From the Publisher: Sirianni’s Predictions for 2021
Our business is a small world. As a community, we’ve lost friends to a new disease, and dealt with market volatility based for the first time on a pandemic and its politicization. To call the reality of 2020 a dumpster fire is an understatement. That being said, our industry — which has been dead center of this crisis — has not only survived but thrived. We’ve gotten closer to our clients, continued to move to greener pastures, and done business in brand new ways that will become the new normal going forward.
I am overall quite bullish on 2021 despite new taxes, expected market volatility, intractable politics, and an ongoing pandemic. We are so resilient. We have adapted, overcome, and kept our humanity. There is no reason to think we won’t continue to do so.
In putting together this article I’ve borrowed a lot from my mid-pandemic predictions in April because I haven’t changed my views on most things. I have also added some thoughts on our future based on how things have progressed, and regressed this year.
All in, I’ve done dozens of print/Zoom interviews and podcasts with billion dollar advisors and CEOs of the largest wealth management firms in the country these last few months in an attempt to illuminate current events, get a sense of where we are, and where we are going to be as an industry when this is all over. These are my key takeaways for our future post Coronacrash:
- Back to the Future
When I started in this business you were able to cold call. We sold municipals all across the country from our NYC office. We built bond ladders in Boise, and sold IPOs in Indiana. We haven’t been able to do that in a while.
Zoom technology has turned back the clock a bit. As clients and prospects accept the efficacy and efficiency of Zoom meetings, advisors are spreading their wings and meeting folks from different parts of the country over Zoom. There is a reasonable expectation of good service and quality contact via the new tech.
My Prediction is that good advisors will steal the lunch of bad ones on a massive national scale. Borders won’t hold prospecting back anymore, and advisors who are less tech savvy or hid their heads in the sand during the market and political turmoil can expect to have their clients wooed by slick, tech forward teams in far off places. Get your arms around your clients because it’s not just the broker down the block you have to compete with!
Like the domestication of the dog, the march toward a European brokerage model continues unabated. Big banks don’t understand why they have to pay the people that built their businesses from scratch so much money. They never will.
Even things that started out as good ideas like teaming, have morphed into complicated contractual arrangements and sunset provisions that ensure that the retiring FAs will be the last of their kinds at the big banks. The disappearance of “small” accounts to salaried sales desks is the death knell for the entrepreneur at the Wires. I’ve written extensively on this topic. If you don’t see it now, you are blind.
My prediction is that within 3 years a major wire will go off the commission grid completely to become salary and quarterly bonus.
- Zoom poisoning
Zoom will definitely change our world, and the rest of this piece focuses on all of the nuances of Zoom tech and how advisors need to embrace that change. All that being said, there’s such a thing as too much of a good thing.
Doing business in a post Covid world will force us to establish boundaries. Being available 24/7 for clients isn’t realistic or healthy. Most of us are overscheduling ourselves during this tumultuous period, and may not be giving good Zoom.
You NEED to embrace Zoom BUT:
-Set boundaries with your clients around meeting times.
-Make meetings meaningful. Too much facetime without enough to say is a bad thing for an advisor.
-Don’t be too casual. It’s one thing to be in a T-shirt after exercising and taking an impromptu meeting, it’s another thing to be eating a Ring Ding on a call. Familiarity breeds contempt.
-Don’t overschedule yourself. You can’t be effective without time to reflect, study markets, and talk to experts.
My prediction is that proper use of Zoom tech will further separate the good advisors and firms from the bad, and facilitate the aforementioned massive client shift. It will just get harder not to be good at your craft and survive.
We are key players in a global drama in two acts. There is the pandemic, which we can’t do anything about, and there are its economic consequences, which we are uniquely positioned to do something about. Everything we do every day reconfirms to us that we are valuable to our clients, and that what we do is important for our country, and in this deeply interconnected melodrama, also important for the world. If America goes down, led by our business owning clients, then the rest of the world will follow.
As every CEO I have spoken to has said, financial advice is, and will be, the key to our durability now and in the future — the one thing the robots can’t emulate. The thinking is that this crisis has highlighted the importance of our role in our clients’ lives. This insight should trickle down to all investors.
Research has shown that our nemesis prospect generation — the millennials — have taken a bath in this market, like the no-load mutual fund investors of yore. When the market tanked they sold, and when they try to buy back in, they will have missed most of the upside. Financial lemmings who eschewed human advice for Robinhood’s algorithms.
My prediction is that this market storm will cleanse some of the smugness from young online investors who have known only bad tattoos and markets that go up, and inculcate in them a much higher respect for the human element in financial advice. We’ve had 0% growth in millennial clients in our books for the last three years. That will change. In five more years they will make up 10-15% of our total AUM.
- Real Estate etc.
Advisors have, for a long time, made use of ever more sophisticated asset modeling systems and contact management software to facilitate their daily tasks. The goal for most is to grow their assets through referrals and prospecting, while servicing current clients in the most efficient way possible.
This though, has always been done in context. Fast new tech has been applied to a very old model, dependent on direct management controls and vast real estate obligations. Large firms have traditionally maintained large offices, in prime real estate locations, in big cities. RIAs have built plush ego barns to house their practices in an effort to reassure clients that they are with a “winner”. All of this is meant to create confidence in advisors and clients and to encourage in-person meetings.
Zoom has created a shift in that old fashioned way of thinking. The CEOs that I am speaking with are rethinking their real estate options. There are many employees in marketing for example, with young children who would love to work from home 2 days a week. They could share cubicles and work from the corporate office in shifts, saving millions in sq. ft costs. I spoke with a CEO at a very large firm looking at 80,000 sq. ft in Manhattan who feels he needs maybe 35-40,000 now — post-Coronacrash — simply because of the success of the firm’s Zoom meetings. A billion-dollar RIA told me when his lease is up he’s just going to rent a conference room with a cube or two and use his office just for client meetings, saving a few hundred thousand dollars a year that he can reinvest in his business.
Let’s not overlook the biggest factor as to why there will be a real estate reckoning in our business (and maybe all businesses) — everyone I spoke with was over 50. That’s the age they let you run a multi-billion dollar firm, and typically an age when your assets cross a billion. It’s my age. All of them had the same reaction to Zoom tech as I did. They have always known what it is, and almost always eschewed Zoom calls for conference calls when they could, because conference calls were what was comfortable and quick. They never tried to run a large meeting in Zoom. Now that they have been forced to, they have been forced to see the greater possibilities that Zoom calls offer.
I know you techies are rolling your eyes, but it is none the less true that once you get something…you get it. It can’t be un-got. Once the boss gets it, you can bet there will be changes. Each boss I spoke with is actively looking for ways to do business differently, more efficiently, and with less cost through technology post-Coronacrash.
Not surprisingly, the Corona crisis has forced them to challenge long cherished diktats like: advisors can’t be trusted to work from home, compliance can’t work long distance, corporate needs to control every daily advisor task. Combine that realization, which is not escaping the rank and file, with the surging independent movement, and traditional firms will have a lot of splaining to do to their advisors about why their old model remains paramount at the end of this thing.
A real estate reality check could be the catalyst to make big firms embrace some of the tenets of the independent movement that have made it so popular, and finally make the bigs change their ways. But I doubt it.
Dual prediction here: First, there will be a new real estate paradigm shift that will lead to balancing costs with tech efficiencies using real time field test data for the first time, and tech will win. Branch offices won’t go away, but all real estate investments will get a hard look, and branches will be smaller and newly configured for the new world. Secondly, the Indy movement will again be a big gainer of advisors. Once advisors have seen Paris, seen that they can work without a branch office or boss staring at them every day, it will be harder to keep them down on the farm.
- Race and Gender
I’ve written pretty extensively on this topic, and spoken to national leaders on racial matters as well as leaders in our business. I hate to be a Debbie Downer on a prediction, but I’m not hearing anything that makes me believe we’re going to see real change quickly. Not that I expected to, but I was hoping for some movement on the practicalities of fairness.
The real problem is that the change needs to occur at the ground level, not the C-suite. We just need more people from different backgrounds to succeed in this business. I’ve outlined practical steps for helping all people new to the biz — first generation college etc., start a practice. Not all will succeed. Not all should. That’s why there’s a good upside in our job, not everyone can do it. But to get at real change we have to answer this: how can a first generation college grad build a book of prospects that each have 250k or more to invest from scratch?
My prediction is there will be some window dressing at the top, which is totally useless. The best job in this biz is being an advisor. Until we figure out how to help folks start a book in today’s environment, and create a level playing field in a way that does not take away the entrepreneurial spirit of our biz, we won’t get future access to the fastest growing middle class (people of color) and wealthy (women) market segments in the USA.
- How a three-year old changed our business
Technology will start to change what we do, not just how we do it. Much of the nation’s and world’s wealth, is still controlled by the baby boomer generation. Like the aforementioned CEOs they understand what Zoom tech is, but they can’t be bothered. They don’t feel obligated to post their latest meal on Instagram (if they know what that is), and while they are actively online they still appreciate a newspaper delivered to their house. It is that adherence to tradition that keeps us in business; the appreciation of a handshake versus a call, and human advice versus a robot.
Boomers. A stubborn generation that uses tech, but is not prone to every new tech innovation. Until now. Today, Boomers have become among the savviest users of Zoom tech on the planet. They simply want to see their grandkids while in quarantine, and they will jump through fiery tech hoops to do it.
They make up a majority of our client base and account for most of our in person meetings. Every advisor tells me they are in more contact with them through this crisis than ever. Most of that contact is via video today.
Tomorrow, that won’t change. Boomers will no longer feel the need to drag themselves down to your office to meet you. You will share docs online, and must be prepared for many more tech interfaces than in the past. They will not go back to the old way of waiting for a quarterly or bi-annual meeting at your office — they will expect a zoom meeting upon request. The standard of service just shifted dramatically. If they can watch their three-year old granddaughter smear a brownie all over her face from their fireside, they will be confident that they can listen to your portfolio update live on their time.
This means advisors will need to shift resources from real estate to staff to handle real time face to face requests. The standard for human versus machine will no longer be whenever you can fit a client in. They will demand instant live contact and a more frequent connection. The third wall that separated us from them has been broken down. They have seen us in our homes and pajamas, and have become comfortable with having us on call.
But wait, I am all about instant service via cell phone and quarterly in-person handshakes, you say. That is completely analog, its last century’s model, it’s why the millennials want nothing to do with us, it has persisted because our Boomer clients were comfortable with it. But like the aforementioned CEOs, the Boomers now get Zoom tech and expect live constant contact, and once they get it, it can’t be un-got.
Our business endures for good and bad. Encroaching Europeanization and stubborn racial hurdles exist while we are embracing new technology and opening efficient and potentially very profitable new horizons.
We will still offer bespoke premium advice, but we must learn to deliver it via a tech solution that makes clients feel that they always have access to us like they have with robo platforms. If your practice won’t be ready to become a live interface for your clients, giving advice and updates live, in real time, you will lose clients to advisors who can. If you go back to a phone based system for handling clients you will be using technology that your 75-year old clients have outgrown.
Use your remaining time at home to figure out how to provide custom, personalized service worth paying a premium for with a live connection capability that rivals Robos and bank sales desks. It sounds easier than it is. If that’s frustrating, blame that adorable three-year old with chocolate all over her face, who just changed the way we will work in the future.