Strive to flip the Pareto principle. Estimates from advice firms indicate the median advisor has fewer than half their clients’ assets and that fewer than 20% of clients are responsible for more than 80% of firm results. Taken in combination, there is urgency to consolidate assets among the “moveable middle” advisor population, which makes up about two-thirds of the advisor population. Noting at the same time that most affluent clients have scattered their accounts across four to six providers, there is also urgency to reach that overlooked 80%, which now counts for more potential upside than the engaged clients. That “small” client we have might just be showing a piece of their potential action.
Client solutions will require leveraging the full balance sheet. Only the most affluent clients can confidently withstand any retirement curveball, like a prolonged illness, divorce, a relative in trouble—or even the accumulated costs of healthcare and home repairs. Ken Dychtwald of Age Wave shared at the MMI Annual Conference that 79% of parents provide meaningful financial support for adult children aged 18 to 34, and that pre-retirees spend twice as much on children as they save for their own retirement. “Holistic” wealth management is an attractive story, but the reality is that limited assets need the leverage found in insurance, annuity and credit products. These products still face limited adoption among advisors.
Most clients want at least some stability. Retirement investing includes “peace of mind” as well as “impact.” Historically low interest rates have eliminated a historic staple of retirement investing—the bond. Nowhere is there a simple, risk-free option with an attractive interest rate. Enter the annuity—and these products have evolved to include market participation, downside protection and risk separation that can provide ballast to both a portfolio and an anxious client. Watching investors shift from bonds to dividend-paying stocks and REITs reminds a lot of us about how a “cliff of risk” is built. There’s a role here for alternative investments as well, if they are truly alternatives and not equity proxies. No matter what or how or why, “peace of mind” has to be respected and addressed.
Changing leadership in retirement income product management. Challenging times are creating new leadership—and new partnerships. Watch for collaborations among financial services companies on product, distribution and new markets as the impact of the SECURE Act is captured by opportunistic firms. Asset managers in particular are used to working together on portfolio management platforms, and those platforms are changing to accommodate income products.
Beyond CRM: Enterprise-level advisor technology is needed to keep up with clients. Perhaps the clearest test of impactful leadership is the adoption level of essential technologies. An MMI-funded study revealed that only half of financial advisors actively utilize CRM for client management. Here’s where the robos will continue to make inroads as they leverage client data to proactively engage on key milestones of behavior. The complexity of “retirement” includes multiple touch points leading up to and through retirement, requiring decisions to be made—like Medicare election—that create anxiety and provide opportunities for agile players to surprise and delight clients with proactive contact. Digital tools are more reliable than Post-it notes to track key moments in time for every client household. Let the machines do the work of proactive customization.
Leaders should focus on the best environment for clients and employees. Fast Company reports Bureau of Labor Statistics data that 20 million people left their jobs between April and August this year—a 60% increase over 2020, which was a double over the prior year. Even more interesting is a Gallup survey in the same article that claims nearly half of the entire working population in the U.S. is actively job searching. Clearly this is not just about disaffected younger workers—this is the experienced and knowledgeable core team that drives most companies. The loss of their expertise and perspective can be a body blow to any business.
There has never been more of a need for engaged, insightful and inspirational leadership able to reach past the C-suite and the teleprompter and connect with employees at all levels. There is a parallel construct here for client appreciation as well. The company that cannot hold its best people likely has even less of a chance to maintain its market share. And the skills to connect with and inspire both clients and employees will make the difference between who leads the pack and who struggles to keep up.
Steve Gresham is CEO of the Execution Project, a firm focused on reimagining “retirement,” and he is also managing partner of Next Chapter. Formerly the head of Fidelity’s Private Client Group, he is also a senior educational advisor to the Alliance for Lifetime Income. See more at theexecutionproject.com.