Executive Summary
Last week, SourceMedia, publisher of “Financial Planning” magazine (and several other financial services industry publications), hosted its annual In|Vest advisor FinTech Conference in the heart of Manhattan, with over 1,000 industry executives gathered to discuss technology opportunities and challenges facing the wealth management industry as a whole.
In the guest post, Craig Iskowitz – CEO and founder of Ezra Group, a financial technology consulting firm – shares his signature Twitter-driven recap of the conference, which featured presentations and discussions on digital advice trends, RIA M&A, pricing models, custodians, and of course new FinTech itself.
Craig kicks the recap off with highlights from Shirl Penney’s presentation on running an RIA aggregator, suggesting that RIAs should use a 5-year economic model in order to time a sale (rather than being forced to sell during a downturn), and that (with the recent Goldman Sachs / United Capital deal) more custodians will be looking in the middle-market for acquisition targets. Meanwhile, panel highlights included a discussion on the pros and cons of the subscription pricing model, which is a hot topic given Schwab’s strong launch of its subscription service (as well a more recent news that Bank of America might introduce a subscription model for Merrill Edge).
From there, other conference highlights included sessions on:
- Drivers of Consumer Choice, with market research firm Parameter Insights pointing out that the biggest reason that consumers aren’t using digital advice is that they think they don’t have enough money to invest in the first place;
- Activating Digital Hybrid Advice, where a panel of industry executives suggested that, while digital advice is essentially useless without personal interactions, digital adoption remains a one-way street (i.e., once a digital solution to a problem is adopted, users rarely - if ever - go back to the old way of doing things);
- The World Wealth Report, where Abhishek Singh from Capgemini showed how only 40% of high-net-worth individuals were satisfied with the personalization from their wealth managers, that service quality is still the most important factor when choosing a wealth management firm, and that AI has the potential to make the biggest impact on helping advisors meet their clients’ service demands; and
- Modernizing Advice, with Michael Spellacy from Accenture emphasizing that, while digital advice may have disrupted the industry, personalization and customer experience remain at the heart of good financial advice.
Attention then turned towards custodians and their vision for the future. Bernie Clark from Schwab pointed out that more than a third of the $1 billion of inflows to its new subscription model came from new clients, and that integrating new tools with existing infrastructure is a major area of focus for them right now. Industry consolidation is also an ongoing trend, as the first half of 2019 saw 67 RIA deals totaling $69.5 billion, or more than a 55% increase over the same period in 2018.
Ultimately, the 2019 In|Vest Conference brought together an otherwise seemingly disparate group of presenters, each with their own perspectives on the trends shaping the ongoing evolution of the industry, yet many shared a common thread around the importance of client relationships and excellent service, the opportunities for technology to help deepen those relationships and improve overall client experience, that industry consolidation will be an ongoing driving force, and that there’s a blue ocean of potential, yet non-traditional, wealth management clients out there that need (and want) advice, and that it behooves the industry to figure out a way to reach them (e.g., through the use of new advisor business models, coupled with new advisor FinTech to serve them efficiently).
"The improvement of understanding is for two ends: first, our own increase of knowledge; secondly, to enable us to deliver that knowledge to others."
-- John Locke, English Philosopher (1632 - 1704)
I didn't think it would have been possible to top last year's In|Vest conference for quality of content, as well as depth and breadth of vendors and industry attendees.
But they pulled it off.
This year's In|Vest 2019 Conference was a two-day event delivering a wide range of wealth management-related knowledge including digital advice trends, opinions on RIA M&A and a 48-hour running discussion on advisor pricing models, custodians expanding into planning and wirehouse technology plays.
This is my Twitter-driven summary, which I've designed to provide you with a quick overview of the whirlwind of activity that included interviews, presentations, and two dozen or so panel sessions. If you made it to the conference, please add a comment below about your favorite speaker or panel. And if you missed it, go ahead and post a comment about which parts of the summary you liked the most.
RIA Business Models
Dynasty's Strategy Unpacked
Have you ever seen those online ads for Master Classes? I see them all the time for things like "How to Write Comedy" (Steve Martin), "How to Direct a Movie" (Ron Howard) and "How to be an Actor" (Samuel L. Jackson).
We were all treated to a master class in "How to Run an RIA Aggregator", by Shirl Penney, President and CEO, Dynasty Financial Partners.
.@DynastyFP buying into #RIAs — min of 5%, max of 10% equity — paying 6X revenue, owners usually take the money out & pay a small interest rate back to their firm — Shirl Penney #Invest19 pic.twitter.com/tRk3uY1Pmq
— Craig Iskowitz (@craigiskowitz) July 17, 2019
Today's frothy RIA M&A market sees 15 buyers for every seller, Penney reported. He encouraged RIAs to build out and stress-test a 5-year economic model so they can sell when times are good rather than being forced to sell during/after a downturn with depressed economics.
Their turnkey asset management platform (TAMP) business has $17 billion AUM, which puts them squarely into top 10 providers. They offer custom allocation models, third party managers that deliver equity, fixed income and alternative strategies, as well as ESG and opportunity zones.
Shirl Penney CEO of @DynastyFP says it's a mistake for biz owners to spent too much think about rivals' strategy. Better to focus on your own plans, he says. #invest19
— Andrew Welsch (@AndrewWelsch) July 17, 2019
This comment reminded me of something similar that I heard from best-selling author Simon Sinek. He said that your mindset should be on the long-term and avoid being distracted by what today’s competitors are doing. Apple doesn't spend any time at all looking at competitors' strategy. They put all their focus on what they're planning to do in the market.
Penney predicted that the RIA custodians will be looking to move up the value chain and into the middle-office space where margins are higher. He also expects more Goldman Sachs/ United Capital type deals with incumbent banks acquiring RIAs.
The Pros and Cons of Subscription Pricing
Over the past decade, the average margin for advisors has risen 30% but productivity has remained flat at around 75 clients each, according to Anders Jones, CEO and Co-Founder of Facet Wealth, a call-center-based advice and planning firm, headquartered in Baltimore, MD.
.@sjallocca talking #millennials, @Netflix and the pros and cons of subscription model pricing with @R_Alan_Moore, @andersjones and Matthew Jackson. @finplan @SourceMediaCo #financialplanning #invest19 #invest2019 pic.twitter.com/d1PW3vIzhv
— Ficomm Partners (@FicommPartners) July 17, 2019
Everyone has been talking about Schwab's move to subscription pricing for financial planning. Alan Moore, Co-Founder of XY Planning Network believes that it was a defensive move for Schwab and more about marketing, since they're under pressure from Vanguard and other competitors such as robo-advisors. While they did attract $1 billion, it seems strange that they're using AUM as a metric to measure the success of a subscription-based service, Moore exclaimed.
Speaking of robo-advisors, Moore is adamant that we should stop using the term and should really be referring to them as "robo-allocators." They're just rebalancing software with a sexy UI, Moore explained, they can’t compete with true financial planning firms.
“We need to get rid of the ‘robo advisor’ term. They are not advisors. They are very sexy allocators.” QOTD by @R_Alan_Moore at #InVest19 @InVest_Event @XYPlanning pic.twitter.com/MYlWK7bHNP
— Chelsea Emery (@chelsea_emery) July 17, 2019
"You can't look at subscription pricing in a vacuum," said Anders Jones, CEO and Co-Founder, Facet Wealth. The shift away from asset management will continue and the market will adapt, he insisted.
Different pricing models, such as Net Worth + Income, Flat Fee, or Hourly Rate, enables more differentiation for advisors, Moore claimed. This theory holds true in most other industries, but advisors will have to ensure they have a strong grasp of their business economics before changing models.
While more advisors are looking into subscription pricing, It’s shocking how many RIAs don’t understand their break-even point, which is the first step in the process, Jones explained.
Moore related an anecdote from an RIA custodian who said that 95% of their advisors have at least 50% of their clients in distribution mode. This can significantly reduce an RIA's valuation. Moore believes that subscription pricing can help attract younger clients.
During the conference, news hit the wire that Bank of America was considering a subscription model for Merrill Edge.
Market Research
Deconstructing Wealth Advice: Drivers of Consumer Choice
I love data! The sessions where research firms share their data and point out market trends and analysis are my favorite at a conference. They not only generate lots of terrific and engaging content but also make you think a little differently about the conventional wisdom you had been following up to this point.
Interesting research from @JoshBook10 and @ParamInsights on what’s driving consumer behavior in digital wealth space. Highlights importance of making data-driven decisions in this nascent space.#Invest19 pic.twitter.com/y3o35cOyhe
— Gavin Spitzner (@gspitzner) July 17, 2019
The #1 reason consumers gave for not using digital advice was that they felt they didn't have enough money to invest. At 47.6% that's a gigantic lift for digital vendors to overcome with marketing and education. I was surprised but the number considering how much money the biggest firms have spent so far. But it just goes to show that people who don't live inside the industry have a very different perception of investing than we do.
Great to see @acorns as the #2 most recognized #DigitalAdvice brand via @JoshBook10 & @ParamInsights at #Invest19 -- But I'm surprised that neither@Betterment or @Wealthfront made the top 5? pic.twitter.com/ZOJVppeHqi
— Craig Iskowitz (@craigiskowitz) July 22, 2019
Another set of stats jumped out at me when I saw the top 5 brands based on social media impressions. Acorns is #1 and Wealthfront is #4. I guess social media isn't as powerful a force for brand recognition as I thought. Or perhaps the breadth of Acorns social media engagement (63% share in March 2019) just powers them into the stratosphere while Wealthfront is just limping along (12% in March 2019) (See Acorns: We're Not Just Gathering Assets, We're Building a Brand)
World Wealth Report 2019
Abhishek Singh from Capgemini shared how to help wealth managers and HNWI clients to navigate these disruptive times using the results from their 23rd Annual World Wealth Report.
#Brexit called out as a significant factor in the decline in #EuropeanWealth by @Capgemini in summary of #WorldWealthReport at #Invest19 another reason why we need a #FinalSay pic.twitter.com/QdBlJ3coKl
— Ian McKenna (@ianmckennaftrc) July 17, 2019
Despite the importance HNWIs place on digital capabilities, the personal connection is still important. Those HNWIs who feel connected to their advisor have nearly 2X net new inflows and are 25% more likely to provide referrals.
Only 40% of #HNWIs were satisfied with the personalization from their #wealthmanagers. This will continue to be a challenge as expectations are being set high in other elements of their day to day lives. #WWR19 #INVEST19 pic.twitter.com/UcRedwyVqv
— Bill Sullivan (@WFSULLIVAN3) July 17, 2019
Artificial intelligence represents a huge opportunity to deliver significant value in enabling wealth managers to better meet HNWI client needs. Service quality remains THE top criteria that HNWIs use to select their primary wealth firm.
Historically, the resistance of wealth manager towards the adoption of digital advice was a major challenge. But now wealth managers are demanding more tools and support to enable them to better meet their HNWI client needs. The biggest gap exists between what advisors see as their most important needs and the strategic focus of their firm. The second biggest gap was in their Process and Support Structure.
The Ubiquity of Digital Advice
Everyone seems to be talking about this now. Digital advice has become tangle stakes in wealth management, as I predicted a number of years ago. (See How the Robo Advisor Renaissance Pushed the Industry Out of the Dark Ages)
You know that something has become ubiquitous when even the wirehouses are telling you that they have it.
My simple definition of digital advice is a self-directed wealth management experience. A more complex definition is also required as firms start piling in everything and anything and slapping a digital label on the mess. Can you refer to a call center full of recent college grads with CFPs as digital advice? Yes, you can!
Activating Digital Hybrid Advice
This session highlighted best practices around commercializing hybrid digital advice models. Speakers were Randy Bullard, GM Wealth at SigFig, Patrick Rodman, WellsFargo Head of Digital Advice, UBS Head of Wealth Advice Leonard Golub and Salesforce Financial Services GM Rohit Mahna.
https://twitter.com/DarbyJ_Rowe/status/1151477142401802240
"Digital adoption is a one-way street in all markets. People don't install Uber, try it, then delete it and say, 'I'm going to go back to hailing cabs.' That just doesn't happen." -- Randy Bullard (See Ep 9: Digital Advice Trends with Randy Bullard)
At Activating Digital Hybrid Advice session, @UBS's Leonard Golub shares example of typical small client buys a product and never hears from an advisor again and no net new money versus digital advice where it's an #xp and thru digital engagement, new $ results.#Invest19 pic.twitter.com/s3CijD2ALC
— Gavin Spitzner (@gspitzner) July 17, 2019
I'd like to know how Gavin made it to both my CRM session and Randy's digital advice panel when they were going on at exactly the same time. Did he clone himself?
Leonard Golub from UBS Wealth Advice Center believes that hybrid advice will always win over pure digital. He noted that guidance from advisors is critical for investors when adopting a digital advice tool (90% of clients would not be using it without).
Let's Think Outside the (Digital) Box
It was a pretty big chunk of industry market share that was represented on Seb Dovey's panel on digital advice when you combine the assets of BlackRock, RBC, LPL Financial, and Edelman.
https://twitter.com/ckeneally/status/1151557262550241280
Martin Small, Managing Director, BlackRock explained that it's important to recognize what advisors and clients really want and stop trying to distract them if you're not providing the value they're looking for. If a restaurant keeps telling you that they have great bathrooms with golden toilets, you’re eventually going to ask, 'Well how is the food?'"
"You can overwhelm advisors with functionality, but in the end, it's the integration that matters."
-- Rich Steinmeier, LPL Financial
Our industry is more about relationship management or information management rather than financial management, stated Rich Steinmeier, Divisional President at LPL Financial. Advisor adoption is the core inhibiting factor that limits the ROI on digital transformation, he added. All of the initiatives at LPL are evaluated based on whether they make advisors' day-to-day workflows more efficient.
It's not just FANG companies. Wealth management firms are looking at a wide range of other industries including soft drinks, cars and even pool floats to help understand how to innovate in their own space, panelists say #InVest19
— Tobias Salinger (@TobySalFP) July 17, 2019
The holy grail for success in financial advice is the ability to scale personal relationships, explained Kelly O’Donnell, EVP and Chief Risk Officer, Edelman Financial Engines. It requires a combination of empathy and technology to achieve. (See Future Shock: Ric Edelman Predicts The End of the World As We Know It)
Edelman has over 1.1 million clients with average assets of $175,000, O’Donnell reported. This is very low when compared to the industry average but is probably weighed down by the 401(k) accounts that came in from the Financial Engines merger, which I would guess could be extremely small. BTW, average client assets are (per Cerulli Associates):
- $459,000 for RIAs <$25mm in AUM
- $644,000 for RIAs $25mm to <$100mm and
- $2.5mm for RIAs $100mm to <$500mm
The technology includes AI and ML-driven personalization to be able to know more about clients than they may know themselves. Predictive analytics will be leveraged to deliver personalized advice at scale, she predicted.
"When will we hear people describing the joy they find in financial services?" asked Seb Dovey.
What Does It Really Take to Modernize Advice?
Speaker: Michael Spellacy, Senior Managing Director, Accenture Global Capital Markets Practice Lead
Provocative insights from @mgspellacy on what it takes to modernize advice. Advice = Perspective + Client Engagement multiplied by Relationship (i.e., "Trust"). A lot of information is masquerading as advice and investors are craving personalization and authenticity.#InVest19 pic.twitter.com/0ubCav3gGW
— Gavin Spitzner (@gspitzner) July 16, 2019
Digital Advice v1.0 had serious shortcomings:
- Lack of quality
- Limited product offerings
- Incomplete vision
- Generic user interface
I'm no mathematician, but this is what @mgspellacy of @Accenture thinks the new formula for wealth management looks like: A=f(p+ce)r
*Notice personalization and customer experience at the center #InVest19 #invest2019 pic.twitter.com/IeuinurKh1
— Sean Allocca (@theseanscoop) July 16, 2019
Despite the digital disruption in the wealth industry, Spellacy noted that the components of good advice remain the same:
- Perspective
- Client engagement
- Relationships
Betterment Still Wants to Win the Robo Wars
Betterment CEO Jon Stein came out swinging as he opened the In|Vest conference first day on the main stage. Throwing grenades left and right, he took shots at all of his competitors and the market in general. He also announced that his B2C/B2B Robo-advisor breached the $18 billion AUM mark.
To me that's the fundamental impact that robo-advisors had - most #FinServ firms just compared to each other, and didn't realize they were ALL bad. New #FinTech platforms like @Betterment & @Wealthfront showed all the custodians & B/Ds how far behind they really were. #InVest19
— MichaelKitces (@MichaelKitces) July 16, 2019
Electronic onboarding was certainly the biggest innovation created by the robo-advisors, in my opinion. An engaging user experience was the other. A lot of RIAs and broker-dealers are still racing to catch up. (See Advisor Group's eQuipt is a Quantum Leap in Onboarding Technology)
.@Vanguard doesn't have a commitment to innovation, they can’t get out of their own way, they’re still selling only their own #mutualfunds — @jonstein @betterment #Invest19 pic.twitter.com/R3bUxHkPaW
— Craig Iskowitz (@craigiskowitz) July 16, 2019
"The future is not written by the incumbents." — Jon Stein
Wirehouses Want to Stay in the Spotlight
JP Morgan and UBS were both sponsors of the event and took center stage to explain their vision for an all-digital advice future. Both are financial services giants that want to appear nimble and innovative to avoid being disrupted by a seemingly endless stream of fintech startups as well as the usual suspect FAANG/Internet behemoths.
JP Morgan Wants to Get America Invested
Dr. Kelli Keough, Global Head of Digital Wealth Management at JP Morgan is interviewed by #1 Social Media Influencer, April Rudin, on how the bank executed on their 2015 digital strategy. She acknowledged that the digital journey never ends as they hustle to keep up with ever-changing client expectations.
Been looking forward to @therudingroup session with Kelli Kavanaugh of @jpmorgan #Invest19 pic.twitter.com/uHXwM4XvbK
— Bill Sullivan (@WFSULLIVAN3) July 17, 2019
JP Morgan is in the process of digitizing every part of their business to create an "ecosystem" for customers to live in— kind of like how Amazon, Apple, or Google do, said Keough. I'm highly skeptical that a bank can design such an ecosystem that is anything like Amazon, Apple or Google. Especially a bank that has 15 different lines of business, 250,000+ employees and as much entrenched bureaucracy as they do. Well, they could eventually build an ecosystem that was like a snapshot of what one of those firms had five years ago. But by the time they do, consumer expectations will have changed to whatever the more innovative firms have moved to in the future.
If the world knocks your train off the tracks, get on your bike & start pedaling! #KelliKeough @JPMorgan via @TheRudinGroup #Invest19 pic.twitter.com/26k7TcnUIL
— Craig Iskowitz (@craigiskowitz) July 17, 2019
Keough claimed that her team introduced design thinking to an organization, but that didn’t really know what that meant. If this can spread to other lines of business, it would lead to better products, services, and internal processes across the entire bank.
"We know we're doing a good job on client experience when clients aren’t thinking about the technology," Keough stated.
People @jpmorgan come into branches to talk about the online offering. Advice is #hybrid and seamless #digitalphysical experiences are key. Kelli Keough and @TheRudinGroup #InVest19
— Nina Schneider (@nimisc) July 17, 2019
I wasn't sure what to make of this insight that Keough shared. It raises a hundred questions in my mind:
- Why would a customer walk into a branch to discuss something they interacted with on their computer?
- Is that a sign that the online offering is insufficient to meet their needs?
- Are they speaking positively or negatively about the online offering?
- What is the average age of the customers that visit branches? Maybe they're just Baby Boomers who aren't comfortable banking online.
Client Digital Experience: Lessons from UBS WMA
Speaker: Kraleigh Woodford, Managing Director, Head of Digital Client Experience, UBS Wealth Management.
The fact that @UBS spent two years building their mobile app is a perfect example of why #banks are usually better off outsourcing this development to deliver faster #Invest19 pic.twitter.com/XTKbvWlLoV
— Craig Iskowitz (@craigiskowitz) July 17, 2019
Woodford explains that because UBS can build an app, it’s an example for other wirehouses to try & build something — but they’re still catching up to innovative startups.
It’s not about an app, it’s about driving #clientengagement for @UBS new #wealthmanagement mobile app - is it enough to keep clients from defecting to #fintech players? #Invest19 pic.twitter.com/TZfB8A00bm
— Craig Iskowitz (@craigiskowitz) July 17, 2019
Comments from #DesignTwitter about the UI/UX of UBS mobile app:
- Design is circa 2010
- Looks like a logic puzzle from a 1999 LSAT
- Functional, but not exciting
Five Industry Trends Reshaping Financial Advice
An insightful and very informative presentation by financial planning guru, Michael Kitces, walked us through the history of the advice industry and described how major events shaped the landscape that we see today. A unique combination of university professor and TED Talk speaker, Kitces described the great convergence that took place across historically separate industry channels, triggering a crisis of differentiation, a search for new business models, and rising pressure on improving the client experience.
There is a crisis of differentiation in wealth management, Kitces explained, with much of the industry focusing solely on Baby Boomers. The problem is that there are not enough of them for every advisor to build their business around!
One of my favorite lines from his talk (there are too many favorites to include them all here) was about how many advisory firms don't understand the value of focusing on a specific client niche. Their marketing will say something like, "we specialize in Baby Boomers, divorced people, retirees, Millennials, Fortune 500 executives, startup founders, and women." Unless you create a value proposition that appeals to a specific client niche, you're going to have difficulty consistently growing your business. If you try and appeal to everyone, you wind up appealing to no one.
7 or 8 million mass affluent households with available assets for management.
300,000 total advisors.
= about 21 #AUM households per advisor, 5 of which are millionaires
That's a problem & and opportunity, says @MichaelKitces
#InVest19 pic.twitter.com/6kEpGl0Zct— Jay Palter (@jaypalter) July 16, 2019
The problem is that there aren't enough affluent households to go around with every advisor chasing after them. The opportunity exists for those advisors who can effectively communicate their value proposition.
As part of the ongoing search for new business models, Kitces illustrated that there is a move towards income-based fees for HENRYs who have debt and low assets but seem willing to pay 1-2.5% of income for ongoing financial planning support.
TAMPs, then re-balancing software, then roboadvisors, and now model marketplaces. @MichaelKitces talking commoditizing happening across the finserve ecosystem then and now. #InVest19 #invest2019 pic.twitter.com/NhpGzkW4tu
— Jimmy Moock (@jimmymoock) July 16, 2019
Professor Kitces gave an Ivy League-level lecture in the history of wealth management technology and its impact on the business model of financial advisors. Asset management has clearly become a commodity. So why do so many advisors still cling to it as their value proposition? (See 3 Reasons Why Model Marketplaces Are Taking Off)
Custodians Stealing the Spotlight
Not to be outdone by the wirehouses, RIA custodians both large and small invaded the In|Vest main stage to present their visions of the future of advice.
Charles Schwab
“The most important word in technology right now is integration,” explained Bernie Clark, head of Schwab's RIA Channel. We're seeing this in our consulting practice from the largest IBDs with thousands of advisors and tens of millions in technology spending, down to the smallest single-family offices. Innovative ideas are being created at an increasing rate by startups and wealth management are grabbing them to try and increase their differentiation. This creates integration issues as the new tools have to communicate with the existing infrastructure while not negatively impacting the advisor or client experiences.
https://twitter.com/onwallstreet/status/1151510602751381505
Clark delivered the quote above in response to Jon Stein from Betterment claiming that the $1 billion that Schwab gathered with their new high-yield savings account was just moving money from one pocket to another and wasn't really that much anyway. Schwab obviously feels differently about it.
Although, I believe that Stein is probably right, the goal of Schwab's program has a big marketing component and Stein is playing right into it by paying attention to their announcement. Just another reason why Betterment will never be a major player in the wealth space since their asset growth will always have a ceiling. They're just an online RIA.
Overrated or Underrated: "Goldman Sachs acquisition of @United_Capital" asks @chelsea_emery of @finplan - Bernie Clark of @Schwab4RIAs w/o hesitation "Tremendously Underrated. It's an incredibly important move; it seems Goldman is working toward changing its model" #Invest19
— Jimmy Moock (@jimmymoock) July 16, 2019
A “high percentage” of Schwab’s new robo clients are millennials, and the average account size has grown to about $300,000 - $400,000, says Clark.
TD Ameritrade Jumps into Bitcoin
Former Head of Emerging Technologies, Sunayna Tuteja, announced that she is shifting her role to focus exclusively on cryptocurrencies and Bitcoin. While some Millennials are interested in these distributed electronic commodities, the main demographic seems to be 45 and older.
RT InVest_Event: Sunayna Tuteja from TDAmeritrade & Investopedia Editor in Chief calebsilver talking about the latest #tech and strategy in TD Ameritrade’s innovation hub. #InVest19 #wealthmanagement #fintech pic.twitter.com/qjUAFdEfGg
— Sharon MacLean ~WorldGate Media*LinkedIn (@sharedmaclean) July 17, 2019
"Go where the customers are” drove TD Ameritrade to partner with WeChat (owned by Chinese Internet conglomerate Tencent) to deliver investment services and education to Chinese investors, Tuteja reported.
I interviewed Tuteja for my Winners of Wealthtech podcast back in June. (See Ep 16: Sunayna Tuteja, Head of Emerging Technologies at TD Ameritrade)
E*Trade's New Game
Since the $275 million acquisition of TCA by discount broker E*Trade in 2017, the new custodian has been busy negotiating big-name partnerships. Referral deals with RIAs Mercer Advisors and Edelman Financial Engines make for splashy headlines, but there needs to be actual dollars of assets flowing through to advisors for them to be worthwhile for either party.
I initially thought that E*Trade buying TCA was a move similar to TD Ameritrade's acquisition of Scottrade, which also had a robust referral program.
The E*Trade executives know that they need to build up their name recognition with advisors if they hope to build assets beyond the second-tier level where TCA has always played. Splashy partnership announcements are a low-cost method to generate industry buzz.
https://twitter.com/onwallstreet/status/1151295453071388674
I doubt they can convert any of their 7 million accounts into fee-based advisory business, but you never know. Maybe there are sub-demographics of customers that are reaching a certain age where they're more likely to give up their self-directed investing and settle down with an advisor. Even a 1% conversation rate is 70,000 accounts, so it's certainly worth a try. (See #ItzOnWealthTech Ep 18: A New Breed of Custodian is Shaking Up the Market)
Fidelity & The Future of Advice
Speaker: David Canter, EVP, Head of the Registered Investment Advisor Segment, Fidelity Clearing & Custody Solutions
David Canter of @Fidelity4BD_RIA on the growing consumer appetite for flat fee, subscription-based advisor relationships: "I'm excited by Facet Wealth and what they're up to in terms of fees and working with investors. We're in a bull market for advice." #InVest19 pic.twitter.com/sSf7h24jSR
— Facet (@join_facet) July 16, 2019
Nice shout out for Facet Wealth, the un-robo-advisor that has designed their business model around flat-fee financial planning services. I would disagree that we're in a bull market for advice, at least not advice as we have known it up until now. We are in a strong market for new models of advice delivery, like subscription-based.
All advisory firms should pivot to lead w/ #financialplanning — David Canter @fidelity #Invest2019 pic.twitter.com/pWoURVlViT
— Craig Iskowitz (@craigiskowitz) July 16, 2019
In the first half of 2019, there were 67 RIA deals totaling $69.5 billion, which was a 55% increase over the same time in 2018, Canter reported. (See #ItzOnWealthTech Ep 17: How Advisors Can Find Their 'Unfair Advantage' with Tricia Haskins)
Live Podcasting
As the proud owner of a new podcast (Wealth Management Today), I was excited to hear that there would be a podcasting stage setup at In|Vest with live interviews being conducted during the conference. John Siracusa from the Bank on It podcast was the host.
Honored to be included w/ such industry luminaries as #KelliKeough #LowellPutnam & #SebDovey on the #podcast schedule for @johnsiracusa #invest19 pic.twitter.com/0keNUeAetm
— Craig Iskowitz (@craigiskowitz) July 17, 2019
Some of the industry luminaries that graced the podcast stage included Barry Ritholtz, Jon Stein, and Michael Kitces.
Quietly observing a Master at work - #SebDovey discusses the history of the company he founded & successfully exited from w/ @johnsiracusa at #Invest19 pic.twitter.com/mMDAnwVzG3
— Craig Iskowitz (@craigiskowitz) July 17, 2019
I'm looking forward to hearing the episode with Seb Dovey where he talks about how he built a successful research and consulting firm, Scorpio Partnership, which is best known for a widely-cited annual ranking of private banks. Dovey sold Scorpio to Aon Hewitt in 2014, which allowed him the flexibility to spend some of his precious retirement time as the host of this conference.
Monetizing Data + The Intersection of Privacy
Panelists:
- Cheryl Nash, President, Investment Services, Fiserv
- Bob Miller, CEO, Private Client Resources
- Timothy Nagle, Chief Privacy Officer, US Bank
- Lowell Putnam, Head of Partnerships, Plaid
- Philip Watson, Chief Innovation Officer, Citi Private Bank
One of the most informative panels of the entire #invest19 conference was at the very end w/ @cherylnash2 & Lowell Putnam @Plaid Tim Nagle @usbank #BobMiller @PCRinsights #PhilipWatson @Citi #PrivateBank pic.twitter.com/Dzw2JtNoWw
— Craig Iskowitz (@craigiskowitz) July 17, 2019
The definition of privacy is expanding to include analytics, geolocation, personal preferences, and smartphone data, stated Tim Nagle, Chief Privacy Officer, US Bank. (See "Don't Get Creepy": Privacy in Wealth Management & Emerging Technology Trends)
All this controversy around #faceapp is making me think about what @PCRinsights CEO Bob Miller said today at #InVest19
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“If consumers really cared [about #dataprivacy], we’d probably be having a conversation about the 28th amendment in the Constitution.” 📜— Bernadette Berdychowski (@bberdychowski) July 17, 2019
Nagle believes that AI will deliver value when it can evaluate investments and identify patterns in customer behaviors that drives successful cross-selling.
"The sexier the tech, the least sexy the use case." — Lowell Putnam, Head of Partnerships, Plaid (former CEO Quovo)
Trends in RIA M&A
Mergers and acquisitions have become a defining factor of the wealth management industry — whether it’s the consolidation in the RIA landscape or the tie-ups among the biggest technology players.
“Even tech that doesn’t have a client interface, really affects the #userexperience” - @jstarcev from @nexainsights in discussion with #invest19 panel moderator and FiComm CEO @megan_ficomm pic.twitter.com/IrrM9mhByR
— Ficomm Partners (@FicommPartners) July 16, 2019
In our consulting practice, we have first-hand experience with back-office and middle-office technology and other infrastructure that advisors don't directly interact with but have a tremendous impact on their experience as well as that of clients. This is one reason why getting the IT folks in the same room to create a strategy for merging all of the software, hardware and data feeds of the two firms is crucial to M&A success.
According to Liz Nesvold, Managing Partner, Silver Lane Advisors, poor integration execution is the beginning of the end in terms of failed transactions.
Goldman + United Capital: How Tech Helps Clients Live Richly
Speaking of RIA acquisitions, the $750 million purchase of United Capital by white-shoe investment bank Goldman Sachs, was the biggest deal of the year. While United Capital's revenue is a like a flea on an elephant's butt when compared to Goldman Sachs' private wealth group, Goldman expects the Newport Beach-based RIA to become the fastest-growing part of the wealth management segment.
@Jason_Gordo, #CX head for @United_Capital shares how advisors are leveraging #FinlifeCX to help clients clarify what really matters and develop plans to achieve desired outcomes. Impressive and premium @GoldmanSachs paid looks like a good investment.@DuranMoney #Invest19 pic.twitter.com/0TbEEwnFxM
— Gavin Spitzner (@gspitzner) July 16, 2019
"What we know is that by going through an honest conversation exercise, we end up with about 8 financial goals," noted Jason Gordo, SVP, Head of Client Experience, United Capital.
I have seen a number of demos of the UC data gathering interface and I'm more impressed with it every time. It's innovative and intuitive and gamified and helps to differentiate UC advisors from the other advisor down the street. Very smart technology and a big part of UC's success and ultimately their purchase by Goldman.
Implementing CRM
Everyone needs it, but implementing CRM is not a walk in the park. I gathered some experienced industry experts who have been working with three of the biggest CRMs for advisors: Redtail, Junxure and Salesforce.
- Jason Borgmann, Head of Investment Platforms, Cetera Financial Group
- Erin J. Kincheloe, Co-Founder, All About It Consulting
- Loren Pierson, Chief Operations Officer, Mercer Advisors
“We decided to work with the best in breed CRM,” @Jasonborgmann, @CeteraFinancial talks about why he chose @RedtailCRM in the Implementing #CRM panel with @craigiskowitz #InVest19 #InVest2019 pic.twitter.com/LdWW7ao3kV
— Ficomm Partners (@FicommPartners) July 17, 2019
Best of breed is a subjective term. Every piece of software can be considered best of breed if it meets your firm's expectations. But it could be the worst choice for the company down the street because of how they run their business. That's why I recruited people who chose different applications and elicited each one's reasons for software selection.
Jason Borgman said Enterprise doesn't do enough to support the technology for the advisor to adapt it (CRM) on the front end.#InVest19
— Maree Moscati (@CopytalkMaree) July 17, 2019
Securing support from the key leaders and decision-makers is crucial to any new technology implementation. But you also need enough support, including budget, people, time, and buy-in. Without all of those, it is difficult to succeed.
Reimagining Retirement Planning: BlackRock & Microsoft
Speaker: Anne F. Ackerley, Retirement Group Head, BlackRock. As the leader of retirement strategy for the world's largest asset manager, Ackerley has tremendous influence on the future of millions of Americans. She oversees the development of strategies and services for more than 60,000 retirement plans belonging to 15 million institutional and retail clients, including half of the Fortune 100.
“We will start in the US then take it global,” Ackerley makes it clear why not only US firms but international financial services providers need to act now or face huge competition from a BlackRock and Microsoft joint venture whose goal is nothing less audacious than reinventing retirement planning.
https://twitter.com/ragspag/status/1151501989731344384
I'm going out on a limb and say that there are no Instagram stars who are promoting their successful 401(k) plans. Only 56% of Americans have started to save anything at all, according to Ackerley. We glorify our purchases and material things, not how much money we've saved.
Navigating life expectancy, health care and stock markets along with all financial security matters is 'a really hard problem,' says Anne Ackerley of BlackRock. Right now, system tells people 'Hey, go figure it out.' #InVest19
— Tobias Salinger (@TobySalFP) July 17, 2019
This sounds obvious, but it is still an outstanding issue that needs to be addressed and most Americans are woefully unprepared.
There are over 50 million Americans without access to a 401(k). It would be great if the government worked on universal access to these saving vehicles.
Invest 2019 Conference
And that's a wrap, folks! Whew! 4,500+ words is a lot of writing, even for me! But it's all for a good cause.
In|Vest is one of my favorite conferences to attend each year, and I'm happy to share my thoughts about all the great content. I never pick just one favorite part, but I thought the panel on subscription pricing was non-stop keeper quotes between Alan Moore and Anders Jones and Schwab's Bernie Clark definitely generated the most media buzz. Of course, I'm biased and had a blast moderating my panel on Implementing CRM.
Looking forward to doing it all over again this December at In|Vest West in San Francisco!