I’ve thought a lot about which firm might emerge as the first Amazon in financial services—a company willing to break from the past, make a big bet on the future, invest billions in transforming outdated infrastructure, and put historic levels of digital and human capital behind elevating the customer experience and financial outcomes.
Amazon belongs to an elite group of companies that have blazed new paths in conventional categories: Netflix, Uber, Wayfair, Airbnb, and Tesla. They’re among the best-known brands today.
My wondering informs the questions I pose to industry leaders—nearly 100 over the past two years—on my weekly WealthTech on Deck podcast. I’ve concluded that Morgan Stanley, Empower, Edward Jones, and Franklin Templeton are top contenders for the mantle of disruptor in chief.
Each has a carefully constructed strategy—I’ll fill you in and how you can hear our conversations in a moment—and are preparing to lead the imminent transformation of our business from being too often characterized by “product of the month” to delivering comprehensive financial advice addressing investors' genuine concerns.
Tiburon founder Chip Roame laid it out to the audience at his recent CEO Summit. “If you’re not maximizing retirement income and addressing taxes, Social Security, and healthcare, what are you doing? That’s what investors want.”
These next-gen leaders are focused on what investors want and aren’t getting. They have made acquisitions and mergers to stitch together traditionally separate industries—wealth and asset management, workplace retirement, insurance and annuities, and financial technology—so they all pull together to benefit consumers.
They are remaking their service, digital and guidance experience to be ready for a future with fewer financial advisors to serve even more investors who know they could be “retired” for 30 years or more.
These four companies understand the remarkable potential and power of 21st-century tech—sophisticated and coordinated algorithms, APIs, and AI—to improve investor outcomes, increase advisor productivity, and enhance their own profitability. They are also addressing taxes, which have the biggest effect on investor returns and income, as explained in a Vanguard study on “advisor alpha.”
We saw what happened when the pandemic generated a rush to the retirement door. Advisors were caught using what amounted to an abacus—spreadsheets, the 4% rule, or their best guesses. When clients needed us most—to know how to convert from working person to retiree—our industry failed them.
Morgan Stanley, Edward Jones, Franklin Templeton, and Empower are on the way to coordinating all the points of a financial compass, optimizing cost, risk, Social Security, and taxes. The new disruptors are relentlessly driving toward giving consumers what they want and need.
Morgan Stanley: Widen The Funnel
Morgan Stanley, the clear leader, has been building its comprehensive advice platform since their 2009 Smith Barney merger. They invested heavily, executed deliberately, rounded out their vision and expanded their reach with E*TRADE, Morgan Stanley at Work, and Eaton Vance/Parametric—all on top of coordinating multiple capabilities on their industry-leading wealth management platform.
The payoff has been significant. According to Tiburon Research, Morgan Stanley joined Schwab and Fidelity in the top three firms in net new asset gains over the past three years. Merrill is far behind at #4.
“We always thought the future of wealth management was going to be the combination of best-in-class advice and best-in-class technology,” Jed Finn, Morgan Stanley Wealth Management COO, told the 2022 Next Chapter: Rockin’ Retirement conference (Finn explains more in this podcast).
Finn doesn’t buy the assumption that clients either want to manage everything independently or hand it over to an advisor. Instead, investors change behavior over time. Morgan Stanley plans to be there when they do.