Cyber Security, Personalization, and the Future of UMH with Nicole Casperson

Jack Sharry: Hello everyone, thank you for joining us on wealth tech on deck. I’m especially excited about today’s episode. Usually we talked with industry executives about their strategy regarding the future of wealth management, and we pay particular attention to the what I call the confluence of human and digital advice. This week is a little different, very pleased to have Nicole Caspersen, who is the FinTech reporter for investment news. She’s joining us on our show, Nicole does a great job covering technology for investment news. And recently she was has been working on a cover story for IN and around the future of financial advice with a specific focus around this crazy new concept called the Unified managing household which has been around actually for decades. So today we are going to talk about her findings and what she has learned as she has reported on this significant and emerging trends. Nicole, great to have you on wealthtech on deck. Welcome. Thanks for joining us.

Nicole Caspersen: Thank you so much, Jack, I’m so happy to be here and join you on this UMHB journey, which Yeah, yeah, definitely nothing new. But what is new is why we got here and how we got here. And so that’s what I’ve discovered.

Jack Sharry: Really, tell us everything. What do you learn? Maybe at a high level, what were some of the maybe start with? What do you think it was? And then what do you find out? It was maybe start there?

Nicole Caspersen: Yeah, I think I had an understanding of what it could be. And I think reporting on it helped me understand really a lot of the elements that create a unified manage household, right? So on the surface, it seems like something as easy as just, oh, well, if we have a bunch of integrations with, you know, external parties, everything will work in concert together. No problem, right? Wrong. The answer really includes a lot of integration as a service providers needing to come into the fold really requires data to be able to actually talk to each other. And there’s so many different advisor pain points that come to light went as I was reporting on the unified manage household, which really is the purpose of the Unified manage household is to have all of these applications all of the points of a client or consumers financial well being financial services, all of their accounts, in one umbrella under one umbrella so that advisors or wealth managers can create their next best action and create the best outcomes. And it creates a personalized experience, it creates more time efficiency, cost efficiency, and allows us to leverage all this technology that we have access to. So that’s kind of what maybe I thought it was something so it sounds simple, right? Oh, just connect everything does. But it’s quite complex. And dealing with the complexities of, you know, a legacy system of m&a activity from these wealth tech providers is no small feat. And so that’s kind of what I had to unfold during this.

Jack Sharry: So I’m gonna see if I can capture what you just defined as the UMHB, maybe as a starting point for our listeners who may not be familiar with the concept. But essentially, it’s looking at all the different elements of managing a household portfolio, where the ultimate aim is to improve outcome and determine the next best thing to do is that maybe a good starting point to define your image or maybe you can enhance what I just said.

Nicole Caspersen: Yeah, I think that’s a great definition. And one of the maybe famous quotes or sayings that came to my mind as I was defining the UNH is that saying that failing to plan means planning to fail. And when it comes to technology, and having financial plans that are suitable for clients, advisors really need to have a clear vision of what they want their technology to achieve, while having each piece work in concert together and with each other. And so I think, you know, understanding the UNH as comprehensively managing portfolios to improve investor advisor and firm financial results is really a great definition but thinking of it along the lines of we’re simply just connecting all of the technology dots and data so that we can give the best like win win-win situation to all parties involved and save time and save money and have efficiencies and if we can understand like external account integration, which is what you know, UNH was requires to function then that can be possible and the technology is mature enough. And adoption of technology is at a level where this is a possibility. And there’s a bunch of other you know, environmental trends happening that I’ve learned from And Reinhardt, the pioneer of the UMich, who helped me understand why we are where we are today,

Jack Sharry: when I talk, before we get into it, I want to explore that further, but maybe talk about the different kinds of folks you talk to and the sort of different perspectives that as you’re putting the story together and trying to understand, because the big challenge, you’ve mentioned a few different ways that this stuff is complicated. It’s also comprehensive. So hence, it’s complicated. But talk a little bit about some of the kind of folks that you talk to that are in and around the whole image concept than being a clear pioneer. And some of the was among the first to really champion that idea.

Nicole Caspersen: Yeah, well, you know, Len Reinhardt, obviously, it’s someone who has been seeing the writing on the wall for like, 20 plus years. And so he helped with kind of the background there. But interestingly, I think today we’re seeing a lot of the newer wealth tax maybe the investments the Orion’s the InVEST clouds, getting a little bit more press when it comes to this because there’s a lot of m&a activity and they really are able to create their UNH or tech ecosystem, really, that’s like the new word for you, mate. It’s like tech ecosystem. And you’ll hear it called that sometimes. And the reason why and I learned this, actually speaking with Jason Moore from Orion, he said that the reason that these newer fintechs are well, Tech’s are buying and merging and having these acquisitions instead of building things in house is because it helps them get to market faster. And it helps them bring these tools right right away. And it’s the complete opposite approach, then the incumbents then the Morgan Stanley’s then the Wells Fargo, who I spoke with their heads of financial planning. And for the wirehouses, or an incumbent or a large legacy bank, it’s completely the opposite. Instead, it’s they have to completely reorganize and rebuild their house nearly from scratch, right? Because legacy systems weren’t built to work in tandem with a bunch of outside external accounts. And that was not the point before, right. The point was to be very exclusive and not share technologies across a legacy system. But so what Morgan Stanley did is they completely built a new house. And that’s what I learned from Rose Plazo. And Eric Lauretti, from Morgan Stanley. So that was really interesting, right, the two different approaches. And from Wells Fargo with Michael Liersch. He helped me understand that for them, it really started even with like organizational structures, and having I like how he used the term finding your North Star, right. So like the, their wealth management side really had to sit down, reorganize and say, Hey, how are we going to find, you know, our Northstar to implement the UNH, so we need staff involved. We need clients on board, we need communications, completely transparent between everyone. So those are the differences with how these are built.

Jack Sharry: Yeah. And I know Michael Whelan actually knew when he was at Merrill and JP Morgan, where he made similar attempts, he seems to me that he’s in a better spot at wells in terms of that willingness to kind of shake it up and start all over again. But not only is there the technological connection, coordination, and all that, there’s also a big shift in culture in the ways of thinking that not only in the home office, but in the field. So did Michael talk about that at all? He and I’ve talked about this in the past, I would assume he spoke about that with you.

Nicole Caspersen: Yeah, absolutely. It’s the new value proposition for wealth management and financial advice, which is, you’re no longer the stock picker, you’re no longer a client isn’t coming to your office and saying, Hi, here are my assets, like enjoy managing them while I just sit blind? No, people want to be so involved with their financial decisions, and they want them to reflect who they are as a person so much more today, because of largely because of the pandemic and how all of our values have just changed and evolved. And so that’s why this is even more important today. I mean, on top of just mindsets changing to where clients want more engagement and involvement with their wealth managers with their investments, and assets and portfolios to really reflect who they are as a person and their values. There are other industry trends are things just happening in the environment, a generational wealth transfer, right with more millennials and Gen Zers in the fold than ever before. There’s an investor appetite for that customized experiences through things like ESG investing, and maturing financial planning software is how we get there. So like, going back to Wells Fargo, right, they’ve partnered up with E money to be able to provide that to their I believe it’s like 13,000 or so advisors. So that’s really where all of this has come together like this perfect storm of clients minds have changed. The adviser value proposition is different technology is mature enough. That’s something I learned from Rosen Eric is just like technology is finally at a place where we can talk about this Send an adaption is there. So that’s what has led us to this point.

Jack Sharry: That’s good. Actually, I spent a little time with the rose blossom just yesterday. She’s been at this probably longer than anyone in terms of the building, Len has been talking about it longer, certainly among the people you’ve mentioned, but Rose has actually been rolling up her sleeves. In fact, we were recounting how she was able to convince a very senior executive at Morgan Stanley to make a bet on the concept of UNH, when it was it was barely formed other than just the concept of Yep, manage the household and prove outcome. Okay, evidence for that. But talk a little bit, if you would about some of the issues around just the complexity of it all, that seems to be the biggest issue. Certainly, technology has advanced data is available for sure, people are more inclined, but you still got to tick and tie and put it all together and make it work and produce a better outcome. So did you find much about that? Just how darn complex this thing is?

Nicole Caspersen: Yeah, absolutely. And I mean, the technology complexities really are involved around these Well, tech providers, taking a step back and really leveraging things like, you know, API’s and, you know, even platforms like what Judd macro left his role, Carson Group to start integration as a service mile marker, I mean, that really addresses the data gap, which is how, okay, so now we have multiple solutions, if you will, or, you know, product offerings for multiple tech providers. But how do you actually make all of that data talk to each other and make it as efficient as possible? You know, it’s think of Amazon, right? It’s the E commerce giant drives value through its use of data to prompt its customers with suggestions and perspectives on what they could be doing next. Literally, if financial advisors can do the exact same thing, and they will be held to that standard in due time. So there are solutions out there, but the complexity is like, how do you actually bring in these into the fold? So kind of what I said before with the legacy system, so like a Morgan Stanley or Wells Fargo, they had to completely rebuild the house. But what the maybe more of the Orion’s, or the investments or the newer wealth tech providers what they run into when it comes to actually like the integration, right? Okay, so they do this m&a activity. And now they have to do things like really reinforced cybersecurity, because obviously, in communications with clients, right, because obviously, there can be some inherent concerns about okay, well, in the past, the idea was, I put all of my money and assets, especially a super wealthy client, in multiple avenues to ensure safety. And now we’re telling them the opposite like, no, it’s actually safer for you, it’s a bring everything under one umbrella, or at least have everything connected in one umbrella for your wealth manager and advisor to advise you properly. So one thing that Orion’s do some more also sort of told me was to really, really reinforced that cybersecurity, you really have to have these, like open discussions with not just clients, but the other tech providers that you’re having integrations with or acquiring, or whatever it is, it’s that is huge. So just being like, hey, we spend millions of dollars on cybersecurity, we’re ensuring that, you know, your very personal data is being as protected as possible. And then also making sure that they understand why a you a major why a connected account, integrations are so valuable to them. And if you’re able to communicate that, then that should kind of help with some of those complexities, because it’s like, what, uh, our friend, your friend, you might know him, Steve Tsushin, you know, from LifeYield. He’s had said that, you know, today, advisors are held to a much higher standard, and they need to automate all of the coordination of these accounts to give suitable advice, because this will become table stakes within the next five years. So those are some of the hard parts and also some of the solutions, I guess, in a sense that I learned from my folks that I talked to for the story.

Jack Sharry: That’s great. I’m gonna ask you some more about the user experience, because so far, we’ve talked largely about the what goes on underneath the hood and the complexity there and talk a moment about how to put that in front of advisors and clients so they can make good choices. But again, for our audience, I’m just gonna do a quick summary of what we’ve covered so far, because there’s a lot going on in the UNH, and it’s not always readily apparent, but I’ll see if I can break it down into some building blocks. So it starts with looking at all the accounts, products holdings in a household and making sure that the data often these are held in different custodians, they’re held in different ways, using different data sources and what have you. But ultimately, what needs to happen is the data needs to be synthesized rationalized. So you can feed it into a plan, you do a plan which suggests what matters and that leads us to an asset allocation and looking at the risk picture and also that consideration of taxes starts to come into play as you You’re putting together the plan. Then there’s a proposal, what do you do about it and namely what products and capabilities that includes, by the way, using existing products, you don’t sell everything to start over that’s there’s really too unrest and too costly. If I dare say that that’s what Schwab Intelligent Portfolios and their income capability require a lead up to celebrating the by their ETFs. The modern day UNH is you can use any any of your existing products along with any new and appropriate products. But as you put all those together, want to make sure your risk and taxes is lined up. That comes through a former proposal that then goes into ongoing management at a portfolio level of all the different accounts, products and holdings, rebalancing over time as appropriate as markets or circumstances change. That usually ends up down the road as an income generation, you need to have income generation capability, again, across multiple accounts, again, rather complex to do. So I share that with our audience just to understand those are the elements that Nicole is talking about here. And what she was referring to as often many folks who are working in different parts of the UNH, they need to work together. And so I’m sure you found that in talking with your sources and the folks that contributed to the article, it’s really important that all the different software providers are in sync and work together. And then all that typically takes place on a platform, whether it’s called Orion, or it’s called invest net, or Morgan Stanley or Wells, or what have you. So pardon that commercial break to just sort of for our audience that’s trying to get their head around you. I’m ah, I think I captured it. And I Nicole, is that about?

Nicole Caspersen: Yeah, that was a great way. And that’s the thing, I guess is, I love that you’ve listed all of the aspects, right? Because that does add to the complexity of what is happening here, right? Think about all the things you listed. That’s not even all of it, right? It’s everything you can think of involves a client’s account that involves everything. And tax management is also a huge thing to highlight. Because, you know, obviously, we’re seeing the path that Congress is, you know, going with increasing capital gains, rates and tax rates and all these types of things, there’s so much going on, and just even the regulatory environment, that there’s also such an important part of, you know, achieving that level of a UNH. So yeah, there’s solutions out there.

Jack Sharry: See if I can add to that, not only taxes just because of the current environment that we’re in. But we another trend, clear trend is more people are retiring today than ever before, and more people are retiring earlier than ever before. And more people are on their own and in managing all of the assets in their household portfolio. Since so many are retiring early, that means they’re missing out on peak earning years, and also means they’re gonna be living longer in retirement. So others are just adding to the complexity of making sure that they can maintain that sustainable income through retirement, which is another aspect of the UNH, so I now share all that because I want to get to the sort of the user experience side of of all that is that that’s all the complexity. And my experience, having spent a lot of time in the space for over many years. That advisor has a hard time explaining all that to a client. In fact, we have a hard time and we actually know we’re talking about right. So what I found, I’m sure you found is that you really have to kind of quantify the benefit of what you’re doing. When you talk about next best action. If you’re going to suggest the next best action that presumes you’ve quantified the benefit of all potential actions. So you can set up the next best action. So I’m curious that gets to user experience. So talk a little bit about what you learned what you heard around user experience around next best action? Because that has its own level of complexity largely about around how do you make it so simple, anyone can understand it,

Nicole Caspersen: Right. And I would probably go back to an Amazon like, example, that’s really the, to me, the best way to explain it to someone is you give or any of the major, maybe like shopping or think about anything that you use on your phone, right? So like even banking on your phone, right? So you have one app that has all of your data connected, you can do things like literally use your thumbprint or your face recognition to give it the okay to use data from another source to then funnel that in so that you don’t have to do anything else. Right. I mean, I know that’s very different. But that’s the idea. And even things like Amazon can use certain pieces of data to say, Oh, I mean, have you ever seen like at the bottom of an Amazon cart, like comparing prices to show you if something is the best price true, you know, and on all of that is so crazily catered to who you are, you know, they’re not. That’s all not out of when that data is curated for you as a specific user and personalized for you. And so if all of the siloed pieces of a client’s financial life can be connected in a similar way that you know, an E commerce site or shopping site does what they do with their connected data and integration that investors can benefit from optimizing their holdings. Well, advisors present their personalized advice to help clients reach their goals. So quantifying it, I will say that’s something that I really could only find via research, right. So things like there’s an earnest and young study that found the UNH method can increase spendable income by 33%, which adds up to more than 1 million have increased discretionary spending power over 30 years on a portfolio with a starting value of $1 million. So that’s something. So that’s really the best we can do at this point, right is to find certain statistics or certain pieces of information that really bring to value the UNH as it’s just like something that continues to be mainstreamed and built out, I would say some of the other interesting stats that I found from another, Ernst and Young Global Wealth research report, were things like over half or 53% of wealth management clients being willing to pay more for personalized services. And in exchange for greater personalization, the majority of wealth management clients that was 71% are willing to share more personal data with their wealth manager. And a higher portion of those are willing to share more information with their wealth manager than they would a doctor or a retailer or tech firm or like a media platform, which I thought was so interesting, like you’d rather have more personalized data information to get that next best outcome. So your financial advisor, your wealth manager, more than like a doctor, I guess I don’t blame them. Doctors can be kind of scary, but like, it’s kind of just crazy, right? How into this people are. And so research in the great research firms out there, keep that up to help us quantify this thing.

Jack Sharry: Yeah. And I will say, as a firm that does quantify benefit, and we work with other firms that we know do the same, like Blackbox, Aladdin, Orion’s recent purchase of hidden levers, what we do at LifeYield, with our tax optimization, we’re all quantifying benefit. And we’re all contributing to those ecosystems that your that you, as you spoke to the executives in charge of those. So it’s early stage still, but it’s coming where that quantification of benefit is getting built into the algorithms getting built into the methodology are not fully connected. All the dots aren’t connected. The UNH is more of a journey at this point than a destination, we’ll get to that destination, but the full on new MH is, is on its way and coming. And I’m curious, what’s your take on where it is today? And where do you see it going around? You MH? It’s clearly in my view, still early stage, a lot of people working on it, a lot of people trying to figure it out. So where do you see it today? And where do you see it going?

Nicole Caspersen: I think it needs to evolve beyond just oh, here’s a platform that or service that we provide from the incumbents or even the wealth to the newer WealthTech. And I think what will happen and I think Steve hit the nail on the head with you know, within five years, it’ll become mainstream, it’ll become table stakes, that technology is connected, that data is connected, that accounts are integrated that more well, tech providers are using external account integration, which just literally means that all of the API’s are connected so that they can talk to each other, and then work together to create different outcomes. So that’s where I see it heading. I think the one of the maybe unspoken heroes of this is that are those cybersecurity efforts are the are everything you need to protect clients and communication with advisors, well, tech providers, consumers just to get everyone comfortable. It’s kind of like any new innovation or anything new that happens in any industry, you really just have to keep reinforcing the positivity keep reinforcing what it brings to the table, the value it brings to everyone because I think one of the things that’s so important and why well, tech is so exciting, or FinTech in general, is the access is the personalization is the idea. And not just idea. But something we’re literally doing today of everyone can win, like, just need to be, the advisor doesn’t have to just worry about oh, I need my bottom line, like I need a high AUM so that I can charge my fee and get what I need to keep my firm running. It doesn’t have to just be the WealthTech provider saying, hey, I need to charge you know, a high subscription or whatever it is, or I only need enterprise deals or whatever it is to like, keep them afloat. And then the consumers like well what about me like it can everyone can win and we literally have the technology for the first time technology is mature enough to say, hey, if we all just work together, if we all just you know, bring everything in concert and work like a nice like orchestras create beautiful music, then everyone can win then the advisor can free up their time and give that personalized advice and have a full picture of their client’s financial wellness and what makes sense you know how much money they can do for that next vacation how much it costs to do that wedding or how much they need for retirement to retire when they want and live the life they want. Happiness life happiness is like something we all decided is something we all want and I think the pandemic showed us that we can’t keep working even as humans we can’t keep Working in the silos that we had. And that applies to our industry, because that clearly wasn’t working before look at how many things were disproportionately impacted in positive and negative ways, because of the pandemic. And so that is also what’s changing. Well, tech, and fueling the UNH platform today is all of those things. And so that’s the idea, like, let’s see financial services when and kind of get rid of the bad rap that they’ve had, and say, Hey, no, we want to use technology for good. We want to bring all of the pieces together. And we want to make the advisor, the tech provider, the legacy firm, the bank that whatever, we want to make everyone richer, let’s make everyone richer, because why not? We can do it. We have the tools.

Jack Sharry: Describing this whole thing, and I love your enthusiasm. The this whole thing is, this is all about more money. It’s more money for the investor, the advisor, and the firm, just about more money. It is that win win-win. So before we start to wind down, keeping our 30 minute objective here in mind, how did you wind up becoming a FinTech report? I’m just curious, how did you get into this game, it sounds like you’re pretty excited about it.

Nicole Caspersen: I’m very excited about FinTech probably the most exciting time to be here. I originally started out covering the housing and mortgage industry after grad school, in the Dallas area for just a couple of small publications, trade pubs out there. And so I kind of got my foot in the door right away in the trade publication world. And a hard core intro to financial services. If you were to see my my grades in my economic and finance classes, they force you to take despite the fact I was a journalism major, they weren’t great. So I got my education by reporting on the industry, and eventually moved on to cover the auto finance market, which if you don’t know, have an education in finance, that’ll definitely give it to you if the housing market won’t. Auto Finance will. So I was covering the biggest names in the finance an auto finance and that was also a great opportunity. And then I now in my third role covering the financial services space with investment news, covering fintech. And now the new term wealth tech these days, is how I kind of ended up here. And but yeah, it’s just it’s really an exciting time because of all the things we’ve talked about, right? And it’s the first time in my career, where folks my age, I’m a millennial, nearly on the cusp of Gen Z, and I’ve never in my life, had my peers speak to me about finance to speak to me. I’m like at a bar hanging out my friends. And they asked me questions they want to know what’s up at a year ago, two years ago, three years ago, five years ago when I first started, yeah, my job used to be a snooze fest.

Jack Sharry: And so yeah, this is great. I really enjoyed it, Nicole, and this has been a lot of fun. I really appreciate your sharing about the story of this podcast will appear. Hopefully shortly after it appears in print, I’ve yet to see it. I look forward to reading it. So thanks for all that one of things we do on our podcast each week was We ask our guests if they would share something interesting or unique or exciting that they do outside of work. And so what do you do that you’re particularly enjoy or passionate about? That some of your work peers might find interesting?

Nicole Caspersen: Sure. Yeah, so I possibly have one of the widest ranges of musical genre and appreciation you could ever meet. I grew up with a father who introduced me to music very young and we’d have listening sessions in our house or singalongs in our car and every moment music was on and music represented a strong aspect of bringing in kind of strong female representation into my life at a young age. And not just women, but also people that are just rocking who they authentically are. So I can go from singing along with like Gen Z artists like Olivia Rodrigo, Miley Cyrus or KPop stars like BTS shout out to anyone in the audience that actually knows who those people are. And I know most of them, okay, there we go. And then but I can also go from knowing every single word to Elton John’s to any like just any of those songs, David Bowie Janis Joplin, Joan Jett, Patti Smith, Stevie Nicks, Debbie Harry, Tina Turner, Aretha Franklin. So I’m actually like a really old soul when it comes to my music tastes. But I can also relate to my Gen Z millennial peers. And then, you know, I could also probably sing most of the Hamilton musical so I could throw in a little theater chops there as well. So I have like a weird ability to know lyrics to things right away. Maybe because I’m a writer, I’m a journalist, but it’s an interesting kind of bit about myself. That’s great.

Jack Sharry: That’s great. Well, that’s why this is my favorite question, these podcasts that I always learned something like new and surprising. So thank you for sharing that. So as I turn to our audience to bid you adieu, hope you’ve enjoyed our podcast, please rate review, subscribe and or share what we’re doing here at wealth tech on deck. We are available wherever you get your podcasts. Thanks again, Nicole. This was a lot of fun, and I look forward to our next conversation. Thanks.

Nicole Caspersen: Thanks, Jack.