A little more than a decade after founding his wealth-management firm, Marty Bicknell has attained national status in that financial-services field. He reflects on changes in investors, investing strategies, and even the industry itself.
Q. A report out just this month indicates that half of Americans have nothing at all saved for retirement. What are some of the critical issues facing wealth-management firms, as a sector, if they’re only serving half the potential market nationwide?
A. Firms that only serve ultra-high net worth individuals or high net worth individuals are significantly limiting themselves to what is, and will continue to be, a very large opportunity. While their needs may be different than those in the upper tier of the wealth bracket, those individuals likely need fiduciary advice to help them with their planning needs. The challenge for firms is to find a way to serve this segment of clients and make it profitable for the long term. The changes in wealth management and advice technology in recent years make this a possibility. Today, it comes down to executing a plan to service this demographic and having a firm understanding of the services your organization can offer, and how they strategically complement your company’s longer-term objectives.
Q. Does that strategy imply future opportunities for firms and innovators who are capable of accommodating the needs of investors who are just starting out and are a long way from high net worth status?
A. Yes, the opportunity is quite large for firms who embrace this demographic. Advisors need to be in the business to help those that need it. With the transfer of wealth that will be happening over the next decade, many who don’t have a retirement plan in place now will inherit money and find themselves in the high net worth category. It’s important to serve those consumers now. Create a plan that fits their lifestyle now, and
then alter it as their life, and their wealth, changes. With the advancements in technology, advisors can work with these clients more efficiently. This ultimately drives down the traditional asset minimums most firms require. While a firm may need to make an investment in the right technology, it will eventually lead to setting the firm apart from competitors. It’s a congested environment. Over time, innovative firms will find ways in which to serve these non-high net worth folks and recognize how large of an opportunity is there for the taking.
Q. How are wealth managers being affected by the advance of technology and abundance of real-time information as a driver of investment decision-making among their clients?
A. Technology enables advisors to scale their business to serve the marketplace. For example, with the right technology a firm can create and monitor an investment plan based on the client’s objectives. While that isn’t new, they can now do it with fewer resources than they would a more complex and larger portfolio. Technology is also advancing the way advisors communicate with their clients. The younger generations don’t want to meet face-to-face. They embrace technology as a way to facilitate meetings, updates, etc. The advisors that embrace this shift in thinking and the technology behind it, will be able to stay in contact with clients the way the client prefers, which solidifies the relationship as the younger generations begin holding the wealth.
Q. How are you managing conversations with GenX and older Millennials who may recall the market downturn of 2009? Are they unnecessarily surrendering potential yield because of an over-abundance of caution, particularly with equities?
A. Many Millennials and GenXers witnessed the wealth degeneration that took place in 2008 and 2009. Because of this, they may have a preconceived notion that the market is less about wealth creation and instead viewed as a large risk. In reality, if history is any indication, the equity markets have created one of the greatest wealth resources, and it will continue over the long-term.
This demographic has access to something that many of us don’t…and that is time. It’s a great attribute to have. Time allows them the ability to take risk because they have the time to make changes and corrections.
While they’ve witnessed this loss they have also seen a large amount of wealth creation over the last 10 years. Hopefully, they can focus on the bounce back that is taking place instead of just focusing on what happened during the market downturn. If they are too conservative, inflation will eat away at their nest egg. They have the potential to go broke…safely.
Q. Tell us a bit about where you see the direction of the overall investment climate now that we’re 10 years into an economic expansion.
A. Although the current bull market is aged, we are experiencing the traditional boom phase of the economic cycle. On the heels of corporate tax reform, U.S. gross domestic product (GDP) growth is expanding at an annualized rate of 3.2% through the first half of year, corporate earnings are accelerating at a rapid pace while business and consumer sentiment remain strong. Meanwhile, inflation remains within the Federal Reserve’s comfort zone, with little indication of pushing meaningfully to the upside in the near-term. As long as the Fed continues to raise interest rates at a measured pace and a true trade war does not develop (which we give a low probability), we expect a positive environment for equities in the coming 12+ months. With that being said, investors have experienced strong returns over the last decade and should be taking a close review of their portfolio allocation with their advisor to ensure that it is still in balance with their risk tolerance
Q. Is it time for investors, older ones especially, to rethink their risk tolerance?
A. It is always a good idea to revisit your risk tolerance and risk capacity every few years or when a life change occurs. It’s also important for investors to have a diversified portfolio and ensure they are taking the appropriate amount of risk within their investment strategy. As people age, it is important to take stock of your retirement goals and where you are in that process. With that in mind, you need to ensure the
risk level you’re comfortable with coincides with your goals. As you age, you may not have the time to recover from a significant loss. It’s a balancing act…you need to be appropriately diversified to provide the opportunity to earn what you want to take into (and beyond) retirement, but at the same time not risk too much. Working with an advisor to help you craft a game plan in advance for future market conditions will not only improve the probability of achieving your goals, but help you deal with the emotional aspect of the ups and downs of the market
Q. What strategies is Mariner adopting now to prepare those investors for a potentially severe downturn, or a long one?
A. At Mariner Wealth Advisors, we firmly believe investors should be diversified beyond the traditional cash, stocks and bonds. We strive to build portfolios with asset classes that are uncorrelated so they don’t move the exact same direction as each other. This helps to provide reduced volatility. Generally, and where appropriate, we invest in alternative investments to complement one’s portfolio to reduce or debit volatility in down markets. In addition, we rebalance portfolios on a regular basis to help take advantage of market opportunities as well as chips off the table after the market has run.
Q. As for firms themselves, how is this industry managing the looming turnover in its adviser ranks? Some statistics suggest as many as a third may be retiring within the next decade—what are the implications for those firms and for investors?
A. There is a significant shortage of advisors on the horizon and with advisors getting older and ready for their own retirement, this problem will likely worsen. We are fortunate that many of our advisors are in their mid-40s. At this age, they have significant experience in the industry, as well as the ability to continue to work with clients and their families for many years to come.
Having said that, we have developed a long-term strategy with several universities across the country that offer degrees in Financial Planning. Students generally enter our internship program and, upon graduation, many have joined Mariner Wealth Advisors as full time employees. Upon joining the firm, we begin to build a career path for them.
In addition, we have firmwide plans in place to make sure our clients work with a team of advisors. Should something happen, like retirement, this process ensures there is no or minimal disruption from a client perspective.