Tobias Salinger, Financial Planning, Senior Editor

Gavin Spitzner, Wealth Consulting Partners, LLC, President

Recorded at InVestWest, December, 2019

Tobias: Welcome to the "Invest Podcast" with Tobias Salinger. In sessions recorded live at Financial Planning's InVestWest Conference in San Francisco, we dive deep with some of the top minds in wealth management. For more on the latest news in wealth tech, subscribe to our weekly invest insights email newsletter on our website, financial-planning.com. And we are so pleased to have as our guest right now, Gavin Spitzner, the president of Wealth Consulting Partners. Thanks for being with us.

Gavin: Great to be with you, Tobias.

Tobias: Absolutely. Now with apologies to some other guests on our podcast, the panel you moderated earlier today at the InVestWest Conference, that panel was the one I was probably most looking forward to. It was called "Wealth Management Innovation & The Five New Rules of Client Segmentation & Engagement." You moderated alongside panelists, Cynthia Loh of Charles Schwab, Jeff Schnitz of SVP Private Bank, Dasarte Yarnway of Berknell Financial Group, and Steve Gresham of The Gresham Company. For our listeners who are unable to attend in person, what were some of those five rules, and what were some of the other key takeaways from that panel?

Gavin: Well, it was a great panel. And those panelists you mentioned made it that way. I was really lucky to pull together a panel that was extremely diverse in terms of very large firms, smaller IRAs looking to grow. So, very different perspectives about client segmentation and the technology and capabilities they need to service those segments. So, we talked a lot about specialization, about personalization, and all the things we need to do to create more time and capacity and arm the advisors or, through the technology, clients with better data to make better decisions. So that was a key focus. Hyper-personalization… there are so many people in the country and in the world for that matter that aren't getting any advice today or getting subpar advice, not advice that's really personalized to their needs, very cookie-cutter model portfolios. Is that really advice? I argue it's not. So, I look at this and say, how do we use technology to create capacity? But then, more importantly, how do we use technology and data to really inform clients, either through advisors or directly through technology, increasingly to help them make better decisions?

Tobias: I see. I see. Well, sounds like a great session and there have been so many at InVestWest. But let's talk about your company, Wealth Consulting Partners. Pardon me, this is kind of a glass houses issue because Financial Planning is quite a generic name, but your company has a very generic name.

Gavin: True. Guilty.

Tobias: Yeah. But with your 25 years of experience in wealth management, what are some of the main consulting services you provide and who are some of the clients we may know if you're able to say?

Gavin: Well, to tell you what I'm doing today, I'll just go back in time a little bit to put it in context. So, I've been in the business, like you said, 25-plus years now, in many different areas from marketing to professional development, to software sales, practice management. So, I've really been a generalist and I've seen the business through the lens of very different types of firms, all in the wealth advisory business. And I've seen what's worked and what hasn't worked in terms of advisor adoption and client satisfaction. So, I've been in consulting now for 5 years, started the practice early 2015. So, coming up on my fifth anniversary, after stints at Envestnet, after they acquired the division of Prudential that I was at for many years doing a variety of things, but mostly helping build out a platform that provided managed account solutions to RIAs, IBDs, banks. Always loved the strategic side of helping the executives at these advisory firms really think about where they need to go in terms of growing their business, meeting the needs of their advisors and clients. So, I had the opportunity to go into consulting.

So that's really what I do. I help these firms figure out where they're going, build out a target operating model across people, process, technology. And from there, figure out, "okay, if that's what we need to look like to be growing, and be vibrant, really meet the needs of the target segments we're going after, what are the implications for our technology stack? What are the implication for process reengineering? What are the implications for organizational structure and resource allocation? And so, do a lot of work around helping them establish their target state, build business cases, and then identify partners, technology capabilities, and the change management that needs to take place within the organizations to take advantage of those capabilities.

Tobias: I see. I see. Well, we were talking just before we started recording and you kind of alluded to it, but you shared a pretty interesting statistic that I have to say I don't think I was even aware of. It's easy to lose sight of it when you have so much discussion of scale and asset growth, and all of those fun stats that I love to look up and obsess over for my news coverage. But we kind of lose sight of it. What was the stat and, what are some of your insights into the significance of it?

Gavin: Well this goes to my personal life and my corporate life of what I'm doing. I think the stat you're referring to, it's somewhere in the 15% to 20% of Americans that are actually getting any kind of advice today. So, you're right, we get blinded by these massive, you know, tens of trillions of dollars of advisory assets. But a lot of that is driven by the market, a historic bull market and very wealthy people. But even very wealthy people only, depending on what studies you believe, maybe a third of them are truly the type that are engaging with the advisor, not just from a...they might have done some business with somebody but in terms of really having an advisory relationship, it's pretty slim. And the number of households in the advisor channel has been pretty stagnant so the growth has been market and firms are growing by M&A and recruiting. There's not a lot of organic growth.

So, somebody in the business shared a stat recently, that organic growth when they really get underneath it and get rid of all the inorganic noise, get rid of the market, that it's roughly somewhere in the 2% to 3% range. And that means...that's an average so there's a whole lot of firms that are well below that in bleeding assets. So, I'm driven by, what can we do from a business model standpoint, from a technology standpoint to create more ability to serve more people however they want to be served, whether that's through a direct relationship with an advisor who can have the capacity through technology to actually spend time growing their business, serving more clients across not just high net worth, ultra-high net worth, but mass affluent clients that often need the advice the most, and do that profitably, and down to your truly digitally native capabilities that a certain segment of clients, especially younger, but not just younger, want to engage with.

Tobias: Well, it is I think a very telling statistic. And I mean, it just begs the question, to me, how much have firms learned this lesson? What's their reaction? When you tell them things like this, it kind of goes against what they want to hear, which I can tell you from experience in interviewing wealth management firms, they don't sometimes react very well when you mention something that they don't want to hear or they don't wan to talk about. So, how much have they learned these lessons and how much are they moving forward to try to make progress?

Gavin: If I'm honest with myself and what I see, I'd say, it's not very popular. And I tell prospective clients, for this to lead to anything productive and for us even to work together, you're going to endure pain, change is pain. You're going to have to make hard decisions about resource allocation and, oftentimes, cannibalizing yourself. And these organizations, there's a strong defense mechanism that resists change. And you often find yourself doing these self-fulfilling, how can we do this, but do it in a way that's really simply supporting the existing channels and business model, and we don't want to compete with ourselves. So, like, guys, you know, if you don't do it, someone else is going to do it.

And so, for instance, I do a lot of work in the bank space, and they're starting to get better organized around their own data and they are seeing outflows now. So, they didn't want to cannibalize themselves, say, taking deposits and moving them into digital advice solutions. It's not as high margin. So, my position there is to some degree, that's just defensive because if you don't do it to yourself then you do have an advantage being the incumbent, if you can take away the friction moving from deposits on the retail side to a digital vice solution, if you don't do it to yourself, somebody else is going to do to you and we're seeing that in the data now.

Tobias: Well, I'm glad that there's someone telling them something that they don't want to hear because it helps advisors and it helps clients. But FinTech and WealthTech, they're funny concepts to me, but also important ones. But on the one hand, everything is tech, something tech, FinTech, wealth, WealthTech, we'll just add tech...InsureTech, BankTech. So, that's funny to me but it's also funny because of how much advisors complain about the tech that they have to use. Is it fair or unfair that wealth management firms have a reputation for clunky technology?

Gavin: Oh, it's fair. You know, we've gone through a period where there's just been an explosion of tech. Lots of firms have bolted on newer capabilities on to more archaic core platforms. Although I do a lot in the tech space, I'm not a technologist at the end of the day, and I tell firms, "Don't look for technology to be a silver bullet and don't look at it as a crutch like it's just magically going to create capacity." If you don't do it in a very thoughtful way, think about the advisor experience, the client experience from CRM to data, to investing, creating a plan, implementing a plan, taking the friction out of that, start to think about the experience in a client journey type fashion, then go figure out the provider or providers to enable that.

I think we're entering a better period where there's more fully integrated solutions through APIs. You've got an ability to bring together more of a best-read solution as well if that makes sense for your practice, where the data and the applications are integrated to a much greater degree than they were even five years ago. So, I think that's opening up. But again, it's really, start with the end of mind. What's the client journey look like? How are you going to enable a great experience? Then figure out your requirements and figure out what technology makes a lot of sense.

Tobias: Well, definitely worth bearing in mind, and this is an excellent conversation. I think our listeners are going to get a lot out of it. But we're almost out of our time, but I do want to wrap it up with one, kind of, look forward question, and it's something that everyone is talking about at this year's InVestWest because how could you not? And when I look at your resume, I just think, "Here's the perfect person to ask about the Schwab TD deal." That price tag of $26 billion and $5 trillion in assets across the combined custodians and brokerages, that just screams for attention. But beyond all of that noise and all the hullabaloo, what do you think advisors will be watching the most to judge this deal and in reality to assess their custodial relationship moving forward?

Gavin: How much time do we have? There's no simple answer there. I know there's different camps forming. I'm kind of in the wait and see. I think it's going to...advisors that were looking at some different solutions already a la an Altruist, some of the newer challenger firms. We heard today John Stein speak about Betterment as the ultimate challenger custodian. He's aggressively looking at that. So, I think for advisors that were already kind of on the fence and were looking for something different, this might accelerate that but then, there's a lot of inertia. I think there's advisors saying, "Look, if through the combination that frees up investment that can be put into the platform and give me what makes sense for my practice," I think we'll see folks stick it out and at least wait and see how that plays out.

Tobias: Well, I guess that's what we'll have to do as we wait on that $26 billion question.

Gavin: It's not going to be all or nothing, right? It's a big market with 13,000 RIAs. They're very individual. I think there's room for many, it's just going to be a matter of finding the right fit.

Tobias: Absolutely. Well, Gavin Spitzner, Wealth Consulting Partners. Thank you very much for your time.

Gavin: Thank you.

Tobias: Thanks for listening to the "Invest Podcast" presented by Financial Planning. I'm Tobias Salinger. Please subscribe on Apple, Spotify, Google Play or wherever you get your podcasts and leave a review to let us know how we're doing. To keep up on the latest in digital wealth management, please also visit us online at financial-planning.com and sign up for our weekly FinTech newsletter, "Invest Insights." We'll talk to you again next week.