The year is just about over and if there’s one thing that I dislike at the end of each year, it’s the “best of” and “year in review” lists that come out in October or early November.
You know…before the year is actually over.
But I think we’re close enough to the end now to safely start talking about the year that was— and I’m ready to give my hot (or maybe lukewarm? some of these have been out for a while!) takes on the biggest news in wealth management from 2019.
So let’s say goodbye to the decade that was and welcome Y20k in with style.
Here are the stories that made 2019 a wild ride.
You know about the “Ken Fisher Makes Crude Statements at Tiburon Summit” story by now.
TL;DR – Alex Chalekian of Lake Avenue Financial released a Twitter video denouncing Fisher’s cringey remarks, and the asset management titan has lost more than $3 billion assets in the resulting months.
To many, Fisher marked a turning point in wealth management—he was a big enough personality to get people talking openly about the issues with sexual harassment and gender bias prevalent throughout the industry.
But the Fisher story, I’m done with it.
Let’s move onto the change happening as a result of that moment, which has sparked a lot of much needed conversation.
Perhaps the biggest part of the story after the story is the “Do Better” series published by Sonya Dreizler, a speaker, author, consultant, and ESG expert. (Click here to read the full series.)
The series takes a look at all-too-common instances of harassment, told by the women who experienced them.
Sonya’s series has been impactful for many in wealth management because it has given women in the industry a voice to talk about their experiences. Traditionally, those stories haven’t been given center stage, and women haven’t felt comfortable coming forward because of the backlash that always come with speaking out.
The anonymous accounts in the series have put these issues front and center because they contextualize the behavior many women have had to endure in wealth management over the year.
Instead of statistics in a survey, which don’t really have the emotional weight to make people move and take action, these real stories have driven change already.
Bigger voices in the industry like Josh Brown have now jumped in and are helping to spread the word that firms and individuals need to give serious thought to how they’re creating an inclusive environment that doesn’t tolerate bigotry and bad behavior.
This is one trend we can’t afford to leave behind in 2019. If you haven’t had a conversation within your firm yet about how you can be intentionally creating a company culture that’s comfortable for everyone, it’s time.
RIAs hit the big time when Goldman Sachs ponied up $750 million (cue whatever Dr. Evil $1 million gif you like best here) to purchase United Capital.
Some saw it as a harbinger of things to come with traditional financial firms wanting to figure out a way to tap into the independent market. Others commented on if United Capital’s sale undermines the very meaning of advisor independence.
Setting all that aside, I see this purchase as mainly about technology. Goldman Sachs is a much bigger name than United Capital. They didn’t need to buy United Capital just so they can attract mass affluent investors.
United Capital wasn’t the typical RIA firm built on financial planning and client service. They did those things, and they did them well.
But what they did better than everyone else was to build a technology suite, FinLife, that gave them a really unique experience and vision they could offer to clients.
I’m intrigued to see how Goldman takes those technology pieces and, over time, wraps into other elements of what they do, and how they continue to build that stack out.
The trajectory of United Capital is a great example of why I believe advisors need to put their technology front and center when marketing to prospective clients. Too often, independent advisors save their technology for a quick client welcome packet or brochure.
So, advisors. Stop hiding your tech away. Make it an integral part of the client experience you want to create, and similarly, make it an integral part of how you market the experience of working with your firm too.
Tragically, Jud Bergman passed away this year.
The CEO of Envestnet was a huge presence in the industry, having built an absolute giant of a firm that many others sought to emulate and chase.
Unfortunately I never got the chance to meet Jud, but by all accounts he was a well-loved and respected father, husband, and friend in addition to being a visionary entrepreneur.
His influence won’t be easy—maybe impossible—to replace.
Financial planning software was a hot commodity in 2019, beginning with Envestnet snatching up MoneyGuide in March.
The acquisition was a big deal, and not just because of the user base that MoneyGuide has and the size of the deal, which many saw as…elaborate.
The acquisition could also be seen as a validation of the financial planning model as being the core value proposition for independent advisors, outweighing asset management as the primary service these firms provide.
From my perspective, the most value advisors offer is in behavioral guidance. Unless there’s a super unique investment management style going on, a lot of dollars are flowing into the same ETFs and mutual funds from one firm to the next.
So what really matters for an independent advisor’s clients is having a solid process for working through what to do with money in day-to-day life rather than obsessing over what’s happening in the markets.
Later in July, Orion Advisor snatched up Advizr. The race to add financial planning as not only central to an advisor’s back office work with clients—but also central to the entire technology experience—was fully on.
If there’s one area I think advisor-centric financial planning software needs to advance in 2020, though, it’s in providing better tools for personal financial management for investors.
I’m talking about something that’s as simple and pretty to use as the way Apple displays spending categories and spending over time for Apple Card users. Seriously, wealthtech could use a big upgrade in the “pretty-looking software” department.
The time is now, finplan firms. Let’s see some real innovation that addresses how people need to manage their daily financial life in 2020, and put financial planning apps at the forefront of the client experience that advisors want to deliver.
We can’t talk about 2019 without talking about everyone falling over themselves to stop making money.
Okay, so that’s not really what The Race to Zero, as it’s commonly called, was about.
The major players like TD Ameritrade and Schwab cut out fees from online equity trades, but let’s be real—Robinhood launched with zero-fee trading a while back.
It’s about time the big firms caught up. And I’m not saying that following is bad—I’m not at all; it’s great to remove costs for investors and their advisors.
The major custodians can absorb those hits better than smaller institutions because of their scale and revenue from other sources, but not all the custodians were able to stomach zero fees in equal ways.
Which led us to the next major event of 2019…
Call it Schwabitrade, call it TD Schwott, call it Amerischwab, call it whatever you want.
Schwab is buying TD Ameritrade and no one really knows what to expect next.
Schwab said its net revenue from commission fees only made up about 4% of its revenue each quarter, so it’s not like the effect was massive for profits—but the story in stock prices was different.
While Schwab’s stock went down about 10% on the news, TD Ameritrade took a dive of 25%.
And then Schwab snatched them up.
So, yeah, you could say that The Race to Zero was a big deal, in more ways than one.
What’s all this mean for advisors? In the short term, maybe nothing. It’s going to take a while to get things cobbled together and integrated.
In the long term, it might mean custody fees for RIAs. Or not.
It could mean that RIAs spend more time looking at new digital custodians.
Oh look, it’s time to segue into the next section.
There’s no custodian getting more love than Altruist right now in my Twitter feed.
When talking about custodians, there is no word uttered more frequently than “trust.” It’s why so many advisors spend time talking about their reason for choosing an established company like Schwab.
They have a track record and experience that says investors can trust that their money will be safe there.
But trust means something different these days. As our lives have become increasingly siloed into apps, trust is built through the user (client) experience of now, more than whatever number goes under the “Year Founded” banner on a website.
If your app gives me a good experience, shows me what I want, and lets me accomplish things fast, then your app is good. It garners trust from how it delivers that experience.
And we use apps for almost everything these days, so the lens through which companies get viewed is colored by their app (or parallel digital experience).
How long until finance is truly appified? It’s already begun.
When someone signs up with Betterment or Wealthfront or Robinhood or Acorns, they’re not thinking about the entity holding their money behinds the scenes.
What matters is the experience they’re getting when they open the app. It’s easy, it’s fast, it’s intuitive.
It’s all the things financial services traditionally has not been.
And so, trust is not so much about how many years of experience you have behind you or how many trillions of dollars you have under management. Those are the standbys that Schwabitrade will use to make people believe they’re best able to handle your money.
And that’s basically like saying “This is right because it’s how it’s always been done.”
The “it’s always been done this way” mindset will usually lead to disruption and failure. That’s not innovative in any way.
And sorry, but acquiring your second-largest competitor is not innovative.
It can lead to innovation, but it can just as likely lead to complacency. Size is not always strength.
So for all those reasons, and a whole lot more, I’m excited to see how Altruist positions itself within the slightly dysfunctional custodian space.
As the industry gets younger and as consumer expectations continue their shift to experiencing services through apps, an advisor’s choice of custodian will matter less.
And that’s a big advantage for a digital startup like Altruist.
An advisor doesn’t need to talk to their client about how the custodian they use has been around for fifty years and yadda yadda yadda.
Instead, they can say “We use this custodian, and here, check out how you can view your accounts through this beautiful and simple website or mobile app. It’s a fully digital experience, and we can open your account right now in a couple minutes.”
There’s a “wow” factor inherent in that relationship that is different, and I’d argue more meaningful, than what the major custodians can offer right now.
Now, if Altruist fails to gain any traction and assets that advisors move to them have to be moved elsewhere in a year, will this hot take look real bad? Yep.
But right now I’m betting on Jason Wenk and his team to make it work.
Those are the stories that stuck in my mind from this past year. If you want to talk about them, you can find me on Twitter.
Featured Image: Photo by Chase Clark on Unsplash