1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,320 Speaker 1: Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. This 7 00:00:32,479 --> 00:00:35,440 Speaker 1: is Bloomberg Markets. I'm Pim Fox along with Lisa Bramowitz. 8 00:00:35,479 --> 00:00:39,760 Speaker 1: We are broadcasting from Pershing Insights Conference at the Manchester 9 00:00:39,840 --> 00:00:43,680 Speaker 1: Hiatt in San Diego. This year marks nineteen years of insight, 10 00:00:44,159 --> 00:00:46,800 Speaker 1: nineteen years that the company is committed to the success 11 00:00:46,800 --> 00:00:48,800 Speaker 1: of its advisors, and we are here with more than 12 00:00:48,840 --> 00:00:53,040 Speaker 1: two thousand financial professionals from all over the globe. And 13 00:00:53,120 --> 00:00:56,440 Speaker 1: it's my pleasure to introduce one of those professionals. Mark 14 00:00:56,680 --> 00:00:59,520 Speaker 1: Tuberson joins us. He is the chief executive officer for 15 00:00:59,600 --> 00:01:03,560 Speaker 1: Persian Advisor Solutions. He is also the author of a 16 00:01:03,680 --> 00:01:08,800 Speaker 1: variety of books related to financial literacy, such as Practice 17 00:01:08,880 --> 00:01:11,520 Speaker 1: Made Perfect, How to Value, Buy and Sell a Financial 18 00:01:11,560 --> 00:01:14,759 Speaker 1: Advisory Practice. Mark, thanks very much for being with us. 19 00:01:14,760 --> 00:01:17,280 Speaker 1: Thank you, thanks for having what what is the biggest 20 00:01:17,400 --> 00:01:21,880 Speaker 1: issue on the minds of registered investment advisors money managers, 21 00:01:22,240 --> 00:01:24,600 Speaker 1: and I want to I want to say sort of 22 00:01:24,800 --> 00:01:29,560 Speaker 1: not very small shops, but those that may have less 23 00:01:29,560 --> 00:01:33,679 Speaker 1: than U fifty people and are not affiliated with a 24 00:01:33,760 --> 00:01:38,360 Speaker 1: very large organization. By definition, most registered investment advisors or 25 00:01:38,400 --> 00:01:42,000 Speaker 1: small businesses, if you put an SBA filter through it, UH, 26 00:01:42,040 --> 00:01:44,600 Speaker 1: and so the experiencemen of the same challenges that any 27 00:01:44,600 --> 00:01:48,800 Speaker 1: small business does. Probably the most acute challenges around talent. 28 00:01:49,200 --> 00:01:52,279 Speaker 1: So the instinct is to say regulation is an issue 29 00:01:52,400 --> 00:01:55,320 Speaker 1: or market threats is an issue, but there is an 30 00:01:55,360 --> 00:01:58,920 Speaker 1: acute talent shortage in this business today and that is 31 00:01:59,240 --> 00:02:01,960 Speaker 1: creating real mutations on growth from many of these firms. 32 00:02:02,000 --> 00:02:04,360 Speaker 1: What is the talent that you're talking about? In particular? 33 00:02:04,400 --> 00:02:06,480 Speaker 1: It is the is the is it the ability to 34 00:02:06,520 --> 00:02:09,560 Speaker 1: interact with people? Is that the ability to navigate UH 35 00:02:09,639 --> 00:02:13,920 Speaker 1: the growing world of robo advisory software and e t 36 00:02:14,120 --> 00:02:17,800 Speaker 1: f s. What specifically is the skill that people need? Frankly, 37 00:02:18,000 --> 00:02:21,160 Speaker 1: it's a skill in all areas, from direct contact with 38 00:02:21,240 --> 00:02:24,600 Speaker 1: clients to the operations and administrative elements of the business. 39 00:02:25,080 --> 00:02:28,560 Speaker 1: It's important to know that since two thousand eight, UH, 40 00:02:28,600 --> 00:02:32,600 Speaker 1: there are forty fewer financial professionals in this country. Uh, 41 00:02:32,639 --> 00:02:36,320 Speaker 1: there are fourteen hundred fewer broker dealers. Uh. And what's 42 00:02:36,320 --> 00:02:39,120 Speaker 1: happened is that the industry has taken such a hit 43 00:02:39,280 --> 00:02:42,600 Speaker 1: that many people coming out of university are not contemplating 44 00:02:42,639 --> 00:02:44,600 Speaker 1: this as a career choice. Is it partly because these 45 00:02:44,600 --> 00:02:47,800 Speaker 1: salaries have gone down? No, Actually, this is one of 46 00:02:47,800 --> 00:02:52,359 Speaker 1: those great careers where you get financially rewarded, intellectually stimulated, 47 00:02:52,480 --> 00:02:57,960 Speaker 1: you get opportunity to act independently to profoundly impact the 48 00:02:57,960 --> 00:03:00,359 Speaker 1: lives of others. So just to add long walks on 49 00:03:00,400 --> 00:03:02,360 Speaker 1: the beach, it's a pretty good personal adds and and 50 00:03:02,440 --> 00:03:06,040 Speaker 1: no no retirement target in terms of when you have 51 00:03:06,120 --> 00:03:09,520 Speaker 1: to leave the practice. Nothing is forcing that. Uh. And 52 00:03:09,639 --> 00:03:12,680 Speaker 1: so if you think about being a young student looking 53 00:03:12,680 --> 00:03:16,480 Speaker 1: for a career that's fulfilling and rewarding, then this certainly 54 00:03:16,520 --> 00:03:19,640 Speaker 1: becomes one of those places to to come to for 55 00:03:19,680 --> 00:03:22,240 Speaker 1: what it's worth. A couple of years ago, we asked 56 00:03:22,240 --> 00:03:24,560 Speaker 1: our reverse mentor group, this is a group of millennials, 57 00:03:24,600 --> 00:03:27,600 Speaker 1: to enquire among the friends who chose not to come 58 00:03:27,639 --> 00:03:30,640 Speaker 1: into this business why they said not and the first 59 00:03:30,680 --> 00:03:33,920 Speaker 1: reason why didn't study finance in schools? So never considered 60 00:03:34,000 --> 00:03:36,240 Speaker 1: as a career too they thought that it was just 61 00:03:36,280 --> 00:03:38,640 Speaker 1: a sales job. And three, they perceived the industry as 62 00:03:38,680 --> 00:03:42,240 Speaker 1: being corrupt. And so when you have those elements playing 63 00:03:42,280 --> 00:03:45,360 Speaker 1: against the profession, uh, none of which are true, by 64 00:03:45,400 --> 00:03:47,800 Speaker 1: the way, Uh, it makes it very difficult for us 65 00:03:47,880 --> 00:03:50,520 Speaker 1: to contemplate how we're going to recruit people to the business. 66 00:03:50,560 --> 00:03:53,560 Speaker 1: For those of us who remember, there used to be 67 00:03:53,640 --> 00:03:56,880 Speaker 1: training programs in a variety of the big brokerage firms, 68 00:03:56,960 --> 00:04:00,760 Speaker 1: those have basically disappeared. Is there anything that replacing that? 69 00:04:01,320 --> 00:04:03,480 Speaker 1: So one of the big challenges I think that that 70 00:04:03,640 --> 00:04:06,440 Speaker 1: is creating this is we used to have big, large, 71 00:04:06,440 --> 00:04:10,640 Speaker 1: employer based financial institutions that would recruit people and create 72 00:04:10,680 --> 00:04:13,080 Speaker 1: a career path for them. Now what we have is 73 00:04:13,080 --> 00:04:17,800 Speaker 1: a more fragmented industry many small businesses. There are twenty 74 00:04:17,839 --> 00:04:22,000 Speaker 1: eight thousand registered investment advisors, mostly independently owned. Most of 75 00:04:22,000 --> 00:04:25,040 Speaker 1: them don't have a human capital strategy. So it's really 76 00:04:25,080 --> 00:04:28,000 Speaker 1: more of an industry crisis than an individual business crisis. 77 00:04:28,160 --> 00:04:29,800 Speaker 1: And it's one of those things that we have to 78 00:04:29,800 --> 00:04:33,080 Speaker 1: think about, how do we appeal to young people earlier 79 00:04:33,400 --> 00:04:35,760 Speaker 1: and how do we help those small businesses become more 80 00:04:35,800 --> 00:04:39,039 Speaker 1: proficient at recruiting and developing talent. You know, I'm I'm 81 00:04:39,120 --> 00:04:41,520 Speaker 1: compelled by the idea that there's a shortage of talent 82 00:04:41,600 --> 00:04:44,080 Speaker 1: at a time when the industry is broadly believed to 83 00:04:44,080 --> 00:04:48,200 Speaker 1: be contracting. We hear so much about consolidation, about the 84 00:04:48,240 --> 00:04:53,120 Speaker 1: cost cuts that are going on broadly across the investment industry. 85 00:04:53,400 --> 00:04:56,039 Speaker 1: How do you square these two ideas? Well? Frankly, there's 86 00:04:56,040 --> 00:04:58,320 Speaker 1: an oversupply of clients and an undersupply of people to 87 00:04:58,360 --> 00:05:00,920 Speaker 1: provide advice. So well, let me you're talking about clients, 88 00:05:00,920 --> 00:05:02,839 Speaker 1: can you be a little more specific Which clients in 89 00:05:02,839 --> 00:05:06,680 Speaker 1: particular are looking for advisors and and and are sort 90 00:05:06,680 --> 00:05:10,320 Speaker 1: of creating opportunities. These would be individuals at different income 91 00:05:10,360 --> 00:05:14,320 Speaker 1: and wealth classes. Uh, the robo so called robo movement 92 00:05:15,200 --> 00:05:20,000 Speaker 1: is is really enhancing the experience that advisors have with 93 00:05:20,000 --> 00:05:24,520 Speaker 1: with individuals rather than replacing it. So that hasn't yet 94 00:05:24,520 --> 00:05:28,080 Speaker 1: proved to be a threat unto itself. Consolidation is true 95 00:05:28,080 --> 00:05:31,279 Speaker 1: at least among the employer based firms because they're thinking 96 00:05:31,279 --> 00:05:34,920 Speaker 1: of return to shareholders. Among the independent firms, the rate 97 00:05:34,920 --> 00:05:37,279 Speaker 1: of growth has been phenomenal. There were seven dred and 98 00:05:37,279 --> 00:05:40,080 Speaker 1: fifty new r A s that we that were formed 99 00:05:40,160 --> 00:05:45,160 Speaker 1: last year alone, so consolidation is really happening UH. If 100 00:05:45,200 --> 00:05:48,040 Speaker 1: you ignore the large companies for a minute, the consolidation 101 00:05:48,080 --> 00:05:52,080 Speaker 1: among the smaller firms is occurring because these businesses are 102 00:05:52,080 --> 00:05:54,800 Speaker 1: trying to get to critical mass. They recognize that they 103 00:05:54,800 --> 00:05:57,599 Speaker 1: have to behave like a business. They have to think strategically, 104 00:05:57,880 --> 00:06:01,919 Speaker 1: have a human capital plan, focus on operating efficiency. So 105 00:06:02,240 --> 00:06:06,880 Speaker 1: we're not seeing consolidation happen because old advisors are dead 106 00:06:06,960 --> 00:06:10,160 Speaker 1: or dying. It's happening because young advisors are thinking, how 107 00:06:10,160 --> 00:06:12,920 Speaker 1: do I build a real business that's enduring. What if 108 00:06:12,960 --> 00:06:17,479 Speaker 1: you could speak a little bit about the compensation programs 109 00:06:17,520 --> 00:06:21,600 Speaker 1: that exist the models, because previous to coming to Pershing, 110 00:06:22,279 --> 00:06:26,600 Speaker 1: you are partner in charge at Moss Adams in Seattle, 111 00:06:26,680 --> 00:06:31,520 Speaker 1: the accounting firm, and you know the incentives for fee based, 112 00:06:31,640 --> 00:06:34,800 Speaker 1: for UH commission based. And wonder if you could see 113 00:06:35,040 --> 00:06:37,480 Speaker 1: see your way towards the future what you think would work. 114 00:06:37,520 --> 00:06:40,039 Speaker 1: Because we know what lawyers do, they charge by the hour. 115 00:06:40,440 --> 00:06:45,599 Speaker 1: Accountants that may be a negotiated UH compensation plan. What 116 00:06:45,680 --> 00:06:48,919 Speaker 1: do you see happening in this space? There's some big changes, 117 00:06:48,960 --> 00:06:53,160 Speaker 1: But I'd make a distinction between the revenue generation methodology 118 00:06:53,160 --> 00:06:55,440 Speaker 1: and the way people would get paid once they're inside 119 00:06:55,480 --> 00:06:58,720 Speaker 1: the firm. So first is the relationship between the advisory 120 00:06:58,720 --> 00:07:01,280 Speaker 1: firm and the client. This is the only profession I 121 00:07:01,320 --> 00:07:04,599 Speaker 1: know where where the client pays based on the value 122 00:07:04,640 --> 00:07:06,839 Speaker 1: they bring rather than the value of the professional brings. 123 00:07:07,279 --> 00:07:09,040 Speaker 1: The more you have, the more you pay, which is 124 00:07:09,080 --> 00:07:10,440 Speaker 1: an odd sort of would be like right in the 125 00:07:10,520 --> 00:07:13,120 Speaker 1: legal profession, for example, a lawyer charges you whatever the 126 00:07:13,160 --> 00:07:16,160 Speaker 1: lawyer charges you, it doesn't matter what your bank account 127 00:07:16,200 --> 00:07:18,280 Speaker 1: says exactly. Would be like it would be like a 128 00:07:18,320 --> 00:07:20,760 Speaker 1: doctor charging me by the pound. I couldn't afford them, 129 00:07:20,800 --> 00:07:24,680 Speaker 1: so I'd have to think about that the So one 130 00:07:24,720 --> 00:07:28,280 Speaker 1: of the shifts that's happening is more of a consistent 131 00:07:28,880 --> 00:07:32,280 Speaker 1: approach to fee charging. And in fact, a study done 132 00:07:32,280 --> 00:07:36,040 Speaker 1: by Bob Various recently showed that of advisors are actually 133 00:07:36,080 --> 00:07:39,400 Speaker 1: charging a retainer either instead of or in addition to 134 00:07:39,560 --> 00:07:42,240 Speaker 1: an asset management fee. So there's a shift towards a 135 00:07:42,240 --> 00:07:47,480 Speaker 1: more fixed structure the variable compensation model around compensation around commissions. 136 00:07:47,480 --> 00:07:50,440 Speaker 1: As an example, Pershing being the largest clearing firm in 137 00:07:50,480 --> 00:07:53,600 Speaker 1: the US, we've observed since two thousand and eight that 138 00:07:53,760 --> 00:07:56,520 Speaker 1: assets on our platform have grown from five percent of 139 00:07:56,520 --> 00:07:59,800 Speaker 1: the total tot of the total. So the shift to 140 00:08:00,080 --> 00:08:04,240 Speaker 1: is a more advisory fee oriented type of approach is 141 00:08:04,320 --> 00:08:07,679 Speaker 1: reflected in our client base quite clearly. Do you think 142 00:08:07,880 --> 00:08:11,480 Speaker 1: that more people are seeking out financial advisors in order 143 00:08:11,560 --> 00:08:15,480 Speaker 1: to get guidance about how to use ETFs? In other words, 144 00:08:15,480 --> 00:08:18,520 Speaker 1: there's this feeling that they're all these passive investments that 145 00:08:18,600 --> 00:08:21,480 Speaker 1: have relatively low fees. Perhaps it's worth paying a little 146 00:08:21,520 --> 00:08:24,480 Speaker 1: bit more to get some advice and how to invest 147 00:08:24,480 --> 00:08:26,800 Speaker 1: in how to allocate. I think what you find among 148 00:08:27,000 --> 00:08:30,760 Speaker 1: most advisors is that they use some sort of passive 149 00:08:31,280 --> 00:08:34,439 Speaker 1: instrument as a core solution, and then the satellite might 150 00:08:34,480 --> 00:08:38,120 Speaker 1: be active instruments like mutual funds or even individual securities 151 00:08:38,120 --> 00:08:41,640 Speaker 1: in some cases. But the reason that most people are 152 00:08:41,640 --> 00:08:44,600 Speaker 1: seeking out advisors is because their lives of lives have 153 00:08:44,679 --> 00:08:48,280 Speaker 1: become more complex. What we're finding it's not just about investing, 154 00:08:48,360 --> 00:08:50,840 Speaker 1: but it's about the complexity of choices that people have 155 00:08:50,920 --> 00:08:54,200 Speaker 1: to make around cash flow, around how long will they 156 00:08:54,240 --> 00:08:57,400 Speaker 1: live and can they will they have enough to endure, 157 00:08:57,760 --> 00:09:02,160 Speaker 1: about a state planning about where they'll live. So these 158 00:09:02,240 --> 00:09:06,960 Speaker 1: become choices that as individuals become um more consumed with 159 00:09:07,000 --> 00:09:09,280 Speaker 1: the complexity of their lives, they have to seek professional 160 00:09:09,320 --> 00:09:11,520 Speaker 1: guidance and what they're doing. And I think this is 161 00:09:11,559 --> 00:09:13,520 Speaker 1: one of the reasons why we find so many people 162 00:09:13,559 --> 00:09:16,839 Speaker 1: attracted to this business who are not necessarily finance professionals, 163 00:09:17,280 --> 00:09:21,880 Speaker 1: but really human professionals with a with a capability around finance. 164 00:09:22,000 --> 00:09:24,080 Speaker 1: I want to pick up on that because this idea 165 00:09:24,120 --> 00:09:27,800 Speaker 1: of consistent guidance. You go to a doctor when you're sick, 166 00:09:28,280 --> 00:09:32,280 Speaker 1: you seek legal advice when you need it, But with 167 00:09:32,320 --> 00:09:35,600 Speaker 1: a financial advisor, whether you're managing the money of an 168 00:09:35,600 --> 00:09:39,560 Speaker 1: individual or a small business and their pension plan, that's 169 00:09:39,559 --> 00:09:44,160 Speaker 1: an ongoing relationship. It should be, because our lives UH 170 00:09:44,360 --> 00:09:48,040 Speaker 1: don't start and stop with one conversation UH, and even 171 00:09:48,040 --> 00:09:50,880 Speaker 1: in our health I I use the concierge program at 172 00:09:50,880 --> 00:09:54,439 Speaker 1: New York Presbyterian UH as a as an ongoing relationship. 173 00:09:54,480 --> 00:09:56,800 Speaker 1: I find I have more ailments since I've done that. 174 00:09:56,880 --> 00:10:00,319 Speaker 1: But but what we see is a real chang change 175 00:10:00,440 --> 00:10:05,240 Speaker 1: in how people are thinking about their relationship with the advisors. 176 00:10:05,280 --> 00:10:10,320 Speaker 1: So clearly what makes a difference is that when we 177 00:10:10,360 --> 00:10:12,640 Speaker 1: look at how people are engaging with the advisors, they're 178 00:10:12,640 --> 00:10:17,080 Speaker 1: trying to deal with more issues that are regularly scheduled meeting. 179 00:10:17,120 --> 00:10:19,840 Speaker 1: I mean, for example, if you're going to meet every 180 00:10:19,880 --> 00:10:22,520 Speaker 1: three months, is that enough or how should you do it? 181 00:10:22,600 --> 00:10:25,600 Speaker 1: Rather than just wait until you have some catastrophe in 182 00:10:25,640 --> 00:10:29,280 Speaker 1: the market or some problem with an individual's finances, I'll 183 00:10:29,320 --> 00:10:31,440 Speaker 1: personalize it in our own example of my wife and 184 00:10:31,480 --> 00:10:34,959 Speaker 1: I have worked with the same advisor for over ten years. 185 00:10:35,600 --> 00:10:38,840 Speaker 1: We have quarterly meetings, but we have regular communication via 186 00:10:38,920 --> 00:10:42,920 Speaker 1: email on different issues, on different questions. Uh. And that's 187 00:10:42,960 --> 00:10:46,000 Speaker 1: an ongoing relationship. And the significance is that they're not 188 00:10:46,080 --> 00:10:50,040 Speaker 1: just reporting on investment return. They're reporting on the choices 189 00:10:50,080 --> 00:10:52,360 Speaker 1: that we're making and whether or not we're progressing towards 190 00:10:52,360 --> 00:10:54,920 Speaker 1: implementing it. I'm sure a lot of people who are 191 00:10:54,960 --> 00:10:59,079 Speaker 1: closing getting closer to retirement staff at night worrying, So 192 00:10:59,120 --> 00:11:00,480 Speaker 1: I'm sure it would be better for them just to 193 00:11:00,600 --> 00:11:02,920 Speaker 1: have a conversation with somebody in a more regular basis. 194 00:11:03,240 --> 00:11:05,199 Speaker 1: Mark de virgin, thank you so much for joining us. 195 00:11:05,200 --> 00:11:08,200 Speaker 1: Mike di virgin is chief executive officer of Pershing Advisor 196 00:11:08,360 --> 00:11:11,360 Speaker 1: Solutions and New Joins. Is here where we are broadcasting 197 00:11:11,360 --> 00:11:15,280 Speaker 1: from Pershing's Inside twenty seventeen conference at the man Chance 198 00:11:15,400 --> 00:11:31,319 Speaker 1: at Manchester. Grant Hyatt, thanks for being here. I'm Lisa 199 00:11:31,400 --> 00:11:33,240 Speaker 1: brom Woy's I'm here with the PIM Fox and we 200 00:11:33,280 --> 00:11:37,760 Speaker 1: are broadcasting from Pershing's Insight seventeen conference at the Manchester 201 00:11:37,880 --> 00:11:41,360 Speaker 1: Grand Hyatt in San Diego, where more than two thousand 202 00:11:41,440 --> 00:11:45,560 Speaker 1: financial professionals are here talking about the future of their 203 00:11:45,679 --> 00:11:49,839 Speaker 1: industry and one big question that keeps coming up. The 204 00:11:49,880 --> 00:11:52,400 Speaker 1: big elephant in the room is what roll will roller 205 00:11:52,559 --> 00:11:56,640 Speaker 1: advisory services play in their futures. Here with us as 206 00:11:56,679 --> 00:12:00,559 Speaker 1: Simon Roy, president and chief executive officer of gems Aposilicon 207 00:12:00,600 --> 00:12:05,440 Speaker 1: value based firm that was acquired by invest Goo last year. Simon, 208 00:12:05,480 --> 00:12:09,640 Speaker 1: I'd love to hear your perspective on the robro advisory 209 00:12:09,679 --> 00:12:13,600 Speaker 1: industry and whether it is starting to take over some 210 00:12:13,679 --> 00:12:17,720 Speaker 1: of the jobs that previously were filled by humans in 211 00:12:17,760 --> 00:12:22,080 Speaker 1: the advisory industry. Yeah, thank thanks, You appreciate the opportunity 212 00:12:22,160 --> 00:12:26,640 Speaker 1: to share perspective on this. I think um technology has 213 00:12:26,679 --> 00:12:30,280 Speaker 1: been sweeping through many industries. We've seen it in media, 214 00:12:30,320 --> 00:12:33,160 Speaker 1: we've seen it in commerce, we've seen it in travel, 215 00:12:33,760 --> 00:12:36,120 Speaker 1: and so those same same trends that have driven it, 216 00:12:36,240 --> 00:12:39,800 Speaker 1: which is consumer adoption of technology, are starting to be 217 00:12:39,880 --> 00:12:43,080 Speaker 1: felt in the financial services industry. And so the initial 218 00:12:43,200 --> 00:12:48,360 Speaker 1: robo advises that came out appeared to be barbarians at 219 00:12:48,400 --> 00:12:51,079 Speaker 1: the gate. Right, They're gonna tear down the edifice of 220 00:12:51,120 --> 00:12:55,000 Speaker 1: the financial services industry, take over the market, and everyone's 221 00:12:55,000 --> 00:12:59,960 Speaker 1: going to be using robo advises, just like they use Amazon, Google, Netflix. 222 00:13:01,000 --> 00:13:05,720 Speaker 1: Hasn't turned out that way. Uh, investing is different. It 223 00:13:05,800 --> 00:13:09,560 Speaker 1: is a very emotional issue. It's very high complexity and 224 00:13:09,679 --> 00:13:12,920 Speaker 1: consequence for individuals, and so the role of the advisor, 225 00:13:13,000 --> 00:13:16,640 Speaker 1: the role of judgment, the role of expertise is quite critical. 226 00:13:16,679 --> 00:13:18,840 Speaker 1: And so we've seen we have not seen that sort 227 00:13:18,840 --> 00:13:21,600 Speaker 1: of hockey stick growth that we've seen in some of 228 00:13:21,600 --> 00:13:25,559 Speaker 1: the other technology sectors in financial services. And what we're 229 00:13:25,559 --> 00:13:29,400 Speaker 1: seeing is a trend towards the adoption of technology by 230 00:13:29,440 --> 00:13:35,000 Speaker 1: financial services firms to enable advisers, essentially creating a bionic advisor, 231 00:13:35,240 --> 00:13:38,479 Speaker 1: a combination of the best of of people in relationships 232 00:13:39,040 --> 00:13:41,760 Speaker 1: with the best of technology, and that that's essentially the 233 00:13:41,800 --> 00:13:44,720 Speaker 1: business gym step is in. I want to see if 234 00:13:44,720 --> 00:13:47,560 Speaker 1: we can take one step deeper into the pool here, 235 00:13:47,640 --> 00:13:52,920 Speaker 1: because let's say you are a registered investment advisor and 236 00:13:53,080 --> 00:13:56,600 Speaker 1: you are on the black Rock platform, or you're using 237 00:13:56,720 --> 00:13:59,480 Speaker 1: t du merrit Trade or you're using Northwestern or Pershing 238 00:13:59,520 --> 00:14:01,640 Speaker 1: or whatever, but you've got a platform. You have your 239 00:14:01,640 --> 00:14:07,280 Speaker 1: own digital what they call wealth management platforms out there. Um, 240 00:14:07,400 --> 00:14:10,000 Speaker 1: what gem STEP I understand does as well as many 241 00:14:10,040 --> 00:14:13,760 Speaker 1: other some other competitors, is you are able to offer 242 00:14:13,880 --> 00:14:21,560 Speaker 1: online advice having to do with portfolio perhaps construction or allocation, 243 00:14:22,000 --> 00:14:28,120 Speaker 1: but in relationship to the registered advisor. Is that accurate? Yeah? 244 00:14:28,200 --> 00:14:31,040 Speaker 1: That So essentially the business GYM STEP is in is 245 00:14:31,080 --> 00:14:35,920 Speaker 1: helping connect investors with advice and quality advisers. And so 246 00:14:35,960 --> 00:14:39,360 Speaker 1: we do this by providing a platform, a digital advice 247 00:14:39,440 --> 00:14:43,440 Speaker 1: platform GYM STEP Advisor pro to advisory firms. So our 248 00:14:43,440 --> 00:14:46,840 Speaker 1: clients are the registered investment advisors or the broker dealers 249 00:14:46,960 --> 00:14:50,200 Speaker 1: or the banks, and we provide a platform. They put 250 00:14:50,240 --> 00:14:53,600 Speaker 1: their logo on it. It's their platform. We're a technology 251 00:14:53,640 --> 00:14:56,720 Speaker 1: service provided to them. But what it enables, what it 252 00:14:56,840 --> 00:14:59,800 Speaker 1: enables them to do is to have a prospect or 253 00:14:59,800 --> 00:15:03,560 Speaker 1: a client go through that same process that they would 254 00:15:03,640 --> 00:15:07,080 Speaker 1: sitting in front of an advisor. So answer questions about 255 00:15:07,160 --> 00:15:11,680 Speaker 1: what goals are important to them retirement, college savings in 256 00:15:11,720 --> 00:15:13,640 Speaker 1: the same way as they would if they were sitting 257 00:15:13,640 --> 00:15:17,240 Speaker 1: with someone, Um, fill out a restaurants question, a very 258 00:15:17,320 --> 00:15:20,920 Speaker 1: friendly question asking about when are you planning to retire? 259 00:15:21,480 --> 00:15:23,600 Speaker 1: Various questions, how much risk are you willing to take? 260 00:15:23,760 --> 00:15:28,960 Speaker 1: Are those answers actually read by human beings or is 261 00:15:29,000 --> 00:15:34,760 Speaker 1: the information that is then uh reported to the client? 262 00:15:35,680 --> 00:15:39,200 Speaker 1: Where does that information come from? How is that constructed? Yeah, 263 00:15:39,440 --> 00:15:41,840 Speaker 1: that's a great question. I think if I could. The 264 00:15:42,600 --> 00:15:46,480 Speaker 1: process essentially allows people to onboard, just like you can 265 00:15:46,560 --> 00:15:48,720 Speaker 1: download an app on a you know, on the phone. 266 00:15:49,000 --> 00:15:51,920 Speaker 1: It allows them to onboard as a client if they're ready, 267 00:15:52,000 --> 00:15:55,320 Speaker 1: without having to talk to the human. But it is 268 00:15:55,360 --> 00:15:58,400 Speaker 1: they're onboarding to that firm, they have access to the advisors, 269 00:15:58,440 --> 00:16:02,280 Speaker 1: they have access to the judgment and the experience of 270 00:16:02,360 --> 00:16:05,800 Speaker 1: the firm, the investment strategies. So to answer your question, 271 00:16:06,240 --> 00:16:11,520 Speaker 1: the the answers are input into the system, but the 272 00:16:11,600 --> 00:16:14,520 Speaker 1: way they are responded to, the way they the client 273 00:16:14,640 --> 00:16:17,560 Speaker 1: is guided to a portfolio, is based on the judgment 274 00:16:17,840 --> 00:16:21,040 Speaker 1: of those humans at the firm. So if I'm sitting 275 00:16:21,080 --> 00:16:22,920 Speaker 1: in front of you as an adviser and i fill 276 00:16:22,960 --> 00:16:25,800 Speaker 1: out a paper based questionnaire, I'm going to get a 277 00:16:25,920 --> 00:16:27,960 Speaker 1: risk score based on that I'm going to be put 278 00:16:28,000 --> 00:16:30,880 Speaker 1: into a portfolio. The fact that I'm entering it on 279 00:16:30,920 --> 00:16:33,520 Speaker 1: a computer as opposed to on a piece of paper 280 00:16:33,640 --> 00:16:36,440 Speaker 1: is not going to change the quality of the portfolio 281 00:16:36,480 --> 00:16:40,200 Speaker 1: and put into It's just easier for you know, Mary 282 00:16:40,280 --> 00:16:43,640 Speaker 1: on Sunday morning at home to be able to complete 283 00:16:43,640 --> 00:16:46,080 Speaker 1: this because she has a busy schedule and maybe doesn't 284 00:16:46,080 --> 00:16:49,000 Speaker 1: want to go to an advisor, doesn't have time. She 285 00:16:49,080 --> 00:16:52,040 Speaker 1: can complete this, be put into a portfolio that will 286 00:16:52,080 --> 00:16:56,000 Speaker 1: be well suited to help her get to retirement and 287 00:16:56,040 --> 00:16:58,160 Speaker 1: get on with her life. And so essentially what we're 288 00:16:58,200 --> 00:17:01,960 Speaker 1: doing is we're helping these firms take what used to 289 00:17:02,040 --> 00:17:05,280 Speaker 1: take about three months and put it into twelve minutes. 290 00:17:05,960 --> 00:17:08,920 Speaker 1: You know, Simon, as you talk, I'm struck by how 291 00:17:08,960 --> 00:17:11,480 Speaker 1: familiar this feels. I mean, this is basically what we 292 00:17:11,560 --> 00:17:13,840 Speaker 1: do in most aspects of our lives when we order 293 00:17:13,920 --> 00:17:17,880 Speaker 1: something online, when we search for airplane tickets. Are you 294 00:17:17,920 --> 00:17:20,440 Speaker 1: surprised that it has taken as long as it has 295 00:17:20,880 --> 00:17:23,879 Speaker 1: for the financial industry as a whole to adopt some 296 00:17:23,960 --> 00:17:31,080 Speaker 1: of these fairly basic technological advances. Uh As as a 297 00:17:31,400 --> 00:17:34,520 Speaker 1: you know, as an executive of a technology services firm 298 00:17:34,560 --> 00:17:37,359 Speaker 1: in this industry, I certainly would have liked it to 299 00:17:38,119 --> 00:17:42,359 Speaker 1: have happened a lot faster. What's the what's the reluctant money? 300 00:17:42,440 --> 00:17:45,440 Speaker 1: Money is different? Well, hold on when you're when you're 301 00:17:45,440 --> 00:17:49,240 Speaker 1: connected in in some kind of legal way with somebody's money, 302 00:17:50,440 --> 00:17:53,359 Speaker 1: it can make things different. Is that the issue with 303 00:17:53,480 --> 00:17:55,439 Speaker 1: money or is it a different issue with I think 304 00:17:55,480 --> 00:17:58,800 Speaker 1: it's a combination. One of the biggest issues that that 305 00:17:58,920 --> 00:18:03,760 Speaker 1: we're dealing with you has behavior change. We're dealing with humans. 306 00:18:04,200 --> 00:18:06,639 Speaker 1: Technology is just a means to an end, which humans 307 00:18:06,640 --> 00:18:10,080 Speaker 1: though that the clients or or the financial adviser, that's 308 00:18:10,119 --> 00:18:13,480 Speaker 1: the key, it's both. Now. Typically technology has been driven 309 00:18:13,520 --> 00:18:17,040 Speaker 1: from within the industry e t f s mutual fans, 310 00:18:17,200 --> 00:18:21,720 Speaker 1: index fans, product based party product, but also a t 311 00:18:21,960 --> 00:18:24,320 Speaker 1: m S in the banking industry comes from within. This 312 00:18:24,400 --> 00:18:27,840 Speaker 1: is the first time technology has been driven from you 313 00:18:27,960 --> 00:18:32,000 Speaker 1: and me, from the consumer, and so the consumer adoption 314 00:18:32,040 --> 00:18:36,359 Speaker 1: of this technology is actually helping drive behavior change of 315 00:18:36,400 --> 00:18:41,960 Speaker 1: the advisors, of the home office and of the back 316 00:18:42,000 --> 00:18:44,639 Speaker 1: office within any every one of these firms. So that 317 00:18:44,720 --> 00:18:49,320 Speaker 1: has been the constraint getting enough tractions, showing enough adoption 318 00:18:49,400 --> 00:18:54,000 Speaker 1: by consumers and the opportunity for these firms to say, huh, 319 00:18:54,720 --> 00:18:56,920 Speaker 1: things are changing. Well, I will tell you the cynic 320 00:18:57,000 --> 00:18:59,560 Speaker 1: in me wonders. If it's a different money issue, then 321 00:18:59,560 --> 00:19:03,359 Speaker 1: what is talking about, which is that investment firms have 322 00:19:03,440 --> 00:19:07,080 Speaker 1: a vested interest in not making a cookie cutter program 323 00:19:07,160 --> 00:19:09,720 Speaker 1: that people could just input data into and get the 324 00:19:09,840 --> 00:19:13,080 Speaker 1: answer that's spit out in twelve minutes. That reduces a 325 00:19:13,119 --> 00:19:16,000 Speaker 1: lot of the workflow and a lot of the legitimization 326 00:19:16,000 --> 00:19:18,080 Speaker 1: that they might have been able to provide for the fees. 327 00:19:18,320 --> 00:19:19,800 Speaker 1: So I'm going to take issue with the way your 328 00:19:19,840 --> 00:19:24,320 Speaker 1: characterize great. Please do when you think about your life 329 00:19:24,720 --> 00:19:27,760 Speaker 1: as I mean your life cycle as an investor, as 330 00:19:28,040 --> 00:19:32,080 Speaker 1: looking to achieve your goals, your entry points into investment 331 00:19:32,119 --> 00:19:35,200 Speaker 1: management maybe a twelve minute process, which is great because 332 00:19:35,200 --> 00:19:38,920 Speaker 1: it gets you towards advice. The issue we're deating here 333 00:19:39,080 --> 00:19:42,080 Speaker 1: with here is most people have no access to advice, 334 00:19:42,680 --> 00:19:44,439 Speaker 1: and so if we can make it easier for the 335 00:19:44,520 --> 00:19:47,720 Speaker 1: mass affluent and the mass market to actually get decent 336 00:19:47,760 --> 00:19:51,480 Speaker 1: advice end up with better outcomes. Twelve minutes. That is 337 00:19:51,520 --> 00:19:55,200 Speaker 1: a phenomenal outcome, But that is an entry point. Then 338 00:19:55,240 --> 00:19:57,960 Speaker 1: you get married, or you get a big bonus, or 339 00:19:58,000 --> 00:20:01,000 Speaker 1: you have kids, or maybe there's a parental shoot, your 340 00:20:01,720 --> 00:20:05,959 Speaker 1: your needs become more complex. You're looking for judgment and 341 00:20:06,000 --> 00:20:08,159 Speaker 1: so really what we're trying to do is reduce that 342 00:20:08,280 --> 00:20:12,639 Speaker 1: friction to get in to get decent portfolio advice, but 343 00:20:12,720 --> 00:20:16,360 Speaker 1: then make accessible the advisors if and when you need them. 344 00:20:16,480 --> 00:20:19,959 Speaker 1: And that's that bionic advisor. I'm just gonna throw out 345 00:20:20,000 --> 00:20:21,760 Speaker 1: a couple of words for you, but I want to 346 00:20:21,760 --> 00:20:25,919 Speaker 1: just give you the context black Rock and the Future Advisor, 347 00:20:26,640 --> 00:20:31,000 Speaker 1: Fidelity and E Money Advisor, Northwestern Mutual, Learned Vest and 348 00:20:31,280 --> 00:20:36,520 Speaker 1: now invest Go gemstep. Would it be accurate to describe 349 00:20:37,400 --> 00:20:40,240 Speaker 1: this industry as one that is taking advantage of a 350 00:20:40,280 --> 00:20:45,000 Speaker 1: generational shift as well? Because last time I checked, you 351 00:20:45,080 --> 00:20:47,960 Speaker 1: look at anybody you know who doesn't have gray hair, 352 00:20:48,359 --> 00:20:51,640 Speaker 1: and there's no paper around. There's no pens or pencils. 353 00:20:51,640 --> 00:20:54,040 Speaker 1: They're not writing anything. In fact, they're not even taking 354 00:20:54,040 --> 00:20:58,560 Speaker 1: telephone calls. They're just texting or they're on their mobile devices. 355 00:20:58,840 --> 00:21:02,800 Speaker 1: That but go on, okay, well but you but you 356 00:21:03,080 --> 00:21:06,640 Speaker 1: get my point, which is that there's no one today 357 00:21:07,160 --> 00:21:10,520 Speaker 1: if you're in business and sends you a message, if 358 00:21:10,560 --> 00:21:14,000 Speaker 1: it's a customer, you're gonna respond to them relatively quickly. 359 00:21:14,680 --> 00:21:17,119 Speaker 1: But having said that, there are some industries, maybe like 360 00:21:17,160 --> 00:21:20,399 Speaker 1: the medical industry, try getting the doctor to call you back. Uh, 361 00:21:20,600 --> 00:21:24,320 Speaker 1: there's some industries which have not embraced the technology. Is 362 00:21:24,359 --> 00:21:29,560 Speaker 1: that what you found? Clearly the rising tide of digital 363 00:21:29,600 --> 00:21:33,399 Speaker 1: adoption is just sweeping through the consumer I mean the 364 00:21:33,440 --> 00:21:37,639 Speaker 1: consumer space. It's not just the millennials. Uh, there was 365 00:21:37,640 --> 00:21:41,639 Speaker 1: an initial conception that it's the millennials. They're digital. You 366 00:21:41,680 --> 00:21:45,880 Speaker 1: have a smartphone, Netflix and say, I want to say, 367 00:21:46,040 --> 00:21:48,040 Speaker 1: is nothing Oh yes, No, No, I was gonna say, 368 00:21:48,080 --> 00:21:50,880 Speaker 1: I still have some hair that is not gray. I'm 369 00:21:50,920 --> 00:21:53,399 Speaker 1: not sure I could say the same. But it's you know, essentially, 370 00:21:53,440 --> 00:21:56,440 Speaker 1: it's all of us, and so we're addicted. Well, it's 371 00:21:56,520 --> 00:22:00,920 Speaker 1: it's addicted. We're addicted because it is so efficient and engaging. 372 00:22:01,480 --> 00:22:05,720 Speaker 1: It means you can have access to you know, to services, everything. Well, 373 00:22:05,800 --> 00:22:08,040 Speaker 1: but that's the point. You have access to everything that 374 00:22:08,119 --> 00:22:11,520 Speaker 1: previously had so much friction you didn't consume. One of 375 00:22:11,560 --> 00:22:14,399 Speaker 1: the things you didn't consume was advice. And so firms 376 00:22:14,400 --> 00:22:17,000 Speaker 1: like Investco look at this and say, we want to 377 00:22:17,040 --> 00:22:21,040 Speaker 1: add value to our advisory firm clients. Technology is a 378 00:22:21,160 --> 00:22:25,840 Speaker 1: key key factor going forward. It's a rising tide. We 379 00:22:25,920 --> 00:22:27,840 Speaker 1: want to make sure that we were able to add 380 00:22:27,880 --> 00:22:29,600 Speaker 1: that as a as a pillar as one of the 381 00:22:29,680 --> 00:22:33,240 Speaker 1: value adds you know we can provide. So that's that's 382 00:22:33,280 --> 00:22:36,320 Speaker 1: the rationale. Well, thanks for providing us with the opportunity 383 00:22:36,400 --> 00:22:39,160 Speaker 1: to speak with you and learn about the business. Much appreciated. 384 00:22:39,200 --> 00:22:41,760 Speaker 1: Simon Roy is the president and the chief executive of 385 00:22:41,880 --> 00:22:46,240 Speaker 1: gem step By Investco. And we are broadcasting from Pershing 386 00:22:46,480 --> 00:22:50,680 Speaker 1: Insight Seen conference is taking place at the Manchester Hired 387 00:22:50,720 --> 00:22:53,919 Speaker 1: in San Diego, and this year marks nineteen years of 388 00:22:54,000 --> 00:22:56,760 Speaker 1: Insight nineteen years. The company is committed to the success 389 00:22:56,760 --> 00:23:00,600 Speaker 1: of its advisors and we are here along with more 390 00:23:00,640 --> 00:23:04,119 Speaker 1: than two thou financial professionals from all over the world. 391 00:23:04,600 --> 00:23:10,280 Speaker 1: This is Bloomberg. Thanks for listening to the Bloomberg P 392 00:23:10,400 --> 00:23:13,360 Speaker 1: and L podcast. You can subscribe and listen to interviews 393 00:23:13,400 --> 00:23:17,440 Speaker 1: at Apple Podcasts, SoundCloud or whatever podcast platform you prefer. 394 00:23:17,840 --> 00:23:21,440 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 395 00:23:21,480 --> 00:23:24,760 Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast, 396 00:23:24,800 --> 00:23:27,399 Speaker 1: you can always catch us worldwide on Bloomberg Radio.