Jack Sharry: Hello everyone and welcome. Thank you for joining us for this week's edition of WealthTech on Deck. I'm very pleased to have Suzanne Schmitt join us for our podcast today. Suzanne knows as much as anyone about the implications of aging and what it means for consumers, advisors, and our industry at large. Suzanne is a managing director at NextChapter Innovation. NextChapter was founded by Steve Gresham, a longtime friend of mine. Steve has talked about NextChapter on our podcast before. We've had a few chats over time and I served on their board. But things have evolved for NextChapter in an intriguing way. A lot has to do with our guest today. With Suzanne joining NextChapter two years ago, I've been impressed with how the firm has evolved. NextChapter is an engagement consulting firm focused on helping wealth and asset management firms, insurance companies, and custodians to create more deeply connected next generation relationships and organically grow their business as a result. They work closely with firms to address client needs through moments that matter. We'll talk a good bit about that, including health events, caregiving, and solo aging, integrating workplace benefits and family financial trade-offs. Suzanne has worked at Fidelity, New York Life, Prudential, and Lincoln on issues around financial wellness. We'll hear a little bit more about that. She's an expert in how to better serve consumers and their advisors to shift from understanding needs to delivering outcomes that benefit advisors and the three generations of clients, their families, they so often serve. Suzanne, welcome to WealthTech on Deck. It's great to have you here.
Suzanne Schmitt: Thank you so much. It's a pleasure to be here.
Jack Sharry: Suzanne, let's start with you providing our audience with some perspective on your background regarding financial wellness, how that has evolved to what you're doing today with Next Chapter.
Suzanne Schmitt: Absolutely, it's a pleasure. So I have spent my entire career really splitting my time between insurance and financial services, typically in the capacity of leveraging my background as a market researcher to help firms get underneath, why don't consumers do the things that we as folks in the financial services community know they should, i.e. save more, spend less, have adequate insurance, et cetera. And then on the flip side, I've helped those same firms figure out how to have advisors just engage in difficult conversations with a little bit more ease and with a little bit more frequency. And so that dovetails into, you know, my primary focus at work has been two things. I am passionate about the space of aging and longevity planning, and I have been fortunate to work in the business, helping firms like Fidelity stand up strategies around just caring for their aging investors. But then in the last seven or eight years, I had an opportunity to step into the space of financial wellness and what I would say about my time in wellness is it reminded me of my time with aging and longevity specifically, because there's so much emphasis on our work years and a lot of financial services companies and insurance companies, a lot of focus on saving and caring for the individual while they're in the workforce, but that all kind of falls off a cliff when people retire. And so I think the nexus of being able to focus on being financially healthy individually and as a family to and through retirement is what makes me so glad to be back with Steve at NextChapter. I'm really glad to talk about some of the work that we're doing in that space with you today.
Jack Sharry: Terrific. So I know you and Steve have done in-depth work with an advisor study where you shift the language from the great wealth transfer to the great wealth transition. In fact, I attended a presentation Steve made not long ago. And you've written a white paper on the NextChapter of wealth management where you highlight five strategic imperatives to address aging clients, generational shifts, and digital disruption in a rapidly evolving industry. It's a lot of ground to cover in one podcast, but we're going to give it a go here. Since both the advisor study and the white paper are so timely right now, they also tend to blend into one another. So let's start with the advisor study. Please fill us in at a high level if you would, what you learned in the study.
Suzanne Schmitt: Yeah, so when I rejoined Steve at NextChapter, we really wanted to make sure that this notion that we had around the impact that what are commonly called life events can have on the planning community resonated with advisors. So we put together a program whereby we went out and we sought the help of 16 top RIAs and IBDs across the country, coming from all kinds of practice sizes, all of whom were successful in their own right. And we asked them to help us think through a couple of things. Number one, we gave them a family use case and that family was multi-generational with the oldest member of the family, that head of household. We had him kind of go through a couple of life events. Specifically, we had him encounter a health event. We had him encounter some trouble with financial decision making. And then we had him unfortunately pass away. And the goal of the use case as a prompt for the study was really to make sure that we were asking a consistent set of questions. So number one, we wanted to understand are these common occurrences in your book, advisors? Two, what are you using to manage with your clients through these situations? And then three, if you had a wish list, what would be on that wish list? And so the goal of the study was really again to make sure that we were leaning into something that resonated in market, that this notion of moments that matter. So things like health events, caregiving events, et cetera, resonated with advisors. And we were particularly keen to understand, what are they doing with these clients today? And what we learned was surprising on the one hand and not surprising on the other. So I'll start with what surprised us. What surprised us the most, Jack, was that the people that were doing this really well were only doing it really well because they figured it out themselves. We talked to advisors who went so far as to build their own team of experts, some of whom were hiring social workers on a per diem basis. The successful advisors went ahead and took what their home offices gave them for onboarding and for progressive profiling, and they rebuilt it so that it worked for their practices with a really heavy emphasis on making sure that they treated the household as the client. Almost to a person in the study, we heard loud and clear that they required, if there was a marriage or a partnership, that both people in the household were engaged with them from day one. And the last thing that we saw with some consistency was that these advisors were using a combination of scenarios for scenario modeling in their planning software and a couple of really low tech hacks, like simple paper family trees that they would ask their clients to complete so that that advisor got a sense for, you know, in essence, who else is out there? Who are the beneficiaries? Who are the folks that I need to get to know as I work with this client and take them through these scenarios? So I'm going to put those all in the, this a little bit of a surprise bucket. In terms of what we expected to find, or I should say what we hoped to find, we did hear strong resonance around the notion that clients present in these moments. They would love to plan proactively, but they don't. So advisors were really looking for a lot more reactive resources in the moment that they could use with clients. And then lastly, to an advisor, the folks that we talked to really said, missed opportunity in the marketplace that more advisors and home offices don't put together a solid package of experts and resources with an emphasis on non-financial resources. So think about that social worker, heavy emphasis on estate planning, and lots of really good discussion around caregiving. So the wish list that we got from these advisors was, please give us more reactive support. Please give us more access to these resources in the form of experts that we can bring and have engage with their clients. And then finally, the shout out for the planning software companies is really please give us the ability to actively track the client's family, including any relationships that might become successor decision makers in a way that we can start that relationship much earlier and not be meeting folks in the time of crisis. So I know I said a lot there. I'm gonna give the mic back to you and see if anything I said piqued your interest.
Jack Sharry: Well, a lot… and one of the things, my first reaction is just how complex this is and that how much it would seem is required of the advisor, the serious advisor that's trying to figure this stuff out. So I guess a couple of questions along those lines. There doesn't seem to be a lot of those folks and how did they wind up here? And then how do you get more? Because frankly, we have an aging population. That's the reality. The services seem to be few and far between. So how do we address this? And I know you as a company are doing stuff to help in this regard. Please talk about that as well. So where does this go? How do we handle this problem, this challenge?
Suzanne Schmitt: Yeah, it's a great question and it's a complicated question as you said, but I think that the first place we at NextChapter would recommend starting is have the emphasis on helping more families and more advisors start the conversation. So a need for much better conversational support on the advisor and the client side. And I would argue, Jack, that it's equally split. We talked to plenty of advisors who said, basically, I got good at this because my clients made me get good at this. And so during my time at Fidelity and all the subsequent firms, I saw a lot of consumers really driving advisor behavior. And that isn't necessarily a bad thing. So I would start with emphasis on conversational support. We've had partnerships in the past with groups like the Conversation Project, which is a not for profit that has amazing conversation guides for really difficult topics, including dementia. But the second place specifically that, you know, clients like ours, including Lincoln, have made investments in is give me three questions as an advisor that I should ask to get the ball rolling. And one of our favorites in market, and one of the ones that has a lot of research behind it is for an advisor to ask the client, what's changed with your health since we last met? And that's a great door opener in a way that is not scary for an advisor and not scary for a client. And frankly, when I do work with clients and I do a lot of client events, one of the things that I hear consistently in the audience is why isn't my advisor asking me this? And how can I, as a client, bring it up so that it feels more natural and we can actually get on the same page? So those are easy places to start. The second place that I would touch on briefly is this notion of nonfinancials. We know advisors well, and advisors aren't going to ask a question that they don't have an answer or a solution for. And so the second place that we think it's really important for more firms to make an investment is, at a minimum, what are good solid caregiving resources? And that could be in the form of formal partnerships with vendors that work your market or a single partnership with a national provider like a Wellthy, Bequest is a local provider that we're seeing more in market. But I would encourage more firms and more advisors to at a minimum just lean into caregiving. The clients that are in your book right now in their 40s or their 50s are very likely, statistically very likely to be sandwich generation caregivers and those folks need help. I can speak from the perspective of one myself and just starting there can be a good way for advisors to get more comfortable and kind of build that muscle memory around difficult conversations. And then lastly, getting into the habit of more routinely asking to meet the power of attorney, the healthcare proxy, starting to get into a conversation earlier, ideally before crisis, helps that advisor build muscle memory, also helps the client feel like this person gets me and just increases exponentially the odds of growing organically through the family, which for most advisors is a win-win.
Jack Sharry: It's really fascinating. And I want to hear from what you all are doing NextChapter specifically, because I know you're doing a lot and it's important. Clearly, this is a complex, challenging set of issues. It's no one issue. There are many issues that you've covered in terms of what you've addressed. And I just recall a very close friend who passed away a few years ago now. But one of the people that spoke at his service, his celebration of life, was his representative, I think he was from LPL actually, and they had built a very strong friendship and my good friend had cancer so they knew what the inevitable was but they were, they of course they loved to chat about the market and this and that and the other thing, as people do. But they also talked about well, how to take care of his wife and, because the husband as often happens was more involved in the money management aspect of it all and so on, so they started to set up a transition. So I'm curious with what NextChapter, and I followed it and I’ve been involved with it, somewhat less so of late, but what do you all do? How do you do what you do? What are the services you provide? Because I know you work with lots of different firms and really enabling them to deal with this complex set of issues.
Suzanne Schmitt: So I think the first thing that we try to do consistently is understand in their own words and from their own perspective, what data do they have already that could be better utilized to help advisors find clients?
Jack Sharry: Would “they” be the firm?
Suzanne Schmitt: Yeah, they are typically the firm. So we do a lot of work with firms and we do a lot of work with product manufacturers. And ironically, they're both on the hunt for the same thing. And that is how to find more people who are early in the consideration process who need help. And that help generally comes in the form of a revision to an existing financial plan. Increasingly, we see a tremendous appetite for protection products and market, especially among younger buyers. Which, if I may, it's I think a misnomer that advisors need some help getting over that folks that are in their 40s or their 50s don't want life insurance, aren't thinking about long-term care, when nothing could be further from the truth. And one of our major clients, former employer of ours, has actually found that the average age of their hybrid long-term care insurance buyer is now moving into the young 50s, so low 50s, like 52, 53. And most advisors are shocked when we get those data points. So we try to have to orient around, are there just some myths that need to be busted out there? So how do we help firms and advisors do more with the data that they have? And then how do we start to wrap around a particular moment that matters? We're doing a lot of work in market and a lot of interest specifically around health events and caregiving. Mostly because the sandwich generation is making it so that advisors can't ignore that situation anymore. And then what we do is we stack around that particular anchor event, a combination of conversation guides, educational resources. You know, we stitch together what a firm or an advisor already has in the form of product solutions. We wrap around conversational support. We introduce them to vendors that they might not be working with that can provide those non-financial service aspects that more and more firms are looking for. And then something that we think is really important to do is to make sure that advisors have practice in a safe space with each other. So we do office hours that allow advisors who are working with us to come together, talk about their wins, talk about what they're struggling with. And then we play those insights back to the advisors as best practices and to the firm as potential training modules and/or actionable insights that they can socialize. And then lastly, we work with a set of what we call metrics that matter, kind of anchoring on that moments that matter. And what we're trying to educate our clients through is the traditional metrics are great, but they aren't necessarily going to give you the best snapshot of your book health and, you know, just advisor success. So we're introducing things like age-weighted revenue and gender-weighted revenue and trying to shift the conversation from share of wallet to share of household. And just the introduction of those metrics alone helps advisors to think a little bit differently about who the client is. And particularly for those next generation advisors, so folks that are in their 40s, their 30s, or even young advisors that are coming out of graduate programs right now, we really wanna make sure that we're giving them metrics that successfully measure the ways in which they're diversifying their book by engaging the family.
Jack Sharry: Interesting. So I recently went through a planning exercise with my wife and one of the things that struck me among many things. First of all, we were thinking about the rest of our lives and what that might look like. Had a business event caused that for us to reflect and figure out what was the next chapter in our case. And went through a pretty in-depth planning exercise, really trying to understand, and interestingly, the advisors we worked with, who are terrific and very much planning oriented, you could tell they kind lit up when we got to the investment part, which was probably the thing I was least interested in because I just with all due respect, I know I can't beat the market, never will. I just want to make sure I maintain an appropriate level of risk and I want to minimize tax and I understand how to get where I want to go. But it's not going to be by beating the market. I have no notion otherwise. That all said, as we were going along, I was very upfront with the advisor, the lead of this team. And so as we were having this conversation, and they did a lot of work, and they have whole team, this is some heavy lifting that they did. I asked the question about, I said, it seems like a lot of work for, clearly we'd be a decent client for them. But I said, why do you go through all this? And he said, well, we want to do such a good job for you that your children will want to work with us also. And it really struck me like, that's very smart. And that will happen. We're lined up this fall. We're going to begin an estate planning exercise. And our kids are going to be at the table. They're going to be part of some decision making. Now, a lot of what you're talking about is even further out when people have health events or other issues. So talk about that and bringing advisors along because they clearly, at least my experience, clearly love the market stuff, but so much of what the client wants is well beyond that.
Suzanne Schmitt: Absolutely. I think what a lot of advisors don't necessarily know is that clients expect market performance or at market performance. That's table stakes, to your point right now. And most clients especially, and I don't mean to paint all women or all Gen X or millennials with the same brush, but the vast majority of women and Gen X and millennials are more concerned about quality of life and lifestyle issues. And they expect advisors as table stakes to be managing their money. So said another way, advisors miss the conversational boat when they don't engage clients around what is actually keeping them up at night. And increasingly, especially for those Xers, it is how are they going to afford health and living in retirement? And that, opening the door with questions about health concerns, opening the door with questions about what's your family health history like, is increasingly expected by this next generation of clients. So I think as a means to kind of bring the conversation full circle with advisors, you get to know a lot more about the client, including assets and liabilities that are held away when you start the conversation with something that is near and dear to the client's heart, i.e. how are they living in the everyday? And not for nothing, Fidelity has published, firms that bring their age-weighted revenue down, what age-weighted revenue does is it takes a look at what is the average age of the client who is driving the bulk of your revenue. That's probably the simplest way to articulate that. And it's interesting for a couple of reasons. One, it's a great, kind of like an MRI of a book, in terms of what is the long-term book health. So particularly for advisors who are a little bit older who are thinking about transitioning to young advisors, having a lower age-weighted revenue really means that that book has a longer successful runway ahead of it. But even in the here and now, having lower age-weighted revenues actually is more profitable. So Fidelity has found that those advisors who have an age-weighted revenue of 63 or under are able to achieve 6.4% greater organic growth. And when you compare them to those with age-weighted revenues over 69, 0.3% organic growth. So there's a huge difference in terms of profitability of the book seen through that lens.
Jack Sharry: Interesting, interesting. Wow, so there's a financial incentive to paying attention to the issues that are most important to your client, correct?
Suzanne Schmitt: There is a financial incentive, but we would also argue, and we saw this in the research that we looked at in the white paper that we just published. There's also an ability by diversifying your book and bringing that age-weighted revenue down to help attract that next generation of advisors. And McKinsey, among other firms, is projecting some pretty dire shortfalls of advisors in roughly the next 10 years. So we think, you know, not just investing in bringing your age-weighted revenue down, but also diversifying your book in terms of gender-weighted revenue, which works the same way and is no surprise. Most advisors work with head of household only, but that isn't gonna work for the next generation of advisors. And we have heard directly from frustrated young advisors that they really need more help thinking through how to build soft skills and build EQ in ways that allow them to start to enter these family conversations. And as your advisor said, do right by the parents as a means to do well by the kids and earn the right to do business with the kids going forward.
Jack Sharry: So this has been fascinating. I want to get to the white paper. We're short on time. We try to keep our podcast to about a half an hour. So if you could, just maybe the highlight version of what you found in the white paper. I know that they're very resonant with one another, but please fill us in on what you learned or what you published in the white paper. By the way, is the white paper out as yet or is it coming out?
Suzanne Schmitt: They white paper is officially out and we're happy to supply copies to you and to your listeners. But I think the top line is this. What the white paper found is there are about six headwinds, heavy emphasis on changing demographics, the increasing prevalence of cognitive, just frankly, cognitive challenges that come along with natural aging. And I think the red thread between the advisor study and the white paper specifically is that the industry is not adequately prepared to help advisors engage family on health and non-financials. And the industry is also not adequately prepared to help advisors detect cognitive change in their clients, because we know that finances is one of the first places that cognitive, just any change in potential diminished capacity is going to show up in the finances first. So we feel really strongly that both the white paper and the third party data that we used and analyzed in conjunction with the work that we do with clients and the advisor study points pretty significantly to the need to diversify the training we're providing our advisors, really look at the ways in which we're supporting older clients and their families, including those non-financials like medical concierge, caregiving concierge, and much more attention needs to be paid to doing something material with a trusted contact, actually establishing relationships. And lastly, just making sure that younger advisors have the conversational skills and the EQ and have access to reactive resources so that as their clients change and go through these life events, they have more confidence and competence to engage the individual clients and the family in ways that are constructive.
Jack Sharry: Well, this has been fascinating and I would love to continue, but we're going to probably have to have a part two at some point down the road where we can go more in depth. So thank you, Suzanne. But with our time going short, I have two questions for you. One, first one is anything that you want to make sure we cover that we may not have gotten to? Anything else you want to add that our audience might find to benefit from knowing?
Suzanne Schmitt: All I would add is this notion of gender-weighted revenue is really important. Getting to know what percentage of the current revenue in your book is held by women, incredibly important, and engaging them on issues of caregiving is an absolute home run. So we touched on it, but I wanted to make sure we doubled down on that.
Jack Sharry: Terrific. And one last thing as we look to wrap up, any key takeaways you want to share with our audience around all that you've covered? There's a lot here, so any takeaways beyond the age-weighted revenue number?
Suzanne Schmitt: Yeah, to your point about there's a lot here, start small. I think a lot of advisors don't start because they don't know where to start. So getting used to asking simply what has changed with your health since we last talked is one of the best questions you can work into your repertoire. It'll open the conversation up. And if you get that question right, you can handle almost any of these life events that we talk about.
Jack Sharry: That's great. That's terrific. So Suzanne, this has been wonderful. One last question, always my favorite. We always ask this on each of our podcasts. What do you do outside of work that you're excited or passionate about that people might find to be interesting or surprising?
Suzanne Schmitt: I am just starting to research, I don't know if they'll find this interesting or surprising, but I think it is. The notion of death doula and the notion of financial therapy. So I'm looking into, I'm just furthering my education in both of those spaces. And I think we give a lot of care and feeding to, no pun intended, to the start of life. I don't think we do justice to the end of life. And that's an area that I think I'm both really interested in and passionate about.
Jack Sharry: Interesting. So what does that look like for the uninitiated or the unaware?
Suzanne Schmitt: Yeah. So the notion of a death doula is they are your concierge for true end of life. And they cover the full gamut of, you know, your spiritual concerns, your physical concerns, helping you have those, I wish I could have one more do-over conversation with my kids or my parents. So it's, it's kind of the maker of things right. And just the sherpa for people when they, they reach the end of this life.
Jack Sharry: Wow, very cool. Very interesting. We've had a lot of different ways that people highlight what they're interested and passionate about. That is a first, I will add that, too. We have many firsts, which is a lot of fun actually. So Suzanne, this has been great. Really have enjoyed our conversation. For our audience, thank you for tuning in today. If you've enjoyed our podcast, please rate, review, subscribe, and share what we're doing here at WealthTech on Deck. We're available wherever you get your podcasts. You should also check us out at our dedicated website, wealthtechondeck.com. All of our episodes are there along with blogs and curated content from many folks around the industry. Again, thank you, Suzanne. This has been a lot of fun. I really enjoyed it. Thank you.
Suzanne Schmitt: Thank you.
