Talent, technology adoption and the future of wealth management

The future of wealth management as an industry may hinge on attracting diverse new talent and convincing current and future generations of financial advisors to embrace technology tools.

Executives from JP Morgan Chase, Envestnet, Northwestern Mutual and private investors backing RIA Wealth Partners Capital Group speaking this week at Financial Planning’s INVEST Conference explained how challenges for wealth managers revolve around practice succession and advisor and client buy-in. Engage and attract clients and aspirants advisers from historically excluded groups can help wealth managers tackle these issuesaccording to experts participating in three panels.

“It’s incumbent on us and our businesses to push the boundaries,” said Kelli Keough, chief product officer of JP Morgan Wealth Management. “We focus on our employees and our customers. And so our goal with our employees is how do we ensure that they can bring their authenticity, that they are as representative of our customer base as they should be? So how do we recruit more diverse advisors, train people to talk to everyone? And then, thinking about our clients, our goal is how to get more people to invest who historically may not have thought it was for them, or who may have been banned from another way or who did not feel welcome. to that ?”

Industry succession is a $10.4 trillion question, when it comes to the fact that 37% of advisors managing that many client assets are expected to retire in the next decade, according to research and consulting firm Cerulli Associates. Recruiting and hiring talent has gained “new prominence among advisors” for this reason, the company found in a report released earlier this month. Among this group of advisors who will soon be retiring, 27% plan to hand over their business books to another planner in their practice, while a quarter say they are unsure of their succession plans.

“There are a series of headwinds and headwinds in the RIA space,” said Mark Tibergien, the former CEO of Pershing Advisor Solutions, who is now an independent director of RIA Pathstone and advisor-in-residence at the company. EY professional services.

“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 different. The good news is that there is an oversupply of customers and a shortage of people. to provide guidance, so that’s probably the biggest driver.

RIAs have taken market share wire houses and the other traditional giants of wealth management consistently for much of the past two decades. Advisors have led this movement by seeking greater independence in their practices and embracing the fiduciary standard as best for their clients. That doesn’t mean everything will be fine when they make this transition, though.

“Escapements tend to be slower to adopt technology, which is definitely a challenge,” said Molly Weiss, Envestnet’s product manager. “As they try to grow, not focusing on the operations of their business, but focusing on customers and customer retention and nurturing the next generation of customers is really where they should be focusing.”

Manish Malhotra, founder of Income Discover, and Ben Matlosz, senior director of product management at Northwestern Mutual, discussed technology integration.

Tobias Salinger

The planning software features an interesting case study involving one of the largest wealth managers and insurance companies, Northwestern Mutual. In recent years, the company has spear a planning tool he calls PX, which stands for “planning experience”. Currently, 80-85% of all company financial plans use the platform, senior director of product management Ben Matlosz said in a conversation with Manish Malhotra, the company’s founder. asset allocation software company Income Discover.

“Throughout the wealth management world, it’s pretty well known that adoption is generally low of any new technology and new platform,” Malhotra said. “And given that, how do you see adoption at this point?”

This level of integration poses some complexity, according to Matlosz.

“If you’re a financial planning provider, if you’re considering migrating to a new platform, there’s definitely going to be a tough time where you’re going to doubt yourself and say, ‘What can we do to make people embrace that?’” he said.

“And from the end-user perspective, you’re a financial planner,” Matlosz continued. “’What is my reward? I have a platform that I have learned to use that is quite efficient and I am making revenue from it. Convincing people to use them, educating them, is the first obstacle. And the second difficulty to overcome if you’re a financial planner is, “I’m used to using a system, and they lay out that system in my script and talk to clients. So they also have to overcome this by learning and investing their time.

According to Nicole Casperson, author of the WTFintech newsletter, advisors need to be tech-savvy in order to adopt more new tools. She cites the example of ESG criteria.

“It’s been such a shift in the industry – that’s sort of where technology comes in, isn’t it? – where we think we can take advantage of technology and create these solutions, like universal solutions “Casperson said. “If we create a solution for ESG, we can just push it out to everyone interested in ESG and they can understand it from there. But no, it’s about being so hyper-personalized. That’s where the technology comes in. But I think, for the everyday wealth advisor or manager, it can be daunting.

Besides the technology, the talent that exploits these new tools could therefore hold the key to solving these dilemmas. Investors in RIA acquirers and other wealth managers have already learned this lesson well, according to Wealth Partners director Nicholas Trepp, who said a firm’s employees are often an overlooked factor behind the industry. . record number of mergers and acquisitions transactions during the last decade. Some people have misconceptions about M&A deals, he said.

“It’s just a way to increase AUMs, revenue and EBITDA, but actually there’s a real benefit to acquiring talent,” Trepp said. “We can acquire a company that has a lot of talent, back office and staff. You can bring them in and not only have them focus on their highest and best use, but also on specialization. This would only improve the scalability of the business, obviously the long term success and longevity of the business as well. You build that G2 and that deeper bench as a partner team.

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