The Trends Innovative Advisors Are Talking About

One of the more interesting positives that came out of the pandemic is the pent-up demand for attending industry conferences and events. A recent case in point: WealthStack 2023, which was widely attended and recently held at the Diplomat Beach Resort in Hollywood, Florida.

It featured three days of nonstop tech demos, sessions and networking. More than 1,500 advisors, custodians, technology companies, industry insiders and experts were all looking to better understand the state of wealth-focused technology.

By far, the top topic being discussed most was artificial intelligence (AI) and its many emerging uses in wealth management — most notably, how generative AI, spurred on by the monumental popularity of ChatGPT, will fundamentally alter how advisors will deliver financial advisory services.

Just about every panel discussion and presentation dedicated some time to the AI topic. The consensus is that AI, while disruptive, is unlikely to displace advisors.

Everyone on stage seemed to agree that it would be a great enabler to enhance, elevate, expand and help drive scale for advisors to solve investors’ very human problems.

Plus, virtually every speaker pointed out that we’ve already seen this movie before, when robo-advisors entered the space a decade ago bringing low-cost algorithms and digital experiences that ultimately were adopted by us humans.

Integration Issues

Another key theme was how to unify the technology experience for both advisors and clients, particularly with the proliferation of literally hundreds of wealthtech solutions.

“The industry has been formed by every custodian and vendor wanting to be the center of the universe, which then creates a massive integration problem,” said INVENT CEO, Oleg Tishkevich. “What is needed is a digital ecosystem approach that advisors control and design themselves, just like the app store on the iPhone.”

Along these lines, the pendulum is swinging away from each advisor building their own tech stack with a “best in breed” component, and then trying to integrate them together. Rather, a more efficient approach is to provide a customizable, flexible platform that provides multiple capabilities under a single experience.

As Reed Colley, CEO of Summit Wealth Systems, explained, “There are too many systems with ‘tech debt,’ meaning that legacy platforms aren’t designed to solve today’s problems. Instead, we need to humanize the approach, letting the technology enable better conversations versus the technology becoming the conversation.”

As part of the showcasing of all that’s new in wealthtech, WealthStack provided a rapid-fire set of innovation demos from emerging technology companies, with each firm having just five minutes to make their pitch and provide a compelling case for its use.

Investment manager Grantham, Mayo, Van Otterloo & Co. (GMO) stood out with its new portfolio construction and asset management platform, Nebo, which “bridges the gap between the plan and the portfolio by redefining risk as not volatility, but rather, not having what you need when you need it,” said Martin Tarlie, product lead for Nebo.

The industry-defining merger between Schwab and TD Ameritrade is also creating a gap for other players to enter the market. The buzz was palpable throughout the exhibit hall, full of alternative custodians vying for mindshare to capitalize on the opportunity the mega-merger is creating.

Apex, the large fintech custodian that already powers many popular digital fintechs, is looking to make waves with their recent hires of former TD Ameritrade executives who built the award-winning TDA Veo platform.

“We’re looking to flex our muscles and superpowers for creating digital solutions for advisors,” said Megan Hausmann, director of Advisory Success at Apex. One example of that muscle-flexing was the recent launch of the Apex cash sweep program offering yields of 4.25%, while incumbent custodians are paying close to zero.

Marketing Muscle Needed

Of course, growth was an underlying theme across the conference, particularly now that industry research is revealing that true organic growth for advisors is declining dramatically, once market gains and M&A activity are subtracted out.

Industry guru Michael Kitces — of Kitces.com and Buckingham Wealth Partners — was the keynote speaker on the event’s first day, and he shared recent research that finds advisors are dramatically under-investing in marketing.

To illustrate this point, Kitces highlighted an example of what the lifetime value of a client is in relation to what advisors spend on acquiring a client. “A typical $1 million client’s lifetime value is anywhere from $60,000 to $100,000 based on the profitability of a firm,” he noted.

“Yet our research indicates that the majority of advisors would only invest $2,500 or less to acquire that client, showing the massive disconnect advisors as business owners are operating under, as they point to referrals as the key to their growth,” Kitces explained.

“Meanwhile, the fastest-growing firms rely the least on referrals, which is why we are now seeing an influx of marketing technology to solve for this new paradigm,” he concluded.

Timothy D. Welsh, CFP, is president, CEO and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.

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