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state-of-the-stack-wealthstack.jpg Photo by Edin Chavez Photography Inc
(L-R): Lex Sokolin, chief cryptoeconomics officer at ConsenSys; Ron Bullis, CEO, Lifeworks Advisors; MyVest CEO Anton Honikman; and Shannon Rosic, director of WealthStack content and solution

WealthStack: Lifeworks CEO Calls for an End to Model Portfolios

In a panel during at the WealthStack conference, the head of Lifeworks Advisors argued the products and services rubbed out personalization for the sake of mass production.

Products like model portfolios and risk scores need to be “dragged out back, shot in the head and burned to death” for the damage they’re doing to clients, said Lifeworks Advisors CEO Ron Bullis at the WealthStack conference on Monday.

The traditional model portfolio for advisors is falling far short of providing the personalization digitization demands, he said, speaking at The Diplomat Beach Resort in Hollywood Beach, Fla., as part of Wealth Management EDGE.

“When we look at a traditional risk score or investor classification, it’s really one-dimensional and static,” Bullis said. “The risk for a client might be not be being able to take three months off and have the work-life balance they want, or their risk might be their family medical history has a short life span, historically. So thinking about this in terms of volatility as the measurement of risk is missing the point.”

The panel, which also included Lex Sokolin, chief cryptoeconomics officer at ConsenSys; MyVest CEO Anton Honikman; and was moderated by Shannon Rosic, director of WealthStack content and solutions, centered on the state of firms’ tech stack, but Bullis stressed the wealth management industry needed to acclimate to operating in a world where customers expect they should be able to get what they want when they want it via their smartphone, and will eventually expect to have it done exactly how they want it, as well. 

To illustrate, Bullis likened advisors’ top-down use of risk scores and classifications to an individual visiting their doctor after not feeling well. The doctor runs some tests to collect data and returns with sobering news; the diagnosis is cancer.

“As you sit there and process that, imagine how you’d feel if your doctor took their script pad, turned it around and said, ‘how do you feel about chemotherapy and radiation, and how much do you want to have?” he said. “Objectively, all of us would probably go, ‘aren’t you supposed to tell me how much I should have?’”

Firms need to think about future proofing themselves against these changes. Honikman said firms faced “real obsolescence risk” without facing reality. Digitization means the cost for clients to switch advisors goes down dramatically, and Honikman said the world had seen the ramifications of this in the banking industry recently, with $42 billion vacating Silicon Valley Bank in hours because clients could withdraw their money “pretty frictionlessly” from their phones.

“What happens in wealth management when your clients can leave you with a click of a button on their smartphone?” he said. “Couple that with the fact that the 60/40 portfolio is dead and obsolete, what does that mean for the wealth management industry, for service providers? We have to think about ‘what is our unique service proposition? How do I deliver that?’”

Honikman’s solution was embracing ‘holistic’ wealth management by considering all of a client’s assets and liabilities beyond the typical purview. But firms face the difficult challenge of making sure they are tying all of their tech capabilities together so it can be a benefit rather than a drain, with Burris likening it to trying to build a Lamborghini using parts from a Volkswagens and Fords and duct taping them together.  

The industry needs to evolve, he said, because the only constant to count on is that change will continue.

“The technology we’re experiencing now and what we’ve experienced in the last 12 months will be the slowest rate of change we’ll experience for the rest of our lives,” he said.

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