In the age of cryptocurrency, robo-advisors and, of course, COVID-19, it’s no wonder that wealth management perspectives and expectations have experienced a tectonic shift, changing the way wealth managers advise and relate to clients, particularly those from younger generations of workers.
The news has been good for some, even amidst the pandemic. Fidelity Investments reported in August that retirement account balances have hit all-time highs and the number of 401(k) and IRA millionaires in Q2 2021 also hit new peaks.
Average 401(k) balances were up 24% in the 12 months leading up to June 30, 2021, Fidelity reports, at $129,300, and IRA account balances were even better, at an average $134,900, up 21% from the same time last year.
Interest in wealth management services seems to be on the upswing, according to one survey by prominent investment advisory firm Vanguard. Last August, Vanguard released the results of an online survey of 1,568 customers nationwide, including responses from 885 millennials, and all with a minimum annual salary of $50,000.
The survey gleaned their views on financial advice, investing and retirement and how COVID-19 may have changed those views.
Six in 10 Americans reported that the pandemic negatively impacted their pocketbooks. Yet, 24% of Gen Zers reported that the pandemic’s economic downturn actually improved their finances. Meanwhile, 78% of younger baby boomers and 67% of millennials expressed confidence that they’re socking away enough money to meet retirement needs.
ESG investing—the idea of putting one’s investment funds only into companies with environmental, social and governance strategies that match one’s own personal values and priorities—is important to some clients. Corporate giant JP Morgan Private Bank now provides clients with online information about its belief in “the power of sustainable investing to drive both long-term growth and positive impact.”
Across Kentucky, wealth management firms are looking for ways to help clients of all ages with their changing expectations, rolling out new products, making targeted hires of younger professionals and continuing to provide mobile and virtual options popularized during the pandemic.
Technology offers convenience, innovation
At PNC Private Bank in Kentucky, Managing Director Ann Georgehead said wealth managers’ advice is tailored to each client regardless of age, though online platforms like its PNC Private Bank Online offering are popular.
“This platform allows clients to group accounts based on how they view and organize their finances, pull statements, search transactions and review holdings and allocations,” Georgehead said. “The platform provides a net value figure, which reflects the net dollars of a client’s assets and liabilities at PNC, as well as accounts at other financial institutions. It also includes the value of personal items like jewelry, art and automobiles.”
This convenience is meant to enhance—not replace—local, direct contact between wealth managers and clients, she cautioned.
“Our business is based on relationships and trust, so technology supplements but does not replace personal interaction,” Georgehead said.
John Gardner is Merrill Lynch/Bank of America market executive/managing director for an area that stretches from Evansville, Ind., to Charleston W. Va. Having previously worked for Wells Fargo and Dean Witter-turned-Morgan Stanley, he’s been in the business for decades.
Gardner has noticed that technology is accelerating and impacting the way the industry operates and said it’s important to continue to attract the best talent to respond to changing trends and needs. He said 40% of today’s investors say they need more advice these days than in the past.
“I think the big key is to make sure that we’re in the position to deliver that advice, not just in the area of our traditional expertise, which is in the investment piece,” he said, “but also at a more personal level, making sure individuals will achieve their goals.”
As interest rates plummeted, Gardner said he did many mortgage referrals over the past 18 months or so, with the average client saving more than $46,000 on refinancing.
Technology now enables wealth managers to maintain client relationships in a virtual world if they choose.
“First and foremost, I think the average client’s bank is now their mobile telephone,” he said.
Developing and investing in new technologies is also important to the company, Gardner noted, as ML/BOA set a record in 2020 for new tech patents applied for and granted. The financial services provider applied for 722 patents and received 444 in areas like cybersecurity, artificial intelligence and improving mobile app and online experiences.
Financial advisors are using video conferencing programs like WebEx to meet with clients. One senior advisor recently shared with Gardner that he’d had nearly 40 meetings of this type with clients in a three-week period. He added that he expects the pace to continue increasing rather than slowing once the pandemic wanes because clients are now accustomed to this format for most routine interactions.
Training programs, younger hires maintain client relationships
In the Vanguard survey, 77% of Gen Zers and 69% of millennials responding said COVID-19 has prompted them to look more closely at their own finances, and 61% of millennials stated a desire to retire before age 65.
Who better to work with these young investors than wealth management professionals from the same generation?
At WealthSouth, two younger wealth management professionals, John Cadwell and Sam Pollom, shared their experiences working with clients.
Cadwell is a wealth management advisor at the firm’s Lexington office and Pollom is incoming marketing director for the Danville office.
“Young professionals are busy and, in my experience, they are looking for someone to help them determine and coordinate their overall financial strategy,” Cadwell said. “There are many investment options with new and emerging technologies, and while young professionals we work with are looking for someone to help them navigate investments, they want help with debt consolidation strategies, insurance, estate planning, and overall cash flow and retirement planning.”
In a sea of available information, Cadwell said, clients appreciate an advisor who can serve as a trusted partner to interpret the data and relate it to their individual circumstances.
“In addition, we can help younger clients by communicating with their attorneys and accountants, with the goal of keeping all trusted advisors on the same page,” he said.
Pollom said it can be tempting for young professionals to use digital investment platforms, but a personal relationship with a wealth management firm has many benefits.
“No matter your age, frequent conversations keep clients on track to meet their goals,” he said. “It’s also important for your wealth manager to meet with you to understand those goals. This is not, and should not be, a one-size-fits-all approach. We consistently engage in these conversations with clients as life events can impact your strategy. It’s important to be personal and nimble.”
Pollom said WealthSouth strives to stay abreast of new technological changes to meet client preferences. In recent years this has included an updated website, new social media channels and digital communication platforms that provide market insights.
“Our client planning is constantly being updated,” Cadwell added. “Although we often meet in person to discuss, clients have digital access to their financial plan that they can review from the comfort of their couch. Younger clients like having that flexibility.”
Gardner said a new three-level training program has been created for ML/BOA that is designed to provide multiple career destinations for participants and explores the increasingly complex types of financial advisor positions.
“It’s no longer just knowing about stocks and bonds and how to create portfolios,” he said.
By finding the right spot for the right people, a younger and more diverse workforce has resulted, he said.
Georgehead said in an effort to bring in younger associates, the PNC analyst program recruits college graduates into a three-year training program to learn the inner workings of the Private Bank, “and make sure they have the training and experience necessary to deliver the exceptional client service we know they expect.”
Pandemic prompted financial reflection, reevaluation
“During the pandemic, (PNC Private Bank) clients have embraced new technology that has allowed us to meet virtually and safely,” Georgehead said. “We will continue to offer these virtual options as the world reopens because some clients have found them beneficial. We are always looking for new ways to improve the client experience and offer a wider range of options to meet their needs.”
Gardner said his firm’s clients took time during the pandemic to reevaluate their financial situation to determine where they were in the journey and where they eventually wanted to be. For some, he said, that was an extended runway toward retirement, while others realized they were so content at home, they wanted to explore ways of accelerating retirement.
“I think people really started to think a little more about, ‘What do I want the rest of my life to look like?’ and realized that retirement savings is not just a number,” Gardner said. “It’s what you need to achieve the lifestyle you want.”
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