For years I have felt like that traveler who races ahead of the tour group, spins around, and thinks, “Why can’t you all hurry up?”
Over more than four decades in the advisory business, I’ve watched with mounting impatience as we prioritized selling products—cash management, mutual funds, annuities and SMAs early on; UMAs, ESG, crypto, and direct indexing more recently—over meeting investors’ most profound needs.
The power of a fully coordinated household-level wealth management ecosystem has only recently been possible, and available. I spend most days educating advisory executives on how to achieve significantly better outcomes for investors, advisors and firms. It’s not just technology that does it but how tech is woven into the process of all that needs to be considered to improve financial results.
The shift was evident at this year’s Tiburon CEO Summit, where its leader, Chip Roame, has for years accurately predicted what’s next. At the recent meeting of 300+ senior executives, these are my takeaways on what Chip showed in the data:
• Taxes matter, a lot.
• Investors have come to learn the hard way, again, not to rely on the market.
• They don’t want another product; they want coordinated household management.
• And most investors want their advisors to help them secure a retirement paycheck and make decisions to protect their health care.
Here are the themes that stood out to me at Tiburon earlier this month.
1. Financial advice is more than a product. I’ve watched this movie before: Manufacturers create a new product. Everyone jumps aboard—until it falls short of the hype and the next product debuts.
For years we didn’t listen to what clients wanted. And because all clients heard about were new products, they didn’t know what they wanted. The upheaval of the past few years and the retirement wave have helped them focus their demands:
• The high-net-worth want advisors to show them how to pay less in taxes. The only way to manage taxes thoroughly is to optimize all the different accounts and holdings in a portfolio. Generating tax-alpha is much more than tax-loss harvesting.
• The mass affluent want to turn their assets into a maximized retirement income stream.
• They want to know how to reduce healthcare care costs.
No single product can deliver the above. And the hodgepodge of holdings investors spread around with multiple advisors doesn’t work either. With the advanced technology now available, advisors can coordinate and customize services to meet clients’ financial needs. Those who do experience a high degree of asset consolidation.
2. The future depends on comprehensive advice platforms. A few companies are going beyond “integrating” tech-stack elements—they’re working to ensure consistent data flow throughout an ecosystem enabling advisors to manage wealth on a coordinated household level.
The key processes to be managed are these:
• Start with a financial plan, then maximize the implementation through intelligent tax planning, especially asset location, which has the most significant impact on results.
• Manage portfolios at the household level to optimize outcomes using asset location, tax harvesting, multi-account rebalancing and graduated transitions to achieve tax alpha
• Maximize Social Security and draw income tax smartly across multiple accounts to create secure, optimal retirement income streams. This process includes providing tax-smart advice about Roth conversions, required minimum distributions (RMDs) and withdrawal sequencing.
No one describes this better than Jed Finn, COO of Morgan Stanley Wealth Management. He explained this at the Next Chapter Rockin’ Retirement Conference, now available as a podcast.
3. Mergers and acquisitions will accelerate. Technological advances take time, money and talent. The recent deal struck by Envestnet and FNZ shows the need to be comprehensive in their service capabilities, even as their disaffected shareholder pointed out that execution and moving quickly matter too.
Morgan Stanley has been at this the longest with a strategy admirable for its reach, depth and boldness. Their acquisitions—E*TRADE, Eaton Vance/Parametric, Solium, among others—on top of their industry-leading comprehensive wealth management platform position them to serve the broadest swath of investors at different stages in life and wealth.
They continue to invest heavily in technology to serve how investors find them—workplace retirement, direct and traditional wealth management. More importantly, they are actively weaving together the threads of risk, tax, Social Security and more that must be coordinated to improve advisor and client results.
RIAs are also primed for mergers, acquisitions and IPOs. They’ll need scale and support on a massive level. Commonwealth Financial Network announced its intentions to become a national RIA by lowering platform fees, enhancing services for fee-based advisors and leveraging its affiliate Advisor360.
4. Superior user experience will attract clients and advisors. User experience is more than the most awesome app. Robo-advisors are not dead. They are amassing significant assets as they add capabilities, including advice. And Gen Z is investing for its future with them.
The user experience dominating the industry at Robos is now being embraced by traditional wealth managers and will be a blend of human advice delivered at scale through technology. Furthermore, the promise of artificial intelligence (AI) enables advisors to prioritize next-best actions over time.
5. You can’t rely on “the market.” For years many have sought to outperform their peers. That’s great when skill and the market align. But not this year. Sobering returns put clients on edge, leaving many to wonder why they’re paying so much.
Clients want advisors with the tech and savvy to manage the entire household portfolio and optimize outcomes by addressing costs, risks, taxes and Social Security.
The leader firms of the future will provide advisors with tools to automate practices vital to client success—all at a multi-account level, like asset location, risk management, tax harvesting, transition and tax-smart retirement income maximization.
I heard it loud and clear from the podium and in the hallways at Tiburon that the shift is on, and the future is bright for all—investors, advisors and firms. Buckle up.
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.