Allie Carey
Hi everybody. Thank you for joining us. I'm Allie Carey, the global head of Strategy for Private Banking and Wealth Management, and I'm joined here today by David Lincoln with Wise. Welcome, David.
David Lincoln
Thank you for having me.
Allie Carey
Yeah. Can you tell us a little bit about yourself and Wise?
David Lincoln
Sure. So Wise is a research firm that I founded about 10 years ago based out of Washington DC, only focused on wealth management, and I've been in research advisory and consulting capacities to financial services for a long time. Again, about 10 years ago, I thought that your, the business that we both serve, the bank wealth management community would really benefit from having research that had more of an empirical bent to it. So, you know, these firms have high labor costs, they're heavily regulated, got a lot of different products and services, and so could we do something from a research perspective that brought a little bit more of a quantitative bent, but also a little bit more rigor to the challenges that a lot of the firms that we work with face.
Allie Carey
That's, that's really truly differentiating. Having that data-driven approach, that rigor that you talked about, I can only imagine how much you're sitting on from insights perspective over the last 10 years of what's changed as we look forward into, you know, the future here. What do you think are some of the biggest challenges that are facing these wealth management firms?
David Lincoln
Sure. As I think about challenges in this business right now, if we look at kind of the data, one of the things that jumps out immediately, especially these days is expenses. And so we have kind of a, a point of view that the cost of business for a lot of our shared clients is going up, and that is largely a compensation story. Not entirely, but largely compensation expense. As you look at root causes, one of the things that's true about our business, or I believe to be true is that the labor pool is relatively shallow. There are a lot of firms that would like to be in wealth management. By some definition. There's RIAs, there's brokers, there's the wirehouses, there's banks, there's everybody relative to other asset management businesses, wealth management's quite attractive. And so more investment, lots of companies all wanting to hire from the same labor pool. I think that is driving ex compensation expense. You add to that the demographics of this business, the average age of advisors, the average ages of people that have ACFA or CFP, they're older. And so you expect a wave of retirements. You've got people leaving, and again, you've got a lot of demand for talent. And so as I think about expenses, I think they're likely to stay pretty high. And so that's my starting point for change.
Allie Carey
It's really a high quality talent that's required to manage relationships to the level of a lot of these wealth managers are working with multi-generational families, so you don't really want to cut costs and potentially inhibit the talent that that's working with your clients.
David Lincoln
On the professionals though, because you made a good point that like these jobs are very talented people, they're very highly compensated and they're really kind of, they are the service, right? That's how you go to market. We have the best teams, we give you advice, we're your trusted advisor, all those things. And so people are really everything in this business. I think one of the things that's happened over time is that even though that's true, I think the wealth management community is under invested in developing people, and that's part of the reason why the labor pool is shallow. So a lot of hiring is done from other companies so that firms have been hiring from each other. I think now this is another short term strategy is firms are more open-minded about sourcing talent. They have to be more flexible. If you accept that the root cause is that the labor pool is shallow then I need to be a little bit more creative about what I'm doing to bring people on board. Some of that I think will mean that there's more focus on hiring younger employees, so more coaching, more career pathing inside of organisations, more partnerships with universities. I think that's one stream. The other one is to be more flexible in mid-career hires and sourcing talent from other industries. So from the non-profit world, military veterans, CPAs, commercial bankers. We've even heard one firm hired a, a, a former basketball coach, right? And so they're looking for somebody who's got a skillset that can translate over to wealth management, got good interpersonal skills, for example, have worked with business owners like the commercial bankers, done fundraising like a non-profit executive. Okay. These are things that I would like put them into wealth management, put them on teams, put them with other professionals that have more technical background, and away you go.
Allie Carey
Yeah. And, and even beyond just looking at it from a cost perspective, there's most likely going to be benefits from really the diversity of your workforce and having the talent your teams really represent, be able to connect deeper in the communities that they're working in, because they're coming from different areas. Not just, you know, the wealth management industry, which you know, has been so small. It's really broadening those horizons. Be able to make deeper connections.
David Lincoln
That's a great point. One woman told us that they've been hiring some teachers, and again, you can't necessarily put all people into like a senior relationship manager role, but if you've got a career track inside of an organisation, you know, you might start out as a client service officer, right? Doing some of the support work and so forth. You know, you bring people in, teachers or nurse nurses, but your, your comment about connections, the quote was something like, you know, the teacher knows everybody in the community. They've raised all their kids, they know so many people, and so some of those resources, right? Those networks, those relationships can be really valuable.
