(Business Insider) The conversation around the big business of managing wealthy people's money — and where the industry is headed — has revolved around three big themes: fees, robots, and scale.
Business Insider recently asked Jim Hays, who was named president and head of Wells Fargo Advisors in July, to predict where the wealth industry is headed in the next decade. This marks Hays' first interview in his position. He joined the unit's parent firm Wells Fargo in 2005, and was previously head of its Private Wealth Financial Advisors group.
Wells Fargo Advisors has 13,723 financial advisors that oversaw some $1.6 trillion in retail clients' assets as of September 30.
Some firms are pouring resources into making the basics of managing money more automated — Charles Schwab said this week it would roll out a new tax and retirement feature in its robo-advisor. And pure-play robo advisors like Wealthfront and Betterment have created an expectation among some younger users for low-cost wealth solutions that can be found right on your phone screen.
Wells Fargo and the other wirehouses that employ tens of thousands of financial advisors around the country are meanwhile placing a bigger premium on high-touch advice, helping people map out a plan for their financial future, and making existing financial advisors more productive.
Here's the text of the full Q&A with Hays.
What kind of wealth-tech will be ubiquitous in 2030 — and what may be phased out?
More sophisticated, predictive analytics built on artificial intelligence and paired with natural language recognition will make investment choices easier. As investment choices become commoditized through those analytics, the value proposition for financial advisors will evolve.
An algorithm can recommend a stock, but a financial professional can help clients understand and plan for life goals and move through the emotional side of investing. That personal interaction between advisors and clients will be driven more by digital collaboration as video becomes the norm.
Regarding what will go away, ID and password authentication will phase out as we move to more secure biometric and more sophisticated authentication. Commission trades will likely become outdated.
Analysts expect a wave of advisor retirements between now and 2030, and a portion of wealth managers think their jobs will no longer exist in five to ten years. As the industry evolves, how will the job description for the wealth manager/financial advisor of 2030 have changed from the manager/advisor of 2019?
Regardless of how technology evolves, the financial advisor field is grounded in relationships. That being said, the predominance of technology and its impact on the financial advice industry can't be understated.
As we move forward and the average advisor age lowers from the current industry average of 51-plus, advisors must embrace tech changes as an ever-evolving way to connect with and advise a diverse population. The need for customized, personal advice on how to reach life goals won't change. But, how advisors connect to deliver that advice will change.
How will robo-advisors and the broader theme of self-directed investments impact the financial markets in 2030?
Robo-advisors are here to stay and I believe they are a positive enhancement for our industry. Digital access to investment portfolios allow a broader segment of people access to early investing. Robo platforms will continue to evolve and provide more sophisticated investing strategies within increasingly easy-to-navigate apps.
Additionally, through Wells Fargo Advisors' Intuitive Investor, we've found users actually prefer a hybrid model: pairing powerful portfolios with advice from financial advisors.
We believe that will be more of the norm moving forward, with some facet of embedding that access to personal advice inside the technology. Self-directed investments will continue to appeal to some and enhanced platforms and offerings will likely make self-directed investing even more user-friendly in the future.
The key to moving forward successfully is to provide the right array choices to investors: from completely self-directed investing, to a hybrid model like Intuitive Investor, along with full-service advice.
Will the wealth management industry consolidate in your firm's segment over the next decade?
Yes. I believe the current wave of industry consolidation is a consequence of several possible factors. It may be a matter of scale — being able to compete and offer a vast array of client services is becoming table stakes as client needs and complexity grow.
Those consolidating may not have a value proposition that is powerful enough for attracting either financial advisors or clients. Additionally, the regulatory environment is likely driving the need to consolidate. Essentially, if a firm doesn't have critical mass, it can be very challenging to be successful.
Clients expect an integrated, unified experience across all their finances. Smaller firms may not have the scale and security to deliver as client needs change.
Not necessarily. While certain types of transaction fees may move downward, it's shortsighted to discount the value a financial advisor brings to a client.
The types of services that financial advisors provide will evolve as technology built on machine learning could commoditize investment options and choices at some point. A financial advisor's inherent value will become the 360 degree view of a client's financial life tied to their personal goals and helping clients reach those life goals.
The companies that can help clients with more aspects of their financial lives will be the most valuable. Will that mean that we charge differently for a different type of service? Very possibly.