Investors are asking for more than just portfolio management, according to experts at the RIA Edge conference—and are in need of more than just a financial plan.
Morningstar CEO Kunal Kapoor and Pershing X President Ainslie Simmonds sat down with Informa Connect’s Managing Director of Wealth Management Mark Bruno at The Diplomat Beach Resort in Hollywood Beach Fla. as part of Wealth Management EDGE to talk about the next generation of investors.
“The portfolio is probably about 20% to 30% of what they want to know about,” Simmonds said. “They also want to know how to pay off their debt, they want to know if they can make purchase decisions, they want to know how they can help their aging parents. There are so many things that people need help with that go far beyond a portfolio."
It starts with the financial plan, she said, but it doesn’t end there.
“The financial plan is central to the delivery of the kind of advice that people are looking for,” she said. “The opportunity in financial planning is to make it incredibly dynamic, to really have that plan be a living breathing thing.”
Technology and personalization are two things that will be needed to really stand out over the coming decade, said Kapoor.
“I think one of the reasons, potentially, that it's been hard for people to stick with their plans is because they demand a certain level of personalization,” he said. “Today, the technology is starting to come online.”
Kapoor said new technologies can help advisors provide better tax services, which he called “one of the most significant sources of advisor alpha.” Personalized direct indexing is another area he expects to create a “very, very meaningful” change in the way advisors are able to serve their clients.
“When it comes to personalization and the future, just remember I think you're now speaking to more of a family when you're managing an account than you are just the patriarch of the family, as historically might have been the case,” he said. “I think this is a really important pivot because all our research shows that the one place that advisors falter in their client relationships is when there’s a generational, or even a spousal, switch.”
“Technology is a piece of the experience that you're delivering, and it's a really important one, but it's not the only one,” said Simmonds.
She said clients expect to be able to access that technology with a single sign-on. They would also prefer advisors make it easier to understand and only send [clients] communications relevant to their specific needs and desires.
“The experience they’re demanding is because they have a ton of choice,” she said. “It’s not easy to change an advisor, but they will if you’re not giving them the experience they’re looking for.”
The media focus on younger investors buying crypto and investing in “meme stocks” during the pandemic caused advisors to become primarily concerned with millennials and Gen Y investors, according to Kapoor—in addition to their core clients, who tend to be at the other end of the demographic spectrum.
“But it’s that middle that really is where all of you should be paying attention,” he said. “I think that group is often ignored, but that is the group that is going to define how your practices really evolve over the next 10 years.”
Kapoor noted investors around their mid-40s are beginning to reap the benefits of generational wealth transfer and are thinking about retirement.
“That group is poised to control more assets in the next 10 years than any group in the potential history of financial advice,” he said. “So, I'd be a little bit careful when we think about what that term means, because it's super easy to get seduced by the Robinhood generation or whatever you want to call it, and that other side of barbell where you have people who are in or near retirement—when the reality is the group in the middle is really going to matter.”