The good news is that next year is unlikely to be worse than 2020. But as noted by The Economist, “21” is the total count of faces on a die. So it might just depend on how you roll.
The world history of significant traumatic events—wars and pandemics—is encouraging for entrepreneurs and business leaders able to adapt to the aftermath. With one important caveat—do not wait for anything to “return to normal.” Nothing will ever be the same again so best we embrace the future and help shape it for our family, friends, colleagues and clients. Easier said than done to be sure, but consider this list I collected from my virtual travels around the industry. Please think carefully as you scan—there is a significant difference between being aware of these opportunities and taking action.
1. Asset Consolidation—Winner or Loser?
$32 trillion is currently splashed across countless custodians, products and advisory firms. The typical HNW household has 5-6 providers, each of whom calls that household “our client.” But the average advisor holds only about 50% of the average client’s investable assets—and nearly half of these investors say they don’t have an advisor. People 55+ who are still working hold $12.7 trillion. This is truly “money in motion”—and most of its owners will consolidate their assets in the next 10 years. Will they stay or will they go? Where and why? Keep reading….
2. ‘Health’ Is Here To Stay—Make Room
Covid-19 shocked the world. Everyone is now alerted to the risks of health. But health was already the number one concern of people 55+, who now control more than 80% of all advice industry profits (through 2035). Top advisors include health in their conversations with clients. You don’t have to be a doctor, but you do need to probe clients and capture their preferences about where they want to live, how they plan to pay for and receive health care—and who you need to contact in the event they are disabled. One in four of our clients aged 65+ is currently suffering a level of cognitive incapacity that prevents them from making good decisions. If you don’t engage, the family will take the money away. By the way, that’s the newly crowned number one reason top clients leave their advisors—they either die or become disabled. What can you do? Keep reading….
3. Sell Security Alongside Opportunity
Investors have never had it so good. Nearly 12 years of equity markets jamming at 18% per year—and bonds at 11%. No wonder client appreciation of advisors is high. But watch out, clients on the cusp of retirement or already out there remember 2000 and 2008. The antidote for insecurity is security. The number one product concept of interest to clients who already work with advisors is retirement income. Not the stock market. Prediction: if you are not discussing protected lifetime income with clients, you are vulnerable to competitors selling safety. Do not assume clients can estimate a retirement paycheck from a portfolio. There are protection products that leverage client assets for legacy (life insurance), health-care costs (long-term care) and longevity protection (DIA, SPIA, et al). Retirement is not just about assets—it’s about managing liabilities as well. Most clients don’t have enough assets to get all the way through retirement. They need leverage. And yes, that means adding products to your arsenal, increasing the breadth of your services. How to keep track of all that complexity? Keep reading…
4. Stop Fighting Automation
Industry research indicates only about half of advisors actively utilize CRM—the most basic digital capability. Post-It notes and Excel spreadsheets stubbornly hold their ground as the go-to client engagement tools. To get an idea of how much lift you can get from better engagement with clients, try a very simple exercise we used in launching Merrill Lynch Private Wealth 20 years ago. List the services you provide clients—asset allocation, investment management, etc. Make sure the services named so far in this column are included—health-care costs, retirement income, legacy planning. Now review just your top 20 client households. How many of the households own all of the services you offer? Even the average top advisor shows significant slippage around number 15-20, so don’t feel bad. But imagine the gains —and the client retention/referrals—if you could extend your reach per household. That’s the payoff for everything here. But you’ll have to be automated to pull it off.