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Practice Management > Building Your Business

Welcome to the Financial Wellness Business, Envestnet’s Bergman Tells RIAs

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Kicking off the Envestnet Advisor Summit 2018, Envestnet Chairman and CEO Jud Bergman equated the development of the food industry in the United States to how the RIA business is evolving through innovation and creativity into a financial wellness business, in which the role of the advisor will expand.

“What lessons can we can take from the development of food, diet and nutrition?” Bergman asked a packed room in New Orleans. “What does that have to do with what I do? Life-changing improvements. It parallels advisors. With advisors, the push and pull of changes, and regulatory environment … the rapid innovation in food and diet over past 100 years is what is happening in [the advisory business].”

He pointed to five broad trends in changes in food and wealth management:

  • Everything is connected. What happens in one part of the industry affects the others, and there is a constant interplay of technology and regulation.
  • No brakes exist to slow the development of technology. Once something hits critical mass, it accelerates, which means you need to anticipate changes, not react to them.
  • Data transformed into intelligence is a game changer.
  • Entrepreneurs and innovators will step up to the plate. Disruptive technology is only the start; it’s the entrepreneurs and innovators will make change productive and valuable.
  • Peoples’ lives get better. When you’re talking about something as fundamental as food and money, it ultimately comes down to improving lives.

With these lessons, he went on to discuss the transformation in wealth management.

“The good news is over the next three years, we expect global retail assets to increase by as much as $38 billion, and nearly half of those assets will come from high-net-worth individuals. However, as I mentioned, investors are increasingly in the driver’s seat and the shift of power is accelerating based on technological change and putting more power in the hands of the investor,” Bergman told the audience of RIAs. “At the same time, clients want advice that’s more realistic and helps them achieve their financial wellness. They expect smart tools that guide them, and they expect seamless integration that allows them to view their complete financial picture.”

Envestnet also expects industry margins to continue to be squeezed and that, as the industry consolidates, there will fewer firms and advisors handling more assets. But by becoming more efficient, they will be more profitable, Bergman said. The firm also expects rules- and index-based management to accelerate with active management and alternatives delivering the alpha. Investors will continue to want ESG and impact investment solutions as well as strategic beta and will get that in the form of ETFs, Bergman said.

“Firms that thrive in this environment provide advice-centric and data-centric wealth management,” he said.

Bergman also said integrated technology in all areas of business will be needed. “And those who have the ability to integrate technology will determine who succeeds,” he said.

There are three critical factors to succeed in this business, Bergman said:

  • Expanding a definition of advice that includes financial wellness.
  • Transforming data into client-actionable intelligence to create better outcomes.
  • Leveraging technology and wealth management operating systems.

He noted that today an advisor is expected to provide advice that achieves goals, not just pick stocks. “This is a fundamental shift for all of us,” he said. “We are in the advice business, and overall, the financial wellness business. And our definition of advice to the extent it expands is the extent it will be successful.” He added that advice and integration turbo-charges revenue.

The payoff, one study found, was that advisors who provide all aspects can create 300 basis points annualized more return for their clients. This expansion includes asset allocation, vehicle selection, tax management and family coaching. “Are your practices structured to deliver on each of these elements?” he asked.

Many advisors are re-evaluating their value proposition with their clients. The days of charging 100 basis points for picking a basket of mutual funds is over, he said. “The best advisors are helping clients achieve better outcomes.”

The advice includes a “whole spectrum of financial wellness,” Bergman said. “Planning, which is advisor-centric, budgeting and spending that is investor-led, and investing … which includes managing credit and even protection.”

This theme was further developed by Envestnet President Bill Crager, who discussed new products that allow an advisor to enhance the financial wellness proposition that includes all the investor’s information in one tech product so advisors can understand what their clients need holistically, including insurance or credit lending advice, as well as point out where their clients may need save, such as going out to dinner less, to reach their goals.

— Check out Envestnet Advisor Summit ’18 Kicking Off With Top Attendance on ThinkAdvisor.


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