gabriel garcia managing director bny mellon | pershing · 2018-06-05 · robo-advice: does it...

For advisor or investment professional use only

Four Myths: Fact or Fiction

Gabriel Garcia

Managing DirectorBNY Mellon | Pershing

Four Myths: Fact or Fiction?

Implications

Questions

1

2

3

Agenda


Robo

Platforms Make

It Difficult

to Compete

The Industry

Will Benefit

From a Huge

Wealth

Transfer

Firms Are

Growing

Advisors

Are Reducing

Their Fees

Four Myths: Fact or Fiction?

He died penniless…

sounds like he timed it just right.

Anonymous

”“

Robos

Wealth

Transfer

Growth

Fees


Placeholder: Expectations vs. Reality Robos

Wealth

Transfer

Growth

Fees

Source: U.S. National Center for Health Statistics

Oldest group turned

71 years old

Have YOLO

mindset

40% will leave behind an inheritance

30% will spend it

30% aren’t sure

Boomers

$30

Trillion

Wealth

TransferBoomers spend $400B annually

on consumer goods


Remaining Life Expectancy at Age 65, 1950-2009

Source: U.S. Centers for Disease Control, Health, United States, 2011, www.cdc.gov/nchs/data/hus/hus11.pdf#022

Robos

Wealth

Transfer

Growth

Fees

What we have here

is a failure to communicate.

From the movie “Cool Hand Luke”

”“


How Advisors Should Respond to Fee Challenges by ClientsRetainer Fees Vs The AUM Model

Revenue Sharing Falls

Victim to Fiduciary Push

Robos

Wealth

Transfer

Growth

Fees

Pricing Headlines


Elite Advisory Firms Are Not Feeling the Pressure to Reduce Fees

Source: Elite Advisor Summit 2018 attendee poll.

Robos

Wealth

Transfer

Growth

Fees

Only 25% of firms

made pricing

changes in 2015,

out of them, 65%

increased fees

Elite advisory firms not feeling the pressure to reduce feesMajority of advisors kept fees steady in 2017

58%No

42%Yes

84%No Change

10%Increased

6%Decreased

Pressure from clients to reduce fees? Most are not feeling it


Yield on Assets Over the Last Five Years

Source: 2016 InvestmentNews Financial Performance Study.

Robos

Wealth

Transfer

Growth

Fees

Only 25% of firms

made pricing

changes in 2015,

out of them, 65%

increased fees


Why Not?


Robos

Wealth

Transfer

Growth

Fees

Only 25% of firms

made pricing

changes in 2015,

out of them, 65%

increased fees

Holistic wealth management services are driving

business and helping advisors maintain pricing

Drivers of pricing power in the market

58%Holistic wealth

management

services, including

estate and tax planning,

private banking, etc.

32%A strong brand that

articulates a unique value

proposition

10%A solid network of

client referrals

Value-based

pricing

Retainer

fees

Hourly

pricing

Project

fees

Flat

fees

The rumors of my death

have been greatly exaggerated.

Mark Twain

London 1897

”“


Robo-Advice: Does it Measure Up to Human Advice?Robos

Wealth

Transfer

Growth

Fees

84% of Millennials

seek financial advice

82% want MORE

personal meetings

from their advisor

is

62% of Millennials

did not know what a

robo-advisor is

Source: LendEDU survey, 2017.


Robo Advice: It’s a “Nay” for Most Millennials Robos

Wealth

Transfer

Growth

Fees



Trust Is Stronger Human to Human Robos

Wealth

Transfer

Growth

Fees



Investor Adoption Rates of Robo Advice and Traditional Advisor Usage by Investable Assets Robos

Wealth

Transfer

Growth

Fees

Source: InvestmentNews, Robos, digital platforms and human financial advice: What investors really want, 2017.

The devil is in the details.

Anonymous

”“


Robos

Wealth

Transfer

Growth

Fees

Firms Are Getting Larger



Operating Profit Margin Over the Past Five Years

Note: 2011–2014 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies.


Robos

Wealth

Transfer

Growth

Fees

20.9% 20.4%22.3%

25.5% 25.2%

2011 2012 2013 2014 2015Note: 2011–2014 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies.



Income per Owner by Evolutionary Stage


Robos

Wealth

Transfer

Growth

Fees

$394,000

$473,000

$775,000

$1,050,000

Solo Ensemble Enterprise Ensemble Super Ensemble


Median Revenue Growth Over the Past Five YearsRobos

Wealth

Transfer

Growth

Fees

10%

16%14%

8%

5%

16%

32%

13%

1%

12%

22%

0%

5%

10%

15%

20%

25%

30%

35%

0%

5%

10%

15%

20%

25%

30%

35%

2012 2013 2014 2015 2016 2017

S&P data

??


Note: 2012–2015 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies.


Implications for Advisors

Seeds of Destruction Invest Profits for

Growth

Execute a

Sales Plan

Become Relevant to

Other Demographics


Drivers of Business Growth


29%

26%

23%

16%

6%

Developing an impactful

branding and marketing strategy

Implementing new technologies,

capabilities or solutions

to meet client needs

Hiring and developing talent

Growing through

mergers and acquisitions

Reaching new and untapped

investor segments


Are You Tracking Leads?

Average Median

Leads generated in

2015

225 90

Leads per professional 30 12

Leads per active owner 59 24

Percent of leads

elevated to prospects

54% 50%

Percent of prospects

converted to clients

37% 37%

Percent of leads

converted to clients

21% 17%


27%

11%62%

Yes, tracked at

a firm-level and

shared among

advisers

Yes, tracked by

individual

adviser, but not

shared among

advisers

No, not tracked

formally


Become Relevant to Other Demographics

Matures Boomers MillennialGen X Gen Z


Capturing the Future Client—Serving New Needs and Attitudes

Source: Capgemini—United States Wealth Report 2015

47%

75%67% 70%

82% 87%

3%

86%

Trust and Confidence Satisfaction with Wealth Manager Multiple Relationships Wealth Manager Understanding

of Needs

Under 30

Over 60

68% 68%

62%

Rising Costs of Healthcare My and My Family's

Health

Assets Lasting Through

Lifetime

Over 60Top Concerns

Key Differences of Prospects Under 30 and Over 60

83%80%

73%

Availability of Quality

Education

Ensuring Children's Well-

Being

Rising Education Cost

Under 30

Thank [email protected]



Disclosure

This document is designed for Advisor/Investment Professional Use Only. The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this presentation is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. Investment decisions should always be made based on the investor's specific financial needs and objectives, goals, time horizon and risk tolerance. The statements herein are based upon the opinions of Envestnet and third party sources. Information obtained from third party resources are believed to be reliable but not guaranteed. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

The graphical illustrations do not represent any client information or actual investments; they are not being offered to assist any person in making his or her own decisions as to which securities to buy, sell, or when to buy or sell. Investors should note that income from investments, if any, may fluctuate and that price or value of securities and investments may increase or decrease. Accordingly, investors may lose some or all of the value of principal initially invested. Past performance is not a guarantee of future results.


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gabriel garcia managing director bny mellon | pershing · 2018-06-05 · robo-advice: does it...

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