- Title: Executive Vice President
- Time in Current Position: 4 years
- Time with Firm: 21 years
- Previous Employer/Title: Ameriprise
- Years in the Industry: 21
- First Job in Industry: Financial Advisor
- Alma Mater: BS, MBA, Widener University
What's the most vital market force facing Ameriprise right now?
Pat O'Connell: We're at the trough of the baby boomers marching their way into their 60s. The demands of that generationand they have changed so many different marketsare such that our industry has to move toward a model where we're serving clients across a broad spectrum of needs, from investment needs to healthcare needs to overall comprehensive advice. The advisors who will gain the most market share are those who really specialize their skill set. Our focus, not 100%, but the majority of it, is on the pressing needs of the baby boomers. And you can see the industry slowly starting to shift toward an advice-based approach to serving those baby boomers.
And a compensation model to match.
PO: I would hope.
You are also anticipating a shift toward a fee-based industry?
PO: Yes. In the 21 years I've been in this business, I've watched margins keep getting compressed on products, whether it's transactional products or fee-based platforms. But my experience is that people are more than willing to pay for advice. They're less and less interested in paying high fees for execution, and I see that just continuing to accelerate.
Are you anticipating a shift to a more transactional pricing model for the advice?
PO: I think it's a combination of the two. People need the advice across their entire life, not just their financial life, but across different parts of their personal lifetheir family situation, healthcare issues, estate-planning issues and the like. There are still going to be ongoing fees for the asset management work. When things are going really poorly, and people are looking at a lot of volatility, my experience is that that's when the asset management advisory work is needed the most. The other piece of it is that they need advice for what's going on in their life.
Do you see that as the way forward for the industry, a fee-for-advice model?
PO: I think the industry will go that way. I think the evolution won't happen fast enough.
Fast enough for what?
PO: I don't think the industry in general will make the turn you just described in the next five to 10 years. People still think of charging a fee for a financial plan as selling a product. The plan is not a product. It's the X-ray. It's the analysis you do so that you can give the advice. I think the industry should go there, and I think they'll continue to march in that direction.
A lot of firms I've interviewed are doing the financial planning part, and they're not charging for it. What's the harm in that model?
PO: I don't think there's any harm in that model as long as firms are actually doing it. There's risk that sometimes they will think of financial advice as a loss leader. So they do it quickly or they leave out really important parts that are critical for the client, and they get very quickly to the implementation, which, of course, is specific to whatever their specialty is, like asset management or risk management. I don't think comprehensive financial planning is a loss leader. It is how you lead.
What do you think is going to happen with the employee versus RIA/independent channel mix in the industry going forward?
PO: I've seen advisors inside our firm go from being in our branch business to our independent business. I've seen advisors do the exact oppositethey get to a certain point in their life and say, "I don't want to have responsibility. I want to outsource the back office, the health insurance, the real estate and the payroll service and come back into this branch business." I think choice is a really good thing in this business.
Does Ameriprise own the client relationship or does the advisor own it?
PO: Our perspective is that the advisor owns the relationship with the client. Regardless of what platform you're in with Ameriprise, you have equity in your practice. You've built a successful service business. But the number one thing that clients struggle with is when they have to transition advisors. There's a much higher probability of a smooth transition when you recognize who owns the relationship.
Given that, how important is the team concept for your employee advisors?
PO: It's important. We probably have 400-plus teams across the business that I run. Most of the teams start with two people coming together who have complementary, not similar, skills. Over time, the relationship gets stronger and the team expands. I see teaming as a growing trend, but I will also tell you there are still a lot of advisors out there who are sole practitioners who do incredibly well but wouldn't flourish on a team. So I think you need to have a model where you don't force it, but you support it. The best teams that I see coming together are those that don't get pushed.
A couple of firms are actively encouraging the formation of teamsas in, "You will form teams"because they feel it is the number one asset-retention tool at their disposal when advisors retire or leave. Is that something that's on the table for Ameriprise?
PO: Yes and no. When I work with my leaders on teaming, I think about it like a dating process. It takes time, and you've got to have the patience with people coming together and getting comfortable with each other, and having confidence in each other. It's not part of our discussion to say, "Use it as a retention strategy." What I would say, however, is that we know this industry is gray. It's getting older. Part of our strategy is to have a practice acquisition strategy in place to bring advisors, assets and clients from advisors who are looking to sell their practice into our business. But forcing teaming is not part of our strategy. In a service business, your talent leaves you every night and decides in the morning whether they come back. Most of our advisors are not on retention. They stay because they want to be a part of this.
- Number of Employee Channel Advisors: 2,289
- Total AUM: $373 billion*
- Average Employee Advisor 12-Month Trailing Production: Not provided
- Average Employee Advisor AUM: Not provided
- % Women Advisors (Not including registered associates): 17%
- % Minority Advisors: Not provided
*Includes both employee and independent advisors.