Krawcheck: Financial Advice Needs Makeover

January 15, 2014

Advisors’ focus should be on serving clients, not outperformance, Sallie Krawcheck says.

When it comes to financial advice, understanding your clients’ needs is only part of the task, but serving them is imperative. Sallie Krawcheck, owner of the professional women’s network 85 Broads, and previously president of Bank of America Wealth Management, says that at the end of the day, the financial services industry needs to remember it’s first and foremost a client services business. Market outperformance is all well and good, but it’s not what financial advisors should be focusing on. More to the point, she says not all investors are created equal.

Krawcheck will be a keynote speaker at IndexUniverse’s upcoming Inside ETFs conference.

IndexUniverse: At our conference, you’ll be discussing the future of financial advice. Some say the new generation of wealthy investors does not want their parents’ advisors. What is it that they don’t like about mom and dad’s advisor?

Sallie Krawcheck: Many young people have never met their parents' advisors. You’ve probably seen the numbers, which show that when both parents pass away, the children of the parents stay with the existing financial advisor only a single-digit percent of the time. It’s very, very low. I’ve said, again and again: The one sales pitch that never works for advisors is, “I’m sorry for your loss. My name is Bob.” Not knowing the kids, not viewing the client as “the family,” but instead as “the guy,” leads to lost business when “the guy” is no longer there.

IU: Where is this next generation going for advice? Are they just finding their own advisor or are they looking for something completely different?

Krawcheck: All of it. We have these pitched debates in our industry about self-directed versus people with advisors, as though it were only one or the other, when in fact, there are lots and lots of clients out there. So the answer is both.

If these individuals are younger individuals, they’re often simply in banks. They don’t have a financial advisor yet, or they’re beginning in the 401(k)s, which is their greatest investment, or they’re beginning with self-directed investing. But for many of them, if they’re older—which is increasingly the case—they’ll have their own financial advisor.

IU: From a financial advisor perspective then, if you’re losing some of your business in the transition, and cold calling is a thing of the past for the younger generation, what do you do to prospect new business?

Krawcheck: I think the answer is teams, and intergenerational teams. I’ve been in the industry for a long time, and every bit of direct and third-party research that I look at—and by “direct,” I mean the financial advisors at Smith Barney and Merrill—shows that teams are more productive, have bigger businesses, and have greater client satisfaction per person than do individual practitioners.

Say that this gentleman specializes in gathering assets, and this lady specializes in asset allocation; if they both go to their specialization, they can work at their highest and best use.

The other thing that works is having intergenerational teams, which gets to the issue: Some people prefer working with professionals and advisors of their own generation. By having a team in which the lead advisor is in his 60s or 70s, and you have an advisor who is in his 40s, and you even have an advisor in his late 20s, then you’re able to have the advisors match up with different individuals in a family who are either most comfortable with them because of age reasons, or because of shared common interests.



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