The financial services industry needs a major makeover, Sallie Krawcheck said at an industry conference Friday.
Advisors need to look long and hard at their racial and demographic make-up, as well as their attitudes toward women and consumers under 35, social media and regulatory changes, the Wall Street veteran told the audience at Envestnets annual Advisor Summit conference in Chicago.
The advisory business needs to worry about becoming the Republican Party -- middle-aged and older white guys talking to each other, warned Krawcheck, who ran Merrill Lynch as the former president of Bank of Americas Global Wealth & Investment Management division.
Advisors also need a new perspective toward women, she said. Talking to husbands and nodding at wives no longer cuts it, Krawcheck cautioned. If women arent fully engaged by the familys financial advisor, they will leave, she said.
Wealth managers also need to adapt to the next generation of clients, who are interacting with experts in a different ways, and have different expectations, Krawcheck said. Stung by market crashes, people under 35 have also become more conservative investors, she noted, and are more risk averse than any generation except their grandparents.
Social media is not going away, and is changing everything, Krawcheck stressed. You need to be on social media, she told advisors, citing one survey showing that one-third of mass affluent consumers used social media as a consideration when determining a financial services provider. That's a percentage that would only increase, she said.
REDEFINING A ROLE
Advisors also needed to do a better job defining themselves as trusted and reliable financial counselors and not stock-pickers, Krawcheck said.
The No. 1 reason clients leave is communication -- when advisors dont return their phone calls, she said. Client satisfaction increases in proportion to the quantity and quality of the interaction.
She also called for regulatory changes at money funds and banks, which she said needed more stringent capital requirement regulation. The logic for new regulation is impeccable, she argued, urging advisors to also push for reforms.
Money funds are not totally safe, Krawcheck said, even though consumers think they are. If theres a crisis and clients cant get what they think is cash, advisors will bear the brunt of the blame, she warned.
Flickr photo from Jeff Maurone