way beyond Yellow Pages. So I want to thank my guests again, David Rosen of Morgan Stanley, David Chubak of Edward Jones, and I want to thank everyone for joining us in this session. Please make some noise for yourselves and my two guests. Thank you so much and for Financial Planning, I'm Justin Mack. I will see you all at the next session. I would open the q and a, but we got it scheduled to keep and I'll be very candid about that. Find me later. We'll talk a whole bunch. And thank you so much for coming.