Sirianni: How A Three Year Old Will Change Our Business Forever

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I’ve done dozens of print interviews and podcasts with billion dollar advisors and CEOs of the largest Wealth Management firms in the country these last few weeks, in an attempt to illuminate current events, and 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 takeaways for our future post coronacrash:

1. Millennials

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.

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 three more years they will make up 10-15% of our total AUM.

2. 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 45-50,000 now, post the coronacrash, simply because of the success of the firms 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 meets, 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 corona. 

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. 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.

3. What about the 3 year old? 

Technology will start to change what we do, not just how we do it. Much of the nations, 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. Much 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 meet 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 will mean 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 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.

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 this 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.