I find myself in a front-row seat every day as I speak with leaders of major financial institutions about their strategies for advancing their businesses and our industry.
Reflecting on our conversations, I see five trends in the race to improve financial advice, described here and on my latest WealthTech on Deck podcast.
1. More people are retiring than ever and want and need advice. As many as 12,000 people turn 65 each day. They have more assets than any previous generation, and their millennial children will have even more.
Just as boomers have changed everything, they are redefining retirement. Many left their jobs in the pandemic, although some appear to be returning to work. They continue to redefine retirement. Here’s a hint (and latest buzzword): they want it “hyper-personalized.”
Their financial circumstances are complex. Many have an array of taxable and tax-qualified accounts, life insurance, annuities, and real estate. And no generation feels more responsible for their financial outcomes and retirement income than these folks.
More money is pursuing the best advice. This will last for decades to come.
2. Investors will move beyond the shiny object syndrome to household-level management. The unrelenting pattern I’ve observed over 40 years—of investors buying high, selling low, and falling for the latest-greatest products—must and will cease.
Investors too often do the wrong things, whether with mutual funds, tax shelters, annuities, managed accounts, tech stocks, day trading, exchange-traded funds (ETFs), representative as portfolio manager (rep as PM), crypto and direct indexing.
Many of these products have their place, but none is a silver bullet. To help them maximize retirement income, advisors are challenged to coordinate multiple holdings, accounts and products, factor in costs, risks, and taxes, and optimize Social Security benefits.
We must lead investors toward coordinated household management for their own good—and yours.
3. Workplace retirement, wealth and asset management, annuities and alternatives are converging. Tomorrow’s clients begin their retirement journey today through workplace plans. As their assets grow, they start understanding the value of advisory services. Increasingly, they seek an all-inclusive approach to financial well-being that advisors must be able to provide.
Morgan Stanley is out in front on this, with other firms in pursuit: J.P. Morgan, Orion, Edward Jones, Wells Fargo, UBS, Merrill, Envestnet, Goldman Sachs, LPL and many more.
It takes billions of dollars—and vision—to develop platforms that put advisors in the position to provide truly holistic advice.
4. Technology is powering the embrace of comprehensive advice platforms. The human brain isn’t wired to do algorithms or the necessary math to manage risks, costs, and tax liabilities at the household level.
One-size-fits-all rules of the thumb are inadequate. Spreadsheeting takes hours – time advisors don’t have. Software can and should automate much of it.
So, firms are creating comprehensive advice platforms to meet clients’ needs for true portfolio advice and retirement income planning.
Going back to the 2009 Smith Barney merger, Morgan Stanley invested heavily in their platform to coordinate legacy systems and new technologies. Fast forward, and they’ve doubled net new assets yearly for the last three years, making them the fastest-growing firm among the majors.
They’ve launched an advisor Tax Academy and built the first comprehensive household-level retirement income program, Intelligent Withdrawals.
And they’ve only just begun.
5. Human advice will always matter. Boomers are swarming advisors’ offices. Millennials are in their 30s and early 40s. Many assumed that they’d shun human advice—they were wrong.
Both generations recognize the value of human advice and software's essential role in delivering hyper-personalized financial plans and executing them for the best results.
Meanwhile, more advisors are retiring than joining the business. Those who remain need technology to be more efficient and provide better advice.
Requisite advisor skills have shifted from investment advice only to family and life advice. That includes:
• Listening to what matters in all aspects of clients’ lives. Financial advice is much more than portfolio management.
• Problem-solving skills, including how to meet multi-generational needs and wants regarding lifestyle, longevity, estate planning and healthcare.
• Coaching clients in developing and strengthening habits around managing assets, liabilities and cash flow so clients can achieve financial peace of mind.
I hear this from execs investing in the future: there’s never been a more exciting time to be an advisor in the tech-powered, human-led financial advice business.
Jack Sharry is co-chair of MMI's Digital Advice Community, a member of the Next Chapter Executive Leadership Advisory Board and co-chair of Next Chapter Leadership in Action. He hosts the WealthTech on Deck podcast, is the author of the book Authentic and Ethical Persuasion, and is executive vice president of LifeYield.