The bottom line has been growing at numerous wealth management firms. But looming on the horizon are big changes to the way advisors work; new technologies, new ways of communicating, and retirement plans threatened by longevity risk.  As part of our special report on the state of wealth management Merrill Lynch's Andy Sieg, head of retirement planning and solutions, and John Thiel, head of wealth management, explain how the business is changing, what Merrill is doing to prepare its advisors and why the future remains bright.

What’s the most vital market force facing your firm right now?

Sieg: First and foremost is the continuing impact of demographic changes on our business, particularly the longevity revolution and the retirement of the baby boomers. 

Life expectancies have roughly doubled in the last 50 years. You have 10,000 baby boomers moving into retirement every day. They’re healthy, they’re going to live longer and they are a generation that is comfortable with reinvention. They face risk that other generations haven’t faced and, perhaps more importantly, have opportunities that other generations haven’t had before.

How are you preparing your advisors for that?

Sieg: You need to enable advisors to help clients and have a dialogue that is holistic and anchored in [client] realities. You need to rethink your platforms and capabilities. You need to be willing to make an investment in training and development. We do that through what I would argue is the industry’s deepest and broadest set of professional development activities for FAs.

We spend a lot of time working with the asset management industry on how they engage advisors. They are very attuned to understanding the strategic opportunities that we see and the needs of our client.

The old role of the asset management specialist was talking about their assets. Today, they are doing a lot of training and professional development, and it’s a very valuable part of how we are preparing our organization for the future.

That ecosystem, which involves the collective intellectual capital of wealth management firms and asset management firms, that’s a very powerful force.

In the old days, you would have thought of my role as the "product guy." You would have thought about what’s the latest fund that could outperform in the current environment. We still do that, of course, but the more powerful activities that my part of the organization is taking part in, involve developing really integrated programs where we have financial products, intellectual capital, and either digital or human ways of interacting with clients. We bring that all together and create a program like ML Clear. That embodies all the ingredients of meeting a major client need. And to a great extent that’s Merrill Lynch One, our new platform, which is designed to help meet goals-based planning.

If retirement is changing for clients, how does that double back on the advisor?

Thiel: It’s going to be a continuation of the kind of relationship they’ve had while that baby boomer was working. They’re still going to need advice, but the advice is going to take on a different form. How do I manage longevity risk? How do I manage catastrophic care and ongoing medical costs?

It is moving from investment advice to life advice. Life priorities and health are a big part of that. And then there’s longevity risk; the potential to outlive your money. We think there will be a lot of product innovation as a result. Like less expensive forms of insurance, longevity insurance. And there’ll be more pressure on those products to be less compensable.

How will technology change how advisors serve client needs five years from now?

Sieg: The impact of technology is massive in terms of the ability to deliver better advice and higher levels of service to clients. In five years, the advisor will have a laptop on his desk that far surpasses what NASA had during the first space launch. The power of technology is awe-inspiring.

How is the industry performing in terms of bringing younger advisors into the business?

Thiel: I think the industry is struggling a bit. It’s probably not going as well as it should.

What we’ve seen over market cycles is that the industry has a boom-and-bust approach. The training programs get big during the good days, and they get taken down when the business goes through troughs.

We’ve stayed committed to our training programs all the way through, even back including in ‘09 when we were bought by Bank of America.  We’ve always stayed committed to it because it brings in talent.

What’s the future of wealth management?

Thiel: It’s bright, for a couple of reasons. It’s the demographics I’ve mentioned. And, to be candid, it’s a low capital intensive business. Banks and others who are required to have much higher capital levels maintained by regulators are looking for more return on assets. Wealth management has a wonderful profile. It does not take a lot of equity. So I think it’s a very attractive industry.

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