The worlds of traditional wealth managers and upstart digital competitors collided on the same stage during the LinkedIn FinanceConnect conference in New York on Thursday, and the competition between the two simmered through exchanges.

Mandell Crawley, global chief marketing officer of Morgan Stanley, told attendees at the Disruption in Wealth Management panel that the much-vaunted $30 trillion wealth transfer from baby boomers to millennials was “a little overblown” since the large majority it will still end up with high-net-worth and ultrahigh-net-worth investors.

Regardless of which generation they belong to, Crawley said that “human capital” would be paramount in serving these wealthy investors.

In response, Hardeep Walia, the founder and CEO of digital advisory Motif Investing, described how the industry was being transformed by three technological innovations -- robo advisors like his firm, passive investing and the use of big data.

“Not everyone’s going to survive, so it’s an exciting, scary, thrilling time to be in the space,” Walia said. “Friction will go to zero, transaction costs will go to zero and the big guys will compete with technology companies in Silicon Valley – a clash of the technology and investing worlds."


Crawley noted that he was well aware of the innovations of the robo-advisors. He conceded that digital channels are important, but reminded the audience that Morgan Stanley did the largest merger in the history of the industry, bringing in 16,000-plus financial advisors from Smith Barney. He cited that an indication of his company’s commitment to human advisors.

“Technology can be an enabler for advisors,” Crawley said, admitting to using Personal Capital. “We have to ask ourselves, 'How can we help FAs provide better advice and use tech to engage with clients in a more efficient way?'"

“Everything we’re doing on the social media side is designed to help advisors be wherever they want to be from a technology perspective,” he said. “Advice will carry the day, but we will have to be industry-standard from a tech perspective.

“We will be hard-charging on the digital front.”

Rachel Perkel, head of marketing at Wells Fargo Wealth Brokerage & Retirement, noted that it is hard to innovate in big companies.

“We’re trying some different things on smaller scales and seeing how they play out,” Perkel said. “To engage millennials, we’re doing things digitally to make things incredibly easy, from texting and real-time balance inquiries to ATMs where you don’t have to punch in a code and can use your fingerprint or phone to log in."

Still, Perkel underscored how Wells was making an effort to reach every generation of investor.

“For our wealth brokerage and retirement business, while we are testing out different advisory models, we have a tried-and-true model that works well in our brokerage business that is popular with baby-boomer clients,” she said.

“We have technology that we need to bring to bear to improve those relationships, and we also have to think through how do we get to other segments in an advice model. We’re pairing non-commission advisors to commissions-based ones to provide a model that can support the next generation, and we’re empowering our financial advisors to do some work around social media to engage in a more collaborative, community-oriented way with investors of all ages and demographics.”


Regardless of the investor being catered to, Walia said the industry will have to accept that service fees will disappear, especially as advice software becomes more sophisticated.

“Fees will go to zero – fee compression will be dramatic, as innovators charge zero basis points for portfolio management and still make money,” Walia said. “That’s the type of innovation that gets a lot of people scared. We will see this globally first, so pay attention to the economic model.

“That said, it is very hard to give good tailored, personalized advice, as the software not quite there yet, so while everyone is going to use software across the board, the question is, where do you want to add additional layers.”

Eli Broverman, co-founder and chief operating officer of Betterment, said the fundamental question his firm is grappling with is, “How do we use technology to help all investors at all times to get better outcomes?” He said that many investors, especially millennials, don’t want to schedule a phone call or an in-person meeting with an advisor.

“We built a new platform based on immediacy to provide better portfolio management to currently more than 85,000 investors so that people can get to their investment end goals,” Broverman said. “We work with end investors and we work with advisors.

“Especially in the Department of Labor’s effort to protect retirement savers, we’re looking at what technology and innovators can do to give retirees the experience they deserve and let them know that their objectives can actually be attained,” he said.

“Study after study says passive investing is the way to do it, so we focus on how to build on index investing to help people achieve investment goals, whether it's working with an advisor or via technology.”

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