Transforming the Financial Decision-Making Process with Michael Liersc‪h‬

Jack Sharry: Hello, everyone. Welcome to our podcast, WealthTech on Deck, where we talk with industry leaders about the future of digital and human advice. Today we are talking with my good friend, Michael Liersch. Michael has been a real thought leader at Merrill, JP Morgan, and now, Wells Fargo. Michael, welcome. It’s good to have you on.

Michael Liersch: Thank you, Jack. It’s good to be here.

Jack Sharry: So maybe as a starting point, you have a really interesting background and an unusual one for our industry, where you started in academia and then went on to a number of other places, including Barclays, Merrill, JP Morgan, now, Wells Fargo. Talk a little bit about that journey. How did it, how did you go from from academia to heading digital advice, or, you’ll have to clarify that title as we go on, but digital advice at Wells Fargo.

Michael Liersch: So when we think about the idea of starting out in academia, a lot of people think of either teaching or research, Jack. I would focus people’s attention on the idea that I was inspired by my own background and family situation where there weren’t great money decisions being made. Sorry, mom, if you’re listening. But it’s true, Jack, it’s just true. And, and that was really more because she didn’t have access to excellent advice from a financial services provider. And you and I have talked about that in our interpersonal conversations. So I thought I’d just share that with your audience as well. So I went and got a PhD, originally, so I could understand why, in my own familial situation, so they call it “me-search,” not research. What was going on there? And what I realized in that discovery is that there’s actually a whole line of research about how human beings make better money decisions. And that’s the research around behavioral finance, in the area of cognitive psychology and decision making. So that was really the inspiration and the focus of my research there. I went on to be a professor and an academic at NYU. And, Jack, there, I had a great time exploring things like default programs, and how they help people really invest more for their retirement and defined contribution plans. And I also focused on things like framing, how you frame up decisions can help people make better and, frankly, worse money decisions. So framing is critical. So those were the different types of areas of research I was in.

Jack Sharry: So tell me, how did you go from researching, talking about it, theorizing about it, to doing it?

Michael Liersch: Well, I was gonna say, I got a call during that process of being a researcher, to actually, to your point, help real humans, not just write academic papers and explore academic theory, which I love, and I loved. But really, the idea of helping real humans, Jack, was too good of an opportunity to pass up. And that’s what Barclays, when they gave me the call, originally gave me the opportunity to do. And I’m so grateful for that, because it really opened up a whole new world to me, of how we can, as financial services providers, to your point, combine advice with digital interactions to truly help real human beings, everyday people, make better money decisions. And that’s really been my inspiration at each of the firms I’ve worked at. And they’ve been so supportive, all along the way in that journey.

Jack Sharry: So talk about that journey. You started at Barclays, what did they have you do to start? And then how did that lead to the work you did at Merrill, and then JP Morgan, and now Wells Fargo, with the increasing levels of responsibility and broader scope and all that. So talk about how you went from teaching to doing.

Michael Liersch: So at Barclays, where I focused my energy was on personality assessments, Jack, which was so fun. And what we did is we actually used data driven approaches to say, “What questions could we ask human beings about their money decisions that would give them insight into the money decisions they made that were serving them and the ones that weren’t serving them in their financial life.” So it didn’t invite… involve any products or solutions, just insight. And so that’s where I started my journey at Barclays as the head of behavioral finance for North and South America. When I went to Merrill, the idea there was to connect it more explicitly to the actual advice we gave. So think of, you know, investment proposal, think of client review. How do we integrate that personality into all the things that human being is considering in terms of the fulfillment to help them achieve their goals? So that was, to your point, just a thrilling exercise of that entire client experience, from understanding the client all the way to revisiting the client relationship. At JP Morgan, the focus there was very global in nature. And it was around how do human beings across the globe actually mentally account for their money? And it was pretty thrilling there, Jack, to see that, and I wrote a white paper on this, a public one. So I just want to say this is public information. For those interested, they really bucket their money in four key ways, which is around, think of it as cash. And it’s just not psychological cash, Jack, but literal cash to keep their operations going. They bucket it into lifestyle money. Bucket it into preservation money. So how much do you want to be worth in your mind? And then they bucket it into money that’s… they’d like to grow over time. And so when you think of those buckets, unless you map them out explicitly, you can actually confuse them with one another. So that was a key learning at JP Morgan that they allowed me to publicly talk about, which was super inspirational, which has led me to where I am today.

Jack Sharry: So talk about, because with each step along the way, you’ve had a broader scope, and my understanding what you’re doing at Wells Fargo is much larger. And it’s taking a lot of these theories, and really putting them into software, if you will, putting it into the hearts and minds of the advisors that work at Wells Fargo. So talk a little bit about that. What are you doing there that you can share at this point, because I know it’s early stage. But I know a lot of exciting things are happening there.

Michael Liersch: Absolutely, absolutely. So I’ll share three things. So the first thing is that the purview I’ve been given is in wealth and investment management. So this is all, think of it as the advisor led and investment related businesses. So think of it as the client led investment businesses. So we have something called Wells Trade and Intuitive Investor that are purely client led, really the purview is that entire ecosystem. And what we’re trying to accomplish with in the framework of advice is to help human beings make incrementally better money decisions, Jack, and I use incremental on purpose. And we’ve talked a lot about this in our private conversations. That old school idea of sending someone an intake form over email, having them fill it out, send you all their statements, entering that into an advice engine. So think of a planning tool. And then playing that back to the client, we really should, as an industry, rethink that format, or that process of client interaction and say, “Well, actually, instead of that one big touch, how do we have all these very incremental touches that make it much more bite sized, a five minute interaction that’s going to help a human being?” So that’s really where we’re focused. And within that framework, the third thing I’ll mention is across the entire client continuum. So how do you think of it for very everyday people who are just really trying to budget and save, all the way to human beings who have the extraordinary opportunity and benefit to have an impact with their wealth, even beyond their lifetime.

Jack Sharry: So again, to the degree you can share, because I know it’s an emerging strategy, and you work with an old friend of mine, Barry Sommers, at Wells Fargo, and just so people understand. If you describe what you oversee, and as I understand it’s the investment management, as well as the, the advisor outlet, private bank, and so on, but you can describe that in a moment. But if you would also talk a little bit about, I refer to what you describe as next best action. In other words, rather than this big plan that gathers all this information, that by the time everyone is done between the client and the advisor, they’re exhausted, and they don’t do anything with it. That kind of plan. You may be familiar with that concept. What I hear you say and would like to have you describe if you would, is what’s the next best thing to do. And that next best thing to do might be a plan. It might be a Roth conversion, it might be a, who knows what, but what’s the next best thing, incrementally, to get you where you’re going? That’s what it sounds like, but why don’t you describe, see if I have that right.

Michael Liersch: So that’s definitely an aspect of it. I would argue, Jack, though, that the look back is important, too. So I really think there are three components to what you’re highlighting. The first is really what have you done already. And I think as an industry, all the data I see is that human beings tend to forget what you’ve done. And and so let’s take a look back, appreciate what we’ve done. So that’s a key piece here, Jack, is that history and a very basic simple playback of that.

Jack Sharry: When you say that, look back, is that to sort of lessons learned? In other words, it’s useful to understand what the decision making process was, or? What, explain that if you would a little bit.

Michael Liersch: It’s the context, Jack. So oftentimes, when we’re making current decisions, to your point, and the next best action, when it’s out of context, it can be misinterpreted, misframed, and we can actually be more subject to bias. So think of it is in my dork-speak, Prospect Theory, which when essentially a Nobel Prize by Daniel Kahneman highlighted that people have a narrow frame when making the decisions. And sometimes if we just focus on the next best action, that narrow frame can potentially not serve us. And that’s why the look back is important, is it gives us context into our broader financial life, how we got to where we are today, and why that next best action may or may not be the right thing to do. Does that help, Jack?

Jack Sharry: Yep, yep, it does.

Michael Liersch: So it’s the look back, then what’s on the table in terms of not just the singular next best action, but you want to give people choice, not too much choice, because we know that leads to cognitive overload. People don’t take action, even though they say they like it. But a couple choices, here’s what you could do next. And then what we also want to look at is what people should be thinking about a bit more strategically. Put it on their radar, so that when it comes into that next best action framework, it’s not a surprise, they’ve almost prepared themselves mentally. And that also provides broader context, Jack, for not just the past, where I’ve been, but where I want to go, what’s my North Star? Does that make sense?

Jack Sharry: Oh, absolutely. Absolutely. So it’s interesting, I, all that is consistent with at least my view of the world, let me see if I translate and see if I get it right. And then please correct me. So it’s very contextual. In other words, what have I done? You know, how did I get to where I am today? What are some immediate things I can do to improve my situation? And I want to keep an eye on the future in terms of my ultimate goal. So for, whether that’s philanthropic, or that’s retirement, or that’s college savings, or it may not be immediate, but all of this decision making I have to kind of reference the past. And I need to keep that that longer view in mind as I make that current decision.

Michael Liersch: Exactly. That longer view is particularly critical, because you and I both know, context changes. Life events, things like marriage, divorce, birth, deaths in the family…

Jack Sharry: Pandemic?

Michael Liersch: Yes, that’s exactly right. A pandemic, that can change a lot of that context for that Northstar.

Jack Sharry: Yep, yep. So talk a little bit, if you will, about what you’re doing specifically at Wells Fargo. So that’s the theoretical, how are you applying that? What are you doing about it, and again, you don’t need to give every detail. But just so a sense of, again, in the context of your framework, you inherited what you inherited, you’re making some immediate decisions, and you have a long view of where you want to get. What is… describe that if you would, at least at a high level.

Michael Liersch: So what’s very exciting is that we have in collaboration, you mentioned, Barry, and others have created what we’re calling an Advice Center of Excellence. And that brings together all human resources that are involved in propagating advice. So how you help human beings make incrementally better decisions, better money decisions, together under one organization, within the wealth investment management context. So that’s been an exciting idea. Because to your point, it can help us in implementation, which I’ll get to in just a second. But there are four key parts of that team that I want to describe. One part of the team is what we’re calling an advice center. And so the idea there is that it has deep subject matter expertise in a variety of areas where we know humans need advice. So think of family dynamics, think of business transitions, think of executive, corporate executive services, think of just general goals based ideas, you know, life events services, all under one roof, centralized, for everyone to benefit from. And they have three purviews: scaled approach, so content, to your point, digital interactions that they focus on; to group based approaches, so think of large advisor group meetings, presentations to clients, client events, to propagate those ideas; all the way to one on ones, when a client or an advisor needs that one on one contact, to really move forward that advice, they’re there. So that’s the advice center. Then we have something that we call advice enablement.

Jack Sharry: That sounds to be like an industry first. Yes.

Michael Liersch: I would say from my lens, the whole organizational construct of this team is an industry first, which is what makes it extremely exciting to me. Advice center is like the intel inside the think tank, to your point. And then we’re connecting that to your other comment around digital, with what we’re calling advice enablement, which is how do you mobilize data tools, technology to scale what’s going on in that advice center. For everyday people, Jack, to benefit from in collaboration with their advisor, or when it’s a client led experience as well. Then the third group we have is around practice management and leadership development. So how do we mobilize our organization, our leaders, and those providing the advice directly to clients and customers? How do we mobilize them around a common advice framework? And then the last piece that’s super exciting is we have what we are calling advice distribution. So we have people in the field sitting in offices that are ready, subject matter experts, to help advisors help clients literally understand what that next best decision is, to your point, in the context of their history and in the context of their future. So it’s an extraordinary team that we have. The thing that you mentioned, too, is what’s our strategy here. I do want to highlight what our strategic approaches at a high level, Jack, is to connect how we understand our clients with how we plan for them, with how we propose opportunities for them to make better money decisions through fulfillment of solutions, services product, all the way to actually how that’s implemented. And then ultimately revisit that, to your point, in a very incremental way. That is the strategy to connect the dots on that entire flow, so that people feel understood and heard, and that they feel the connection to the strategies they’ve employed to get to where they want to go. And that we revisit that and on an ongoing basis. So to your point earlier, that Northstar, as it changes, we adjust it so that we make sure we’re course correcting all along the way.

Jack Sharry: So I know you have a PhD in behavioral finance, it sounds like you might need one in organizational development, because what you just described is, is new. I’m pretty much a student of all this kind of stuff around the industry. And I know of nothing that approaches what you’ve just described. Talk about your role a little bit in that, it’s clearly, it’s articulating and developing the strategy. But it’s also, I would assume, managing that it gets executed. So talk a little bit about that dynamic.

Michael Liersch: So in terms of the execution, you know, to your point, I do. I’m gonna give you a quote that one of my academic advisors gave me when I was all hopped up about, you know, “Someone took my idea!” He said, MIchael, he sat me down, put his hand on my hand, he’s a wonderful man. And he said, “Ideas are cheap, work is hard.” And so I said, “Okay, I understand what you’re saying, now.” You know, you can have all of the greatest ideas, to your point, Jack, but unless they’re implemented, it’s not “Who cares?”, but then it’s just a dream. So what I would, what I would highlight are three quick points along those lines. What I’m responsible for is not just the ideation, but the actual development of a real plan that can execute on that vision, which forces me to pick my spots with my team, because we only have a certain level of capacity, and you need to start in the right place. So one of the places we’re starting is really the modernization of the planning experiences that we just alluded to. So that is a key area where we’re starting is planning modernization. The second thing I would, I would say is that within that planning framework, we don’t want to be ironic, right? We’re asking our clients to look back, look at the immediate decisions to be made, and then look at the Northstar. We have to do the same thing within the business. And so we’ve really set up in this second part of this framework, not only picked our spots, but we’ve set up agile teams to really focus their capacity and energy on those things that we’ve prioritized and been very discreet and explicit about it, Jack, socialized it around the organization. Zero people are confused about what the work is that needs to be done. Which gets to my third point, is we have a very discreet six quarter roadmap that will get us to where we want to go, that’s very outcome based. It’s very benefits based. What is the benefit to the client? So that again, no one is confused. And what’s been very wonderful about that, Jack, is then it’s very easy to articulate in a very public way, like we’re doing here, what we’re trying to accomplish, and everyone can rally behind that mission. Because I’m going to tell you, it’s not an easy one, as you well know. You know, change, transformation is difficult, especially when you’re trying to do something, quote unquote, first, those benefit statements in that third point are just so critical to the organizational success and mobilization around that Northstar vision.

Jack Sharry: Well, I’m most impressed> I’m not at all surprised you’re doing all that you’re doing. Because we’ve spent a fair amount of time talking about these sorts of things. So it’s great to see that this is happening for real. Before we start to close out, if you would, just comment on the challenge, because you just described being, my term, not yours, but probably will resonate. So you’re the “change agent in charge.” And then you have to rely on a whole lot of people to follow your lead or follow your… follow the strategy that don’t report to you, that are parts of a very large and far flung organization. So how do you, how do you make that happen? How does that occur?

Michael Liersch: So, Jack, when when I think about influence, one of the things that Wells knows about me, and you know about me, and the other organizations that I’ve worked at know about me is that I’m very data driven. So I think a key piece here is to really speak in data and fact around the mission of the organization in the transformation exercise. And the data and facts that I always love talking about are around real human beings. What are their needs? What are their concerns? What are their goals? And what I’ve started to talk about, Jack, in a very dorky way, is the jobs to be done. What are the jobs that real humans want to be done with their money? What are their problem statements? What are they trying to solve, their needs, their concerns? And that has really inspired people, Jack, intrinsically, to say “Yes! tThis is a purpose driven organization.” That’s what we’re all about. That’s the value prop of the organization. And in that way, it becomes a very exciting mission. And then you get a lot more, let’s call it input and insight into where you can make sure that those problem statements that clients and customers have, can be solved in the most efficient, effective, and also in the most exciting, experiential way.

Jack Sharry: That’s really great. Congratulations. And I know you’re, you’re early on. Was it eight months at Wells Fargo?

Michael Liersch: Yeah, I think it’s yeah, seven or eight months.

Jack Sharry: So you’ve accomplished a lot already. I’m sure a lot more to come. So I’m excited to, to see that unfold. I’ll be in rapt attention. As we go to close out, I’m just going to ask you one last question. What’s something that most don’t know about you in this, those of us in this business that is important, something you’re passionate about, something that’s outside the realm of human and digital advice? What makes Michael Liersch tick?

Michael Liersch: I’m trying to think of, do I give you the real, deep answer, Jack? Or do I give you the…

Jack Sharry: Whatever you’re comfortable with.

Michael Liersch: Okay. All right, I’ll give you the real deep answer. How about that? Because I’m going to pretend no one’s listening. And it’s just us. So really, what makes me tick is my 11 year old daughter, and my wife is fine with me saying that, she knows she’s sort of number two, next to my daughter. And, and the reason why is when I look at our world today, and all the opportunities, we just have to get better as human beings. I use her as my inspiration. She’s a brilliant human being who has extraordinary insight. And I really want to provide her with opportunities that maybe other human beings who were in earlier generations like her didn’t have. And so that’s always my inspiration for transformation. If we can just get better as human beings, through money, through our life experiences, through our organizational constructs, and become truly inclusive of every thought, idea and debate those actively. I just, I couldn’t imagine a better world. So Amelia is always my inspiration for what I do each and every day, Jack.

Jack Sharry: Well, thank you for sharing that deep expression. So it’s, it’s wonderful to hear. It’s wonderful, as always, to talk, Michael, we have to do this more often not necessarily on a podcast, but it’s really been a treat to talk with you. And I’ll say thanks on behalf of WealthTech on Deck, so thanks so much.

Michael Liersch: Thank you, Jack. It was great to be here.