The World is Flat — and Some People Like it that Way

Change is hard, but these six wealth management trends won't wait

May 15th, 2019

By  Steve Gresham

Last time in this space I stirred the pot a bit by calling out the uneven "progress" of wealth management firms on adopting better productivity and embracing demographic realities — especially the rising importance of women clients and the impact of a generally older population. Thought leaders say these are obvious issues requiring immediate action. Market leaders are taking action ahead of less nimble competitors. I always wonder, since all the industry forces and factors are published widely across the advice industry, what keeps the followers from being leaders?

No one likes change. A good psychologist can make you a robust list of behaviors that protect people from change. In his thought-provoking book, "The Unpersuadables," Will Storr documents some of the more extreme examples of human intransigence in the face of overwhelming evidence. The subtitle says it all: "Adventures with the Enemies of Science."

Mr. Storr warns us about our unconscious brain: that we "experience hunches about ... rights and wrongs" and that "we come across an explanation of the world that fits perfectly over the shape of our feelings ... and tells us that it is all okay." We've been fooled — by us. 

A 10-year bull market reinforces our confidence in the principles of long-term investing. Facts should be the cure. "The scientific method is the tool that humans have developed to break the domination of the narrative," Mr. Storr writes. We don't listen because we don't want to.

Two recent industry events showcased the changers — industry pioneers living the reality of the advice world, watching the cues and using data for clues. The InvestmentNews​ Innovation Summit in New York and the Envestnet Advisor Summit in Austin both attracted advice industry leaders. At IN, the delegates brought their energizing A game — Joe Duran, Eric Clarke,​ Edmond Walters and more. Infectious. RIA chief Heather Ettingertold us about the need to entirely reimagine the advisory practice — this from an honoree who is already winning. The award for innovation in adviser educational materials went to a health and wealth fintech. 

At Envestnet, the backdrop was the historic Texas capital, BlackRock's booth ran non-stop demos. Frank Coates gave several sessions about analytics by barely dipping into his data treasure chest (the new scientific method!), and Michael Kitces turned heads with his graphic depiction of the state of the state. And the recurring theme of financial wellness permeated the atmosphere — after all, what's wealth without health?

Yet for all the inspirational speeches, compelling insights and impressive success stories, there were clearly some unpersuadables: the financial advice industry's parallel universe, in which the world is flat, there is no climate change and all vaccines and news media are bad — or fake. Change threatens, creates discomfort, forces action. The comfy sofa of the status quo is much more appealing to many. Others think there is still time — why rush? 

Six issues won't wait for the stragglers. These are the trains already leaving the station. Not catching them will make it really hard to keep up with competitors. The key point? These trains aren't full. There are still holdouts against the trends:

  1. Wealth management is planning, not just investments, and relationships, not just reviews

  2. Technology's disruption of advice has only just begun and will accelerate 

  3. Clients' best interests are already their expectation — don't wait for regulators to force a fiduciary standard or to do the right thing

  4. You must be able to articulate your unique value and your differentiation versus competitors, and defend your pricing

  5. You must know how you will be paid by clients over the next three to five years, while you co-exist with free trades, free beta, subscription deals and hourly fees. 

  6. The wealth management client is not a person, it is a household, typically of three generations, and the most important influencer is a mature woman. 

Years ago, a wirehouse CEO I knew was quoted in BusinessWeek saying he never looked at the internet — that was "for the kids." Failing to embrace technology led to a very costly catchup strategy for his successors, who shelled out well over $1 billion by the time they gave in to reality. Don't miss the train. 

Steve Gresham chairs the advisory board at Cogniscient Inc. He was previously head of the private client group at Fidelity Investments and adjunct lecturer in public policy at Brown University. See more at