Clearly, it’s great to be the client’s trusted advisor. Now get ready to be the trusted advisor of the future. What’s that? The trusted advisor of the whole family. Morgan Stanley, for one, isn’t wasting any time: its FAs are right now training to become those advisors.
To be sure, it’s a transition that requires shifting to an entirely new practice management model; namely, a family wealth model. That’s how Morgan’s Jim Tracy, director of the firm’s Consulting Group, for managed money, as well as director of practice management for advisors, described the evolving new world, in an interview with ThinkAdvisor.
The expected big change to this substantially different business model brings big challenges to advisors industrywide, especially those still operating as they were 10 or 20 years ago, as Tracy points out. FAs need to evolve just as their clients are evolving by, for example, focusing more on diversity within their teams.
Morgan’s practice management program, Elevate, trains advisors to prepare for the future “to make sure they’re putting themselves and their clients in the best position on a go-forward basis,” Tracy notes.
That includes FAs in the firm’s fiduciary advisory business, Consulting Group, which, under Tracy, has grown to $930 billion in assets under management, according to Morgan’s latest earnings release in April.
Its Universal Managed Account (UMA), the fastest growing platform at the firm, boasts $220 billion in AUM, ranking No. 1 industrywide, Tracy says.
One chief reason for that growth is Morgan’s use of more and improved high technology. In fact, technology is the firm’s biggest line expense annually in its quest to differentiate itself from competing wirehouses and others.
For instance, its technologically advanced UMAX gives UMA advisors capability to trade across their entire client base using a dummy account applied to every client. And, says Tracy, it takes only three minutes.
ThinkAdvisor recently interviewed Tracy — a former chairman of the Money Management Institute who has been in financial services for more than three decades — about the present, the future and the past. That last one? Advisors doing business the old-school way. Here are excerpts from our interview:
THINKADVISOR: Please describe the practice of the financial advisor of the future.
JIM TRACY: It’s a family wealth advisory model, where the advisor will be less focused on the individual client and more focused on family needs and goals to become the trusted financial advisor of the entire family. The services that were provided for the patriarch or matriarch will be provided for the whole family.
What’s the biggest challenge?
That transition to the family wealth advisor model. It comes with focusing more on financial planning, creating diversity among your team – not only in age but in ethnicity – to make sure your practice looks more like the clients you’ll be dealing with in the future. It’s training advisors to evolve as clients are evolving. So the practice management model has to shift, and advisors need to change. Some of them are doing business the way they did 10 or 15 years ago.
What are the most important demographic shifts FAs need to be aware of?
In not too many years, women will control the decision-making on 60% of U.S. wealth. So there’s a higher need for advisors to be able to communicate with multiple family members, including Generation X and millennials.
Certainly much attention is being paid to millennials.
Yes, but the Gen X universe of older children are the likely inheritors of the current client. There’s a fair probability that the average client approaching retirement will transition a lot of their assets to their Gen X children first. The aging baby boomer’s assets will flow first to Gen X and second to the millennial clients, or some combination of both.
What other insight into Gen X and the millennials can you share?
The one thing people are missing in this whole analysis of the marketplace is that we change over time. People assume the differences between Gen X and millennials are going to be that way forever. But that’s not true because as they go on in life, their needs will change and how they want to engage will completely change.
Exactly how will the millennials change?
Our expectation is that with [mounting] responsibilities, complexities and challenges in life, they’ll become much more serious and more desirous of having a relationship with a trained professional that’s been attentive to them over the years and has the skills [to help them] for the rest of their life.
How do robo-advisors fit into all this?
Robos sit right where the industry was 20 years ago – focusing on investments. There’s nothing new that’s being offered. The algorithms, a lot of the models – all firms have done that for many, many years. What’s new is the access. Robo’s aren’t complete solutions and certainly don’t pass the needs test of high-net-worth and ultra-high net worth clients.