At Ladenburg Thalmann’s first-ever innovation conference, 36 tech-savvy advisors from its five independent broker-dealers joined venture capitalists and vendors to examine a new crop of financial planning tools and brainstorm how best to use them.
One takeaway: Advanced technology can only do so much if advisors don’t overcome a mental hump about the next wave of clients currently in their 30s, says planner Nina O’Neal, who attended the May 22 event held in Twitter’s San Francisco building.
“A big issue is not understanding the ‘why’ to adopt this technology,” says O’Neal, a partner at the Raleigh, North Carolina-based Triad Advisors practice Archer Investment Management.
“Now, there’s a real need in younger generations for good financial planning,” she continues, describing tech as critical for helping advisors tap the next base of clients. “They do have money, that mentality is wrong. They need help, they want help and they’re fantastic client relationships.”
IBDs have been bulking up their tech investments in recent years, with the largest, LPL Financial, pledging to spend $100 million this year. About two-thirds of advisors in the IBD channel now have access to one or more of 16 different types of digital solutions, according to Greg O’Gara of Aite Group.
The applications include integrations with customer relationship management systems, planning and asset management tools and automated document programs. For example, Ladenburg’s asset management unit launched Symbil, a robo advisor, in March 2016.
However, the new annual conference shows how the Miami-based IBD network is “looking beyond just robo investing” toward capabilities like artificial intelligence-driven planning and better communication tools to attract the clients of the future, says Dan Sachar, Ladenburg’s vice president of enterprise innovation.
“We want to make sure that our advisors are prepared for those long-term trends and looking ahead,” says Sachar, a former business consultant hired for the role in January. “It’s not just about what we do today, but it’s about building a path for what we’re going to do 5, 10, 15 years from now.”
The network’s roughly 4,300 advisors can already offer the automated investing tool. Symbil clients place their money in one of five Ladenburg funds, with suggestions based on their answers to a questionnaire, according to its SEC Form ADV.
The funds cost 75 basis points for active management and maintenance, plus fees of 8 to 15 basis points for the underlying ETF investments. Popular client-facing digital investing services like Wealthfront and Betterment offer much lower costs.
Ladenburg is making other tech investments, though. Its largest subsidiary IBD, Securities America, plans to roll out a new client portal in 2018. Ladenburg also opened what the firm calls its innovation lab in January, under Sachar, to develop ideas and explore investments.
Rival incumbents have unveiled solutions like an automated account opening process and discussed plans for services like a virtual assistant for administrative tasks. Ladenburg has integrated e-signature and automated pre-population of forms into its account opening process as well.
Sachar described the conference as an effort to “initiate the ideation process and do that collaboratively with our advisors” and a way of “cross-pollinating ideas” with 20 participating startup CEOs. Without getting specific, he promises announcements later this year on possible partnerships or acquisitions.
Ladenburg has not yet emerged as a prominent participant in the fintech race, says Aite Group's O’Gara and F2 Strategy CEO Doug Fritz. Fritz sees platform providers like Dynasty Financial Partners as offering better tech than IBDs, and O’Gara cites custodians as more common sources for digital solutions than IBDs.
The firms face a tough fintech fight as they seek to attract and retain breakaway advisors, and both O’Gara and Fritz view the conference as a positive step by Ladenburg. It reminds O’Gara of tech demonstrations for RIAs held by TD Ameritrade and Charles Schwab at their conferences.
“Including advisors in the conversation with early-stage tech start-ups developing AI, automated solutions, and new CRM applications will help to bring those products directly in line with advisor needs,” he said in an email. “I have not heard of this kind of micro-collaboration in the IBD channel.”
Fritz deems it as similar to ScratchWorks, an accelerator where vendors present their offerings to potential wealth management investors. He warns that Ladenburg could run in to trouble with advisors if the vendors’ technology won’t work with Ladenburg’s platforms and custodians.
“It’s a little bit risky to do this because not all of the technologies that you can demo and get excited about are actually secure enough for your client data,” Fritz says. “You want to be a little bit careful, if you’re Ladenburg, not to showcase technology that you can’t use.”
O’Neal, the advisor with Triad, praised five demos by firms using AI tech and a speech at the conference by fintech investor Mike Sigal of 500 Startups. Wealth management is “a little behind the curve” from other industries in enhancing its technology and making communication with clients easier, she says.
“I think the consumers and our clients and future clients are going to want those things just like anything else in their lives,” O’Neal says.
One presenter at the conference, Trent Bigelow of Track Technologies, see his digital tax planning firm as carrying the potential to blend robo capabilities with advisors’ expertise through machine learning. Track currently works primarily with real estate agents and is interested in partnering with Ladenburg.
“What I heard from advisors is that they complain that technology too often gets in the way of working with clients,” Bigelow says. “The quote I loved was that, ‘I want technology to help me move faster with the right info and then get out of the way.’”
Ladenburg may team up with the presenters’ firms to provide their services to the advisors or explore potential acquisitions. The network plans to make the innovation conference a regular event as Sachar seeks to work with advisors on developing and testing the new tech tools.
Digital solutions carry outsize benefits for firms like Ladenburg, O’Gara of Aite Group points out. IBDs with advanced tech integration double their client assets, serve 44% more clients and produce 73% more practice revenue, Aite Group and Envestnet found in an October 2016 study.
“It would be valuable if advisors could make time to attend one or two fintech conferences a year,” O’Gara says. “It would give them a chance to see how technology is evolving, allow them to have a dialogue with developers, and stay informed.”