CHICAGO The clock is ticking for the wealth management industry, as client and advisors grow older, and evolving demographic trends make the nation more diverse, said Timothy Scheve, CEO of Janney Montgomery Scott.
Scheve told attendees at SIFMA's Private Client Conference that the industry needs a more diverse workforce and younger clients if it is to be as successful in the future, as it is today.
He pointed to accelerating trends of women controlling more assets and the nation becoming more racially and ethnically diverse. Scheve said that the industry needs to better reflect those changes within its own ranks.
Cultivating an advisor force that better reflects the nation's population has long been a challenge for the industry, and one that other speakers acknowledged.
"As I look around the room, I realize that we are not quite there yet," said Lisa Hunt, executive vice president at Charles Schwab.
Firms also face another demographic challenge: the average age of current clients is rising.
"It's not just that older clients are more likely to meet their maker; they are also drawing down their wealth," Scheve said. "We need new, younger clients now in order to secure our future."
Getting younger clients can be a challenge, he said, acknowledging that investors between the ages of 30 and 39 are more three times more likely to open accounts online. Scheve rejected the notion that robo advisors would soon replace financial advisors.
He said that firms need to focus on having technology compliment the advisor-client relationship, pointing out that the youngest generation of investors has grown up with high-speed Internet and smart phones.
"We have an obligation to provide our clients with highly skilled and ethical financial advisors, who can help them meet their financial goals," Scheve said. "Clients want tech that assists their advisor, not replaces him."
Other speakers echoed Scheve, saying that robo advisors and similar technology could compliment advisors, helping them scale their businesses while making connections with younger investors.
Schwab's Hunt said that her firm's efforts are designed to meet investors on their terms. When asked if advisors should be concerned about robos cannibalizing their business, Hunt said they shouldn't be worried.
"We recognize that relationships are critical to investment success," she said. "When we developed this product it was not to disintegrate existing relationships. It was to enable choice for the client and to recognize that clients want to engage in different ways with the same company."
Her advice: embrace and recognize it as another way to engage with clients.
Brand Meyer, head of Wells Fargo's independent brokerage group, said similar technology could play a role in helping firms and advisors secure relationships with young investors who have only begun to accumulate assets. A robo advice channel would allow the client to establish a relationship with the firm.
"We would hope that as that client creates additional wealth, we may build trust with that client and transition them into a different channel," he said.
FIDUCIARY STANDARD: THE THIRD RAIL
Janney's Scheve also said that regulation is likely to increase, presenting another challenge to the industry. It was a theme that other conference speakers picked up.
Ken Bentsen, CEO and president of SIFMA, said that the industry is working closely with regulators to address issues facing the industry, adding that the organization has called on the SEC to craft a new fiduciary standard.
In recent weeks, however, the debate over a new fiduciary standard has heated up as the Department of Labor has begun to move forward on its own rule while investor advocate groups urge regulators to act swiftly on crafting a more rigorous standard.
"That is not to say that the process could not be better," Bentsen said. "It is even more imperative that regulators improve collaboration amongst themselves, particularly when it comes to crafting new rules with regard to market structure. I believe that it is important that the industry takes a leadership role."
Bill Johnstone, chair of SIFMA's board of directors, told attendees that they need to be engaged in the regulatory and political process, particularly because there is a gap between the reality of what the wealth management industry delivers and what some advocates have called for in terms of regulation.
"For someone who started in the business in the 1970s, the difference between the training, technology and skills of today's financial advisor, compared to that of 40 years ago, is incredible," he said. "Today, when our business is criticized by those seeking a new standard of care, these qualities are often overlooked and an important perspective and balance is lost."
- What Advisors Need to Know About Their Older Clients
- Ask Aging Clients: Can They Stay in Their Homes?
- How Advisors Can Make the Most of Social Media