Rethinking Wealth and Asset Management - Edition 1: The Power of Core Memories and the Right Conversations

Lately, every institution wants to capture a piece of the wealth pie. We are seeing RIAs rethinking client strategy, banks using deposit success stories to capture wealth in international and regional markets, insurance companies foregoing certain asset management plans to focus on wealth, and private equity firms doubling down on RIA PortCos.

Underscoring this are fundamental questions of:

• At a company level, how do you add tax and estate planning, health, wellness, and education?
• At an industry level, who’ll be able to scale this in a quality way and be disruptive?
• At a client level, what does the wealth transfer actually mean and how do I capture it?

While these are great strategic questions, my recent experiences have made me ask what really makes a difference when it comes to “winning” clients even when you have the right services.

If you are in the wealth space, you are trying to capture new clients, convert clients from a competitor and retain family assets during inheritance. Everyone’s heard that identifying the right person, at the right milestone, and with the right service content is important. But we’ve seen firms have the perfect “hit list” of clients to go after, know their milestones and the right services, and they still can’t capture, convert or retain. What gives?

I want to share two experiences:

First, I recently switched advisors. I wasn’t unhappy with my old provider, and my new advisor was probably 10 in a line of others who had approached me about switching. So why did I pull the trigger?

Here’s how that conversation went: “I know you are entering a territory in your profession where you must file taxes in every state. That’s annoying. I also assume you already have a tax advisor. First, we can use the guy you already trust. And second, we can link that person to our analysis of how best and when to file and help provide buffer across navigating 50 states. I’ve done this a thousand times over. Also, we know you opened a 529 recently, but have you thought about the right daycare option for you in Philadelphia?” This conversation was different. Others had gotten the timing and milestone right – I was in a new part of my career, and I had just become a mom (he’s 14 months now, and I am thoroughly impressed by the new muscles in my arms) – but none talked about my actual stressors.

Second, I asked my new advisor about wealthier clients transferring assets to their children. “I have a client who has about $100m in assets he’s handing over equally to his three daughters. I’ve spent an equal amount of time with each daughter, but I’m only for sure going to get one as a client, and while I’m working on the other two, I’m not sure how it’s going to go.”

“What’s different with the one daughter?”

“I think it had to do with something 15 years ago. Her father was already wealthy then and asked me to talk to her because she had just gotten out of college and was nervous about opening a bank account. It wasn’t my paygrade nor where I spend time. She didn’t need much help, but I asked her how she was thinking about it and helped sort through the paperwork and the process when she finally made a call. I think she remembers that.”

“Sounds like she will forever associate you with that core memory; it wasn’t about managing investments, it was something a new adult is nervous about, and you made it feel easy.”

“True, it was a core memory. You’ll always remember opening your first bank account.”

Both experiences got me thinking – when it comes to the right person, milestone and content, maybe our definitions of milestones and content need to be changed.

Milestones usually include divorce, marriage, death or a new job. While great to target, there are others that are lower cost and effort and higher impact. For a 24-year-old they could include her first breakup, buying her first car or opening her first bank account. For a 40-year-old they could include moving, picking a day care or a sickness. The point is … we should redefine milestones to core memories, and a strategy that does not target wealth but targets being there when someone is about to embark on something new, exciting or stressful, will eventually yield wealth results.

With content, I think the old-school way of salesmanship will stay and is a skill that few advisors master. It’s not about content per se, but the right conversation. You can easily have the right content (e.g., here’s a tax planning model), and it might not make a difference. That was my case: other advisors had impressive brochures of tax and education planning for the future, but no one addressed the specific stressors I was facing. Fifty state tax filings are annoying, and darn picking a daycare is stressing me out.

My take-away is 1) we need to replace our definition of milestones to instead be core memories. ANY core memory may suffice – financial related or not. And 2) how you talk to people matters, what you say matters – and the perfect person at the perfect core memory with the perfect content means nothing if you can’t have the perfect conversation.

The problem with all this is scale. AI can get you to the core memories and give you bullet points for the right conversation – but it requires investment and thought behind the privacy hurdles to overcome. But conducting quick codes on tax stressors in a particular field or daycare tradeoffs in a particular city is a start. With this, I’m going to start collecting more anecdotes and continue bugging our AI team to build some of these modules out.

Next post: Who I think will likely disrupt the wealth industry and why you should be concerned.

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.