5 Lessons From 150 WealthTech Podcasts
By Jack Sharry
What’s up with the latest dramatic changes in our industry? I’m referring to the flurry of senior-level comings and goings at fintech and wealth and asset management firms.
I wonder if directors, funders and shareholders see what I see—our industry isn’t growing much if, as Chip Roame shared at the recent Tiburon CEO Summit, you take out the effects of markets, mergers and acquisitions.
We just celebrated the 150th episode of my podcast, WealthTech on Deck. Our guests have included many whose names are making the news lately. I hear a lot about what it takes to generate organic growth on my podcast. Five “headlines” emerge from three years of listening:
- Multi-account, household-level management is the new standard.
- Job #1 for financial advisors: Minimize taxes.
- Investors want more from our industry. Heed what they have to say.
- Learn from the few firms making organic growth happen.
- AI is changing wealth management, but maybe not how you think.
1. The New Standard: Household-level Portfolio Management
The unified management household (UMH) is another term for risk-smart, tax-smart multi-account portfolio management. Len Reinhart coined the term and wrote the first white paper on UMH more than 20 years ago at the firm he founded, Lockwood Advisors.
While not there yet, we’re moving closer to the dream. The challenge: UMH sounds simple; the execution is hard. Industry ecosystems weren’t built to unify anything. The industry has been on a 40-year tear of issuing one product after another. And systems were designed to only manage single products and accounts.
Add in workplace retirement plans, and the multiple rollovers and taxable accounts investors have strewn among two to four advisors and firms, and you won’t find a cohesive strategy anywhere.
Yet, surveys show investors feel the pull to consolidate assets as they approach retirement. They’ll respond positively to advisors who help coordinate all those elements and limit tax drag on their investments. To accomplish this, advisors must focus on what matters most to consumers: cost, risk, taxes, and Social Security.
UMH rewards advisors and firms, too. They retain more because of fewer redemptions to pay taxes. This is a critical part of the organic growth equation.
The technology is available. We’ve started an ongoing series called WealthTech in the Weeds with people who have led and guided UMH system builds. They include Rose Palazzo of Edward Jones, Charles Smith of EY, and Mark Hoffman, LifeYield CEO. Stay tuned: More are coming.
Many are also working on coordinating workplace retirement services with wealth management. They include industry leaders and guests of our show: Ed Murphy at Empower, Aaron Schumm at Vestwell, Brian McDonald at Morgan Stanley at Work and Jed Finn, who heads Morgan Stanley Wealth Management.
2. Reduce Investors’ Taxes
Research says consumers know they’re not good at “beating the market.” That was such an ‘80s and ‘90s thing. Their tendency to buy high and sell low hasn’t worked. As they move to and through retirement, their focus is on how much they keep.
The best way to keep more is to pay less in taxes. Taxes are the single biggest cost investors incur by far, and they understand that paying lower taxes means they will have more money. Podcast guest Amanda Lott of J.P. Morgan Private Bank compared tax-efficient wealth management to helping clients squeeze every last drop of juice out of an orange.
The more of an investor’s accounts an advisor manages tax efficiently, the better the results. Achieving tax alpha relies on using multiple levers across all of an investor’s accounts. And the earlier the better. Applying applying asset location from the time an investor opens an account has a significant cumulative effect.
Yet, the focus has tended to be one lever: tax harvesting. It has benefits, but they tend to dwindle over time.
3. Heed The Investor
A few weeks ago, BlackRock CEO Larry Fink blasted the industry for not doing more to ensure workers are prepared for retirement. He tapped into a vein of discontent.
Podcast guest Jacque Reardon of Franklin Templeton has explained lessons from the company’s annual Voice of the American Workplace survey (sign up to get an email when Jacque’s upcoming podcast airs).
This year, the survey showed how deeply employers and employees are out of sync regarding compensation and benefits. Employees are stressed about their financial health and want more compensation and promotions. Employers feel they’ve extended a host of benefits to employees who don’t understand their value.
The annuity industry understands investors’ unease. Annuity manufacturers and distributors have brought down costs and tailored products to meet consumers’ needs, especially regarding tax reduction, guarantees, and protected income. Annuity sales are off the charts.
My annuity friends are at the forefront, including Jasmine Jirele, Allianz Life CEO and her colleagues Corey Walther and Chad Virgin, and old friends like Tom Buckingham of Nassau Financial Group, Tim Seifert from Lincoln Financial Group, and David Lau from DPL. David Blanchett from PGIM DC Solutions, Jason Fichtner of the Bipartisan Policy Center, and others have joined the chorus.
There’s lots of money out there. If you listen, you can attract it.
4. Figure Out Organic Growth
Organic growth and net new assets are the same. How can firms attract new assets and move their firm beyond our industry’s 2% to 4% growth rate?
There are two ways:
- Do what the leaders do: relieve investors of the burden of figuring things out for themselves. They can’t. A recent AARP survey of people 50+ found that 62% haven’t consulted a financial professional yet for retirement planning.
- Win assets away from your competitors by offering UMH-inspired solutions and quantifying the value of your advice, particularly by reporting the accumulated value of taxes saved and compounded growth results.
A handful of firms can now demonstrate the after-tax benefits in dollars and cents of managing a household portfolio in a coordinated way (see #1: UMH). Some are among the industry leaders in growth.
At Tiburon, Roame ticked off the 2023 leaders in net new assets: Fidelity, Schwab, Vanguard, Morgan Stanley and J.P. Morgan. Chip’s recommendation? Study and copy them. If we take the leaders out of the equation, the industry’s organic growth is negative. Chip and I will talk about this in an upcoming podcast: Sign up to get an email alert.
The leaders aren’t standing still. Fidelity just announced a digital “growth hub” to help advisors with client acquisition. J.P. Morgan is focusing on tax alpha. Vanguard keeps adding to its advice capabilities. Morgan Stanley makes a strong case for consolidation with its Intelligent Withdrawals, which guides withdrawals
5. Get To Know The Bot In The Corner
Several guests have put AI into perspective. Jud Mackrill of Milemarker and Mammoth said, “AI is just the next way to work.”
Companies like Morgan Stanley and J.P. Morgan are using large language learning models to extract answers from thousands of reports and data hubs.
Mackrill predicted that AI would handle 80% of the reading, searching, processing, analyzing, and data crunching that people do today. The remaining 20%? “That’s where human intelligence and skills will shine.”
Vinay Nair, CEO and founder of TIFIN, said: “What we are talking about will be a human and AI collaborative experience.”
Amy Young heads strategic partnerships in financial services for Microsoft, an AI leader. She said the power of aggregating data from sources like SEC reports, earnings, news releases, and other sources and extracting insights are now being built into presentations on Teams, with much more to come.
Sandy Kaul of Franklin Templeton believes Bill Gates is onto something with his prediction that soon we’ll all have a personal assistant. My “Jack’s assistant” will know my schedule, suggest dinner reservations and alert me to a gallery opening nearby.
Similarly, AI will lead to an “easy button” for financial advisors to:
- Create dynamic, highly personalized financial plans to embrace all the taxable and tax-advantaged accounts in a household’s portfolio.
- Optimize clients’ portfolios through multi-account management of risk, taxes, and withdrawals.
- Secure retirement income through tax-smart, multi-account withdrawals, annuities, and Social Security.
Hello Siri, are you listening?
Jack Sharry is the EVP and chief growth officer of LifeYield and host of the WealthTech on Deck podcast. He is on the board of Next Chapter, a leadership community dedicated to improving retirement outcomes.
