There is trouble brewing in the corporate workplace. The fall of 2021 promises to challenge company leaders to engage better with their employees or risk further declines in morale—or worse. The rate of retirement in 2020 doubled over 2019; resignations and job changes are also increasing, and many companies have struggled to find the appropriate balance between work conducted at home and done on-site. The decisions being made right now will have lasting consequences. This is one of those moments when all leaders are in the spotlight and every move is judged in real time by employees comparing the places they might want to work. The companies that win will be able to accept current conditions, including the uncertainty, and navigate through them. There is a profound difference between leaders who view Covid-19 as an obstacle and those who see it as a catalyst for changes already underway. We have an opportunity to take advantage of the destabilization to find focus in chaos. This is a time for leaders.
The first step is to admit things are uncertain. No one knows if the virus or its variants will be controlled enough to ensure a safe workplace—or travel. If we name specific dates to be back in the office or set occupancy targets, we’re pursuing a strategy of hope at best, and hope has an unreliable history in business planning. So we should focus on things we can control.
Next, we need to pick objectives that move our organizations and clients forward. The financial advice industry was already earning poor grades from clients for failing to address some pretty basic needs—especially from retiring baby boomers. These problems were smoldering for some time and Covid-19 threw gas on the fire. Our think tank, Next Chapter, has come up with a partial list of things we need to address. Can we say we’ve made progress on these in the past year?
Retirees seeking advisors. Retirees are the fastest growing age cohort in America. Twelve thousand people are rolling out of work every day. They’re afraid and anxious about the future, and it’s a challenge to the entire industry to respond with care. This is the ultimate test of our value. We helped get many of these retirees to this stage of their lives. Now that they face new challenges, we can’t suddenly let them down, especially as nimble competitors from other sectors emerge (and promise the mother of all disruptions).
Clients’ cognitive decline. One in four Americans older than 65 suffers from cognitive impairment bad enough to keep them from making safe financial decisions. What will we do to help?
Clients’ liquidity. The largest asset class right now is residential real estate. Can we find an intelligent and economical process to unlock that value for the benefit of retirees? (Consider my 87-year-old mother, for instance. Her No. 1 objective is to safely live in her home.) We’re facing a massive conversion of wealth on the horizon as people’s personal home equity turns into income—a massive shift bigger than retirement plan rollovers. Crack this nut.
Financial literacy. Covid-19 has shown the world how little most people know about medicine—and the results have been devastating. A lack of financial literacy also threatens people’s well-being. Financial advisors might not be charged with explaining vaccinations, but it is our job to support people of all ages with the insights and tools they need as financial consumers, something we generally aren’t doing. Kids don’t learn the ropes in high school or college.
Young people aren’t engaged. One of the things we have to do is engage young people. If financial literacy were more prominent in our schools, we might have a better chance of attracting younger people to financial advice jobs. And if we’re really being ambitious, we might rethink the role of sales-based compensation for people we expect to deliver personal service. The advice industry is being helped by a historic bull market. If prices slip, the fallout will be bad. Let’s get the right people in place with the right incentives to do the work most needed. The right incentives—focusing on client need—mean we no longer rely on keyboard managers who pound their teams to do more without giving them the tools or support. We are better.
Not just innovation but adoption. Remember the Pareto principle: Eighty percent of success goes to 20% of the players. That principle hangs heavy over the fintech industry, where a generation of fabulous inventions has been roundly ignored by most professionals. Technology is a game changer only if people play. If engineers are going to succeed, they’re going to have to work with advisors, be creative and do things in concert and figure out the priorities. What is it that machines can really take over? What about investment policy questionnaires? If we can program a car to drive itself, certainly we can train a bot to walk a client through such a document. (Blind spot found!) Let’s try to let the machines do almost everything, but save the jobs requiring judgment for humans.
The search for meaning. Investing is not just about the returns. Clients are interested in how their money makes an impact. You don’t have to be a mindfulness pioneer to see that environmental, social and governance investing is the only truly interesting development in active management in decades. Don’t fight it.
Clients’ best interest. Consumer protection—i.e., regulation—is here to stay. Can we any longer deny that what clients want is a fiduciary standard of care (or an otherwise common-sense standard of suitability)? Can we rid the industry of bad actors, confusing policies and overpricing? Also, we’re confusing clients when they need things to be easier. Can we revive the concept of a “simple” prospectus, the type we once used to demystify mutual funds and a simpler generation of retirement products? If we don’t, we lose trust and credibility. And that feeling bleeds over to employees.
Peace of mind. Two Next Chapter sponsors, the Alliance for Lifetime Income and Allianz, have done surveys and found that nine out of 10 retiring consumers say they would like to discuss guaranteed income. Seventy-one percent are concerned about healthcare costs, 67% are worried about the rising cost of living, and 66% fear a declining market. This much uncertainty creates an incredible opportunity for organizations and advisors willing to have the conversations—and it spells doom for the unengaged. The first stage of industry disruption is someone’s inability to answer very basic questions and alleviate understandable concerns. For all of its brainpower, the financial advice industry is a sitting duck, vulnerable to interlopers who will be able to give consumers what they want with a new level of simplicity. Do you think massive organizations reading real time consumer data will ignore this opportunity? Thank goodness for the current distractions of space travel and driverless cars—and buckle up.