I built my career on listening. I especially enjoy good storytellers. With the pandemic making conversations harder to have, I launched a podcast, WealthTech on Deck. Then I invited the brightest leaders in our industry to share their perspectives on the confluence of technology and human advice and the epic disruption in financial advice today.
Sixty guests, 3,600 listeners, 9,600 downloads and 50 episodes later, here are some lessons this listener learned.
1. Investors want to maximize retirement income. Now. People are turning 65 at the rate of 10,000 a day, rising to 12,000 in a few years. The pandemic accelerated retirements. As advisors know well: The demand for services to maximize retirement income is white-hot.
Our industry knew this was coming for years. Still, its response was more focused on producing great products than answering every retiree’s questions: How do I secure a retirement paycheck from my multiple accounts, products, custodians and advisors? And how do I make sure that I don’t outlive my assets?
Len Reinhart, the founder of Lockwood Advisors and arguably the founder of the advisory industry, wrote a paper on this 20 years ago. He explained that investors and advisors would benefit by coordinating all assets, managing household portfolios and achieving alpha by addressing cost, risk and taxes.
“When we talk about moving from accumulation to decumulation, it really is the time for the portfolios to be working in concert with each other as an orchestra, instead of being managed in pieces,” said Rose Palazzo, former head of financial planning at Morgan Stanley, now Group Head at Envestnet|MoneyGuide.
John Thiel, former head of wealth management at Merrill Lynch, said: “We need to have a decumulation strategy that is simple, direct … consumable, and that people can execute in a relatively simple and easy way.”
Now that the number of retirements is hitting record highs, firms are spending billions in the race to build comprehensive advice platforms to achieve what Reinhart described two decades ago.
2. Defined contribution/401(k) fintechs are winning the battle for new clients. The workplace is the new financial advice lobby. Ed Murphy, CEO of Empower, and Aaron Schumm, CEO of Vestwell, are two leaders who have found fertile ground in defined contribution plans and participants.
Empower is now the No. 2 record keeper behind Fidelity. Both firms work closely with advisors and wealth management firms. Empower bought Personal Capital as it looks to capture eventual rollovers down the road.
What Empower, Vestwell and others have latched onto is the fact that individuals often develop their first investment relationship at work often through a 401(k). “Seventy-five percent of individuals, the first dollar they ever save is through the workplace,” Schumm said.
That spells “opportunity” as investors climb the salary ladder, and invest more. Both Empower and Vestwell work with firms, such as Morgan Stanley, that recognize if they earn the trust of workplace savers, they can win them over as wealth management clients.
“There are 128 million mass affluent households, and many are underserved today,” Murphy said, adding, “those customers have real needs, whether it’s retirement, college savings or emergency savings.”
3. Find your inner Ted Lasso because advisors’ hats will say, ‘Coach.’ We know how intertwined money is with hopes and dreams. Financial advisors have tended to focus on investment strategies. But clients expect much more than that today, several guests told me.
Both Frank McAleer and Steve Gresham talked to me about the disconnect between what investors want—and what advisors are equipped to give. Their biggest questions are about health care and outliving their money.