In this new series Research magazine talks with the heads of leading investment and wealth management firms about their careers and the key issues they see facing the industry. We are pleased to launch the series with John Thiel, head of Merrill Lynch Wealth Management.
Thiel, who joined Merrill Lynch in 1989, is responsible for the strategic management of over 14,500 financial advisors and 150 private wealth advisor teams. He spoke with Research at his New York office.
How did you get started in wealth management?
I was in the insurance business. It was a family-owned general agency, so we not only sold insurance directly but insurance brokers purchased insurance products through us where we got an override. It was a very successful business in Tampa, Florida, but I didn’t have the same last name as the owners; the more productive we became, the less the owner wanted to share.
I was approached by what we then called a market executive at Merrill Lynch about the prospects of joining the firm, of which I knew very little. I had been in public accounting and then the insurance business.
When I was being courted by Merrill Lynch, what I realized about a wirehouse or a broker-dealer like Merrill Lynch is that when I thought about helping my clients and doing financial planning, in the insurance business, that all resulted in the purchase of one of three things: a life insurance policy, a disability insurance policy and/or an annuity.
When I looked at what the solution set was at a place like Merrill Lynch it was so much broader and, to me, provided so many more appropriate funding vehicles for people’s future liabilities or goals, if you will. So, I got very excited about the ability to help people on a much broader and a much more direct and liquid basis.
I’m not saying that risk management isn’t very, very important but it ends at some point and then asset and investment management begins once your risk management profile is set up appropriately. That is the reason that I joined Merrill Lynch in June 1989 — I thought there were more ways to help my clients and potential clients at a firm like Merrill Lynch than there were where I was in the insurance business.
What is the most significant change you have you seen at Merrill Lynch, and why did it occur?
It would have been 2008 when our firm — like several others in the financial services industry — struggled, and we were taken over by Bank of America or merged with Bank of America. It really allowed this business to prevail and now to, in my mind, flourish.
What is the biggest challenge facing Merrill Lynch today, and how is the firm addressing it?
I think the biggest challenge is for us to remain nimble and relevant given three big factors. One is to stay relevant and nimble and adapt to the regulatory reality in the environment which ultimately will be a harmonized, higher standard of care for our clients over and above the suitability standard.
Two, it’s just the nature of the competitive set and the role of technology and the role of some subset of the competitors to potentially disrupt the value or question the value of advice. When I mean advice, I mean more holistic planning advice, not just investment advice.
The third is to stay relevant to the evolving needs and wants of our clients, which are going to be based on their behaviors. Those behaviors could be how they access us, how they interact with us, how they collaborate with us, and how much we empower them in the relationship. All those behavior changes are going to manifest themselves in a relationship with a firm like ours and our clients and prospects.
When you mention the role of technology and potential disruptors are you thinking of robo-advisors?
Automated investment — that’s really what it is. It’s not a robot. It’s an algorithm that is automating some component of the investment process, which we embrace because it creates capacity and allows us more time to spend time talking to our clients about what keeps them up at night. It’s probably not the one basis point difference between their return and the S&P.
What are the biggest challenges facing the wealth management industry?