WealthTech in the Weeds with Ted Dimig and Mark Hoffman

Jack Sharry: Hello everyone. Thank you for tuning in to this edition of WealthTech on Deck. Each week, we explore the many issues and opportunities around the confluence of digital and human advice, and we are privileged to do this with the best and brightest in our industry. I’m very pleased to have Ted Dimig join us for this conversation today. Ted is the Global Head of Wealth Management Advisory Solutions at JP Morgan. Ted is responsible for leading product development, portfolio management, and platform modernization around advisory solutions at JP Morgan. He oversees 500 billion in discretionary assets globally, across 1 million accounts. Drilling down a little further, Ted leads wealth management’s outcome oriented and thematic investment offerings, including strategy and development of managed account platform. And this is where JP Morgan is working on creating a holistic advisor and client experience that delivers advice at a single, connected wealth platform. I’ve also invited my colleague Mark Hoffman to join our conversation. Mark is the CEO and founder of LifeYield, and works with many of the leading firms in our industry around building the platform of the future, something Mark and Ted share in common. So these two gents know as much as anyone about where our industry is today and where it’s headed. I can’t wait to hear what they have to offer. Ted and Mark, welcome. Thanks for joining us on WealthTech on Deck.

Mark Hoffman: Great to be here.

Ted Dimig: Thanks for having us, Jack.

Jack Sharry: So, Ted, JP Morgan, obviously, a very large global organization, and you clearly have a big remit. Let’s break that down. It sounds like a key focus, as I read on your LinkedIn bio, is to create a holistic advisor client experience that delivers advice in a single, connected wealth platform. This holistic approach is a favorite topic we discuss here on WealthTech on Deck, how to manage client assets in a comprehensive and outcome oriented way. I know you’re working hard on all this. At a high level, what are you building and how’s it going?

Ted Dimig: Well, so far, so good, Jack. And again, thanks for having us today. I think if you take a step back and you look at the evolution of the wealth management and candidly, the asset management industries, there’s a couple of very broad trends that are turning into hurricanes at our backs that most asset and wealth managers are going to have to get right. The first big trend is the importance and the need to personalize investments, and that’s really a function of the fact is the more you can get a client’s goals to match their investment solutions, the higher the probability that they’re going to stick with their investments over the long run, and the more you can do that in a seamless, integrated ecosystem that enables them to personalize based upon preferences, wants, taxes, the better the probability of hitting their outcomes that you’re ultimately going to have. So that, in a nutshell, is what we’re working through today.

Jack Sharry: That sounds great. Music to our ears. Mark, you work on this every day with among some of the top firms in our industry. How does JP Morgan’s efforts look as we see this trend toward multi account management play out?

Mark Hoffman: Well, JP Morgan has worked successfully to build a wealth and asset management brand that offers the key features advisors and their clients are asking for today, which is tax optimization, the ability to generate income in a tax smart way. And as Ted said, while adhering to a customized risk profile with a wide variety of products to choose from, so that they can achieve their goals. And in fact, in models programs alone, Cerulli is estimating that the AUM is going from 4.2 trillion today to 10 trillion in the next five years.

Jack Sharry: Yeah, I think that there is that incentive of if you do a better job for the client, and you do it in a personalized way, as Ted suggested, and you deal with such important elements as taxes and all the rest risk and so on, everybody wins. So, Ted, tell us about what you’re doing day to day, you follow advice, product, technology, and platform trends closely. What are some of the things you’re seeing that are important as you look to bring together all this for a better experience and better outcomes for the client and the advisor?

Ted Dimig: Yeah, Jack, I’ve been on this journey, personally over the last few years, where I’ve been fortunate to be in a spot to become progressively less stupid in all things fintech. And I think if you’re to ask me, you know, how I am spending more and more of my time today, it’s really looking at that intersection of classic investment management and portfolio construction and applying more modern technology to accelerate those trends. And when I look at the things that we’re reading every single day, you know the world is moving fast, and our clients are expecting their advisors and the firms that they work with to show and demonstrate how technology can help them better. So I’m spending a lot of time, whether it be with our world class internal technologists or also looking at different partners that we’ve either invested in or worked with to see if we can add some more futuristic things to power these investments and personalization. At the end of the day, if we can create an ecosystem where we can increase the probability of clients having a consistent investment experience from the inception of that relationship to how we ultimately trade, it’s going to be better for the clients, and even more so, it’s going to be better for that entire end to end ecosystem, because the advisors will have to spend less time rebalancing portfolios, looking at individual line items, and they can spend more time on the things that should matter most to their practice, and that’s their clients, deepening and understanding what really makes those clients tick increases satisfaction and better outcomes for everybody.

Jack Sharry: Yep, yep. Makes sense, absolutely. So, Mark, you spent a lot of time on the topic of taxes. That’s LifeYield’s thing, and that necessarily also connects to risk. Because as you make adjustments on the risk front, the tax has a ramification. But talk a little bit about what Ted has talked about in terms of the ecosystem, about connecting the risk-tax conundrum, or at least addressing those, those issues around that to improve outcome. Why don’t you talk a little bit about that?

Mark Hoffman: Yeah, I’ll start from a high level in support of what Ted’s saying. I mean, many of our clients today are working to link their planning and their proposal, investment proposal systems to portfolio construction. Plans and proposals are by nature, holistic, and they give the financial advisor the purview over all their clients’ assets, and then the opportunity of supporting a path to advice and advising on all the assets, resulting in the better experience and outcome for the client. You know, to Ted’s point and over our client base, LifeYield estimates that more than 55% of the plans or proposals created in calling us are identifying external assets. There’s external assets as part of that. So to your point, Jack, LifeYield not only can sit on top of the trading systems and not have any conflicts with the different programs and products that an asset manager like JP Morgan may have, but we also quantify the benefit of implementing those things across multiple accounts in a tax smart way, and very often that benefit pays for the programs themselves and has money left over for the client, because money, less money is going out the door in terms of taxes.

Ted Dimig: And Mark, if I could just chime in really quick. And I don’t know if this is a quote that I made up myself or stole from someone, but the taxes are too damn high. And I think when you look at the things that you’re doing as a firm, but even more so from a client expectation, gone are the days where tax management was a broker, an advisor, emailing someone in December to just sell something at a loss. You need to think about that tax journey 12 months out of the year, 365 days, whether that be through direct indexing, whether that be through tax location, whether that be through adhering to different vehicle preferences. If you are not doing that today, you’re missing out on a huge opportunity to gain trust of clients and show the potential value add from helping defer or offset gains through more systematic loss generation. So again, this is becoming more and more table stakes, and there’s not a one size fits all approach, but everybody is looking for a more holistic approach to solving this primary personalization.

Jack Sharry: So Ted, let me ask you further, because I know you deal with this every day, and you’re not down in the weeds, but you oversee the weeds that your whole team is digging through every day. So what you describe sounds great, but it’s not easy, as we say here in Boston, it’s “wicked hard” to make all this stuff work together. When you got multiple accounts, multiple product types, each with their own kind of parameters, you talked about personalization, so each client has a different set. Some of the assets are at JP Morgan. Some of the assets, dare I say, are elsewhere. So you got all this stuff…

Ted Dimig: Complexity, complexity.

Jack Sharry: Yeah, that’s the word… that’s the word I was looking for. So how do you deal with that? I’m not asking you to take us through your whole process, but I know that’s a big part of it. How do you operationalize what you’re talking about?

Ted Dimig: Yeah, and a lot of this goes back to the comments earlier around embracing technology and willing to kind of view historical problem sets a little bit differently. You know, one of the biggest evolutions that we embrace in terms of being able to think more holistically around taxes, it’s again, pretty basic, but model delivery, the more you can have centralized trading by one team that’s able to take a look across everything holistically, the higher the probability that you’re going to be able to control at least parts of that journey. The other thing that I think is super important is understanding where your clients are in their tax life cycle. What I mean by that there are certain parts of that journey where it may be more important to nail what we call transition management. They’ve come into your ecosystem with a certain pool of assets and they want to get to a different destination. That approach may be very, very different than someone that just wants to invest directly in a direct index and in a former life, I was the CIO of our direct indexing business within asset management, so that is an area I’ve been deep in the weeds over time, so understanding where they are in their journey, essential, and embracing some of the things like model delivery and systematic optimization, I think, go a long way to leading to better client outcomes.

Jack Sharry: So, Mark, please weigh in again from an operational standpoint. We don’t do the operations at LifeYield, but we certainly advise and consult and enable our clients to work through all that, because there is a high degree of complexity, as you well know, and you got to deal with a variety of different tax optimization opportunities, call them. So you’ve got asset location, you got tax loss harvesting, you have transitions, as Ted just mentioned, you’ve got income generation rebalancing. You’ve got a lot of stuff going on, and that’s sort of the stock and trade of LifeYield is figuring all that stuff out and advising clients on how to operate on top of, frankly, legacy systems, which were not designed to be multi account, but need to be as we go forwards. But weigh in, if you would, just about some of the challenges and some of the things that our audience might be interested to understand and learn as they’re grappling with these issues?

Mark Hoffman: Well, to Ted’s point, you really want to build your ecosystem in a way that is easy to explain to the client, being able to explain to them the savings and why you’re doing certain things, like trying to manage the accounts together reduce the trading that you have to do because you’re coordinating things is important, but they don’t necessarily need to know how the watch works. They may not even be interested in how the watch works. You just want to be able to tell them the time. So as an example, we routinely see our clients who are using us to perform what we call intelligent withdrawals. That is withdrawals over multiple accounts together, save on average, 5% of the full transaction amount by paying less than single traditional, single account, first in, first out, type of withdrawal. So being able to quantify the benefit is important to build that trust with the client. And as you know, Jack, and I don’t know if Ted knows this, but early on with LifeYield, we had Ernst and Young perform a detailed analysis of our algorithms, and from a historical point of view, they analyzed assets that had been managed. They took a look at four household scenarios, from high net worth down to modest investment of half a million dollars, and they used historical data and using the LifeYield methodology versus treating each account pro rata being managed singly generated up to more than 44% more in retirement income and 39% in fewer taxes. So to your point again, Ted, tax… we tax too much, and so we really need to manage things in a way. You’ve got 365 days a year, and even at the portfolio construction level to, you know, make the product placement into the right registration, preparing the client to minimize their taxes at every step of the way through the investment process.

Jack Sharry: So, Ted, I know you have done a lot of work, you indicated earlier that you led the direct indexing effort. I know you’re actively involved with 55IP, all tax oriented programs. We’re doing some work with you all in terms of improving outcomes on a different plane. So talk about that. How important are taxes? I’m sure you guys have done plenty of studies. How important is that to the client? How important is that to the advisor? Talk a little bit about that, if you would.

Ted Dimig: Yeah. So I’d say, from both a client and an advisor perspective, I think about things like tax loss harvesting and being conscious about how you do it through multiple ways. From an advisor perspective, at the barest of minimums, it gives them something to talk to clients about whether markets are up or down. If you can start every meeting by saying, hey, Jack, I saved you $25,000 by using that tax strategy, that’s a good starting point. The other piece from a client perspective, you know, sometimes in the world that we live in, they’re filled with way too much jargon. I really do care about our long term capital market assumptions, but when I put that forward to a lot of clients, you can see their face glaze over. But if I were to tell them that I saved them $10,000 by buying this direct indexing strategy and then go into market performance, it’s an element of EQ that’s super important when you’re balancing the IQ. So I think it’s super essential. I think the other thing is that it gives you more things to talk about over time, because when you think about taxes, it’s not just one product. It could be what’s the appropriate investment vehicle. ETFs are super tax efficient. Maybe it opens the door to have a conversation about annuities and insurance, and so by having a broader conversation as an advisor, you actually get to know your clients better and deeper. It may open the door to a gifting conversation. You’ve got concentrated stock with low basis. Maybe you want to talk about a donor advised fund. Maybe you want to use that to fund your college… your grandkids’ education, things along those lines. So it goes beyond just the, how did I do versus the S&P and it really enables you to get deeper and better understand what makes your clients tick.

Jack Sharry: That’s great. Great. Mark, I know you deal with a variety of firms again, at the operational level, at the implementation level, taking a plan and then implementing it across multiple accounts and products, including holdings that are elsewhere, that may be better served to be brought together, and every firm is a bit different. Talk a little bit about that in terms of how you work with firms, because you can’t boil the ocean in one sitting. You got to do it over time, step by step. But talk a little about what that operational sequence tends to look like, because it’s literally different at every firm.

Mark Hoffman: Yes, it is different at every firm, but the way I would state it is that each firm decides to pick where they want to start. So you start a complex project that may take a year or two to complete, you pick the best place that fits in with maybe a pain point that you caught some of your clients have. But once you, really the biggest thing that the firms to be successful have to accept is to work holistically. I’m no longer going to just do one account at a time and have that single conversation with my client about one product, one account, here’s what we’ll do. To Ted’s point, it’s the technology allows you to be more holistic. It allows you to make all the connections and to do things right, and that frees up the advisor to have a conversation at the client’s own level, like Ted was saying, it’s easy to talk about saving them $5000 or $25,000 rather than the intricacies of following a S&P 500 index product and all the machinations that goes through and why these trades are done, and so forth and so on. So each firm starts and picks where they want to go. But once you marshal the data and you accept that you’re going to be connecting accounts together to get those operational and tax saving benefits for your clients, you’re on the road to being able to have is what Ted suggested, it’s going to be table stakes for firms. They’re going to have to do this.

Jack Sharry: So Ted, it’s one thing to build the platform, and that’s what you’re responsible for overseeing. Talk a little bit about how that goes from building it to then bringing advisors on, getting advisor adoption, as we know, that’s always been a challenge on anything technological. And then, of course, this is far more sophisticated in terms of where the industry is going, and certainly where JP Morgan is going in terms of pulling it all together. So talk about your journey. How’s that going? I know you’re, you’ve made great inroads, but I’m sure much more to go as everyone is going through.

Ted Dimig: Yeah, Jack, I think to your point, anything new is new, and particularly when you look at advisors that have been in practice for decades, it’s kind of put up or shut up is kind of the approach you need to take, and so we spend a lot of time really on the practice management side. We’ve got dedicated teams that are focused on telling advisors how the new platforms work and why it’s better for their practice. I can’t remember if you or Mark made comments about models based practices, but models based practices save advisors countless of hours every single week. And so once you’re able to show those tangible benefits to their practice, I do think the benefits to the clients become self evident, because if nothing else, they’re spending more time with those existing clients, and they’re better able to evidence the value of what they’re doing from a practice perspective. If their entire client engagement is predicated to a bunch of random fact sheets put together, how much information are you going to get from that? But if you can put forward and personalize the benefits of your investments, the ecosystem that it lives in, and then the journey that your clients are on, those clients become clients for life.

Jack Sharry: Yeah. So, Mark, two things we’ve learned along the way that I think are important to share with our audience. One is that how important it is to quantify the benefit in dollars and cents, because that… to Ted’s earlier comment is that if you can quantify the benefit as a $10,000 benefit, that has a lot more power than explaining the intricacies of how asset location works. So you want to keep it to a dollar value. That’s step one. We learned that a while ago, and continue to put that in the forefront. The other part, in terms of showing benefit or engaging advisors I should say, encouraging adoption, is we’re seeing a trend where firms similar to what Ted just suggested, where there’s practice management specialists, where there are specialists that help pull all this stuff together. You want to weigh in on that? So a few of our clients are trying different ways to try to help the advisor pull it all together, but have someone that they can turn to to get some help.

Ted Dimig: Yeah, so on that front and I think, Jack, that was directed to me, you’re really seeing a two prong approach across the industry. The first prong is dedicated experts internally, and they can either be an extension the front office sales team or parts of solutions type businesses, and those are the teams that are doing demos. They’re incorporating it into the practice, so on and so forth. But the other thing that you’re seeing more and more from wealth managers is them looking for their asset management partners to be part of that educational journey as well. If a wholesaler or a client advisor is selling an ETF, a mutual fund or a separately managed account, if you’re just doing that the old way, you’re significantly less valuable than if you come on into a branch office, you talk about the new technology du jour, and you show advisors how they can buy it in that ecosystem. So if you can get leveraged educational experts that can meet the advisors where they are and help quantify those benefits, the acceleration of adoption becomes increasingly more probable. The other thing that drives adoption is there’s never anything wrong with a little bit of FOMO. Having other advisors talk about their successes…

Jack Sharry: If I may, Ted, for those that may not be familiar with FOMO, that’s fear of missing out. One of my favorite tactics.

Ted Dimig: 100%. It’s positive peer pressure. If you have Jack Sharry, who’s that phenomenal financial advisor, talk about a new prospect that they won because of embracing technology, transition management, asset location, then everybody’s going to be looking around saying, man, I’ve got to, I’ve got to get involved in that too. So I think a lot of that can go a long way.

Jack Sharry: Mark, if you have anything to add to this, but I know you see everything Ted was just talking about, but please weigh in if you do.

Mark Hoffman: Well, I agree with everything that’s been said, and an interesting thing that we’ve experienced, and we’ve even been told by this, by some of our clients, they’ve said, well, look, here’s how it’s going to work with the advisor adoption. They’re going to use what you’ve built until they trust it, and then they’re going to have someone else, you know, they’re going to have their admins do it, and that’s a good thing. It means they trust it. They trust the trades, they trust the methodology. But no, they’re going to concentrate on the high level. They’re going to concentrate… the good ones are going to concentrate on building those client relationships and satisfying the client needs, and finding ways to communicate to those clients in a way that the clients understand. And then, to Ted’s point, those are the advisors that the other advisors look up to and say, well, this one’s built this book of business and is well respected, and it really treats their client base great. And all these things take time. You have to be patient, and you have to have a firm that has the knowledge of putting together the right resources and people, technology, everything, products, you know, that’s what a firm like JP Morgan with Ted’s leadership has been able to do and and why they’re successful.

Jack Sharry: Yeah, I’ll add a comment here, having grown up as a wholesaler and sort of was, and also sales manager, national sales manager, etc, a few places that names, we know. One of the things I found early days, I was an annuity wholesaler way back when, and then not too long after that, I was among the first to promote separately managed accounts, SMAs, when they were just starting their popularity. Of course, now the whole world has managed money and models and all the rest. But one of the things that I found interesting early on is you just had to make it simple. You had to keep it really understandable. You had to find that thought leader, that super smart advisor in the office, and make sure and just help them succeed, which is a lot of what Ted’s talking about, the practice management support, help them succeed so they, in turn, are successful. And then the word travels around, an office says who’s doing what and how they’re doing. So I think that’s part of it. Also just, Ted, it’s something we haven’t talked about enough on WealthTech on Deck, I’ll have to get some of my friends from the asset management side. The role of the wholesaler, historically has been to train advisors in new opportunities. I mean, that’s really what it’s been. That’s how SMA has got kicked off. That’s annuities, way back. You name it, any models, it’s all let tax loss harvesting. One of our colleagues, Harry Bartle started as a wholesaler, selling SMAs, promoting tax loss harvesting, which it was a wholesaler led training effort. So point that out to our audience. If you want to make a difference, find out what your wealth management firms are doing along this multi account management, see if you can’t play an important role. So one last question, Ted, before… well, actually, we got a couple more, but on this topic of where we are in our industry and where it’s going. What’s your crystal ball say? We’re well underway. You’re well underway, certainly. Where do you see it all going? Where does it lead? We’re still early innings on all this stuff. Where do you see it… how do you see it playing out?

Ted Dimig: Jack, I don’t, I don’t think we need a crystal ball anymore. We’ve got ChatGPT to tell us where the industry is going. Listen, I mean, I said this a little bit earlier, but I’ll say it again, but the world and this industry is moving faster and faster and faster. There was a point in my career, I’ve been here 23 years now, where I think people started with an element of nervousness when they thought about technology and their practice. You are going to need to embrace technology if you want to be a winner in the personalization space, in the end to end client investment journey space, in the tax space, so those that don’t adopt will be left behind. And it doesn’t require a crystal ball for me to see it. You’re seeing it firsthand. The other thing that I think is super important is for firms to lean into what they do well and then lean out and find partners for the things that are going to be sprinkles or compliments to what they’re doing. We are fortunate at JP Morgan to have world class investment teams, world class technologists, but there are other things that we can accelerate our roadmap and our benefits to clients if we find the right strategic partners. So I think that that balance is essential if you’re going to want to win.

Jack Sharry: Yep, music to our ears. Mark, anything to add to that?

Mark Hoffman: Only that I’ve really enjoyed our conversation today.

Jack Sharry: That’s great. Yeah, Ted, this has been terrific. Really enjoyed the conversation. And as we look to wrap up, Mark has answered this before, so I’ll relieve him of this. But curious as you’re looking to really kind of wrap up this conversation, any key takeaways from our conversation that you’d like to share with our audience?

Ted Dimig: Yeah, just three things, and some of them are reiterating what I’ve said, but I’ll say them again. This industry is moving fast, and it will continue to move faster. Things like AI and large language models are real, and you shouldn’t be scared about things like that, but you need to figure out how this can drive advisors, investors, you name it to be even better at what they do. So if you don’t embrace it, others will. And the final one is, the more your client’s investments are personalized in a way that connects to who they are, their interests, and their goals, the higher the probability that they’re going to stick to their plan and stay with their investments when the market inevitably becomes more turbulent. So I think that that’s a key thing to end on.

Jack Sharry: Terrific. One last thing, though, we’re not going to let you get off that easy. So as our final question, my favorite always is what do you do outside of work that you’re excited or passionate about that people might find interesting or surprising?

Ted Dimig: So in terms of interest and passion, and I often look at this through the lens of like, what would I be doing if I wasn’t doing this? I love to cook, and I love to travel, and I’ve already worked on my future TV cooking show. I’m gonna call it, “Don’t mess with the chef” and it’s like one part Bobby Flay, one part Anthony Bourdain. Good eats, good travel, and lots of time with my family, that’s what I love.

Jack Sharry: Love it, love it, love it, love it. So, Ted, thanks so much. This has been a lot of fun. Mark, thanks. This is a great conversation. For our audience, thanks for tuning in. If you’ve enjoyed our podcast, please rate, review, subscribe, and share what we’re doing here at WealthTech on Deck. We’re available wherever you get your podcasts. You should also check us out on our new, dedicated website, wealthtechondeck.com. All of our episodes are there, along with blogs and curated content from many folks around the industry. Ted and Mark, thanks again. This has been a real pleasure.

Mark Hoffman: Thanks, Jack.

Ted Dimig: Thanks, Jack.