What Is Next for Wealth Management? A Conversation With Fidelity Labs’ Patrick Hannon

• [2:19] Patrick Hannon discusses the value of mentorship in career trajectory
• [6:57] Four major trends transforming the retail wealth management market
• [8:09] The pressures facing wealth management firms and the consequences
• [9:32] How technological innovations are changing advisory practices
• [11:33] Fidelity Labs’ approach to influencing wealth management through technology
• [14:53] The importance of focusing on the problem first in FinTech solutions
• [16:18] How will an investment advisor’s practice evolve five years from now?
• [22:19] The critical role of financial literacy for beneficiaries in wealth transfer

• “I take great pride in taking time with the younger folks on staff and just helping them look around corners.”
• “We’ve thrown AI solutions at you, but no one’s actually talking to the advisors and saying, ‘What’s the problem we’re trying to solve here?'”
• “The best firms out there are going to build beautiful, bespoke technology experiences for clients.”
• “We could do so much more to provide guidance and support to people who are going through a grieving process.”
• “Find someone who’s maybe eight to 10 years younger than you, and make an impact on their career.”

1. Engage in mentorship to help guide the next generation of industry leaders.
2. Articulate your value proposition clearly to clients, emphasizing a holistic approach.
3. Integrate tax planning services into your offering to provide tangible client value.
4. Embrace AI and technology to enhance client servicing and advisor efficiency.
5. Develop strategies to build value for beneficiaries and the next generation before wealth transfer occurs.

This podcast is brought to you by Beacon Strategies, LLC, a go-to expert in financial technologies.  

As a new-age wealth firm management provider, we help you understand, adapt, and be more relevant in today’s dynamic enterprise wealth management industry.

With our suite of operational, educational, and practice management product offerings, we strategically synchronize your strategy with a robust infrastructure that fosters business expansion and profitability.

To learn more on how Beacon Strategies, LLC can help you align business strategy and vision, visit beaconstrategiesllc.com. And don’t miss out on our exclusive podcast Beacon Flash for industry news and trends. 

 

Speaker 1:0:02

Welcome to the podcast that is dedicated to providing insight, intelligence and thought-provoking conversations with members of the enterprise wealth management community.

Speaker 2:0:17

Chip Kisbert. Here. I’m the host of the Beacon Flash podcast, where we discuss the future of enterprise wealth management with leaders in the space. Past guests have included Salesforce’s Michelle Feinstein, sidney Anamendra, the CEO of Surge Ventures, and Raymond James’ Frank McAleer. Most recently, we had Jeff Moore, cio of Valmark Securities, on the show to talk AI.

Speaker 2:0:39

This podcast is brought to you by Beacon Strategies LLC, a go-to resource for enterprise wealth management firms and providers. We are a consulting firm that is dedicated to the wealth management industry. We help our customers understand, adapt and be more relevant in today’s dynamic enterprise wealth management space. We bring three services to bear we host focus roundtables, deliver consulting services and provide gap products. In short, we help wealth and provider firms foster business growth and improve profitability. Recently, we helped one of our customers choose a new clearing firm and investment platform. Add to those bodies of work. We aided them as they reset their cash management economics. Our work helped them add millions to their margin. If you need some industry perspective or help, visit BeaconStrategiesLLCcom and don’t miss out on our exclusive Beacon Flash podcast for the industry news and trends.

Speaker 2:1:38

I am so excited to have Patrick Hannon with me today. Patrick is a member of the Fidelity Labs team, he brings an unbelievable amount of experience to the table. Previously, he’s held positions at Nitrogen, formerly known as Riskalyze, and at Vicent, which is now a part of InvestCloud. Patrick, welcome. Hey, thanks for having me, chip, how are you? I am fabulous. You’re here. You know one of the things that I always, you know we talk a fair amount. I love our conversations, you know. Share with me a little of the, or a few of the things that you know. You’re really proud of your some of your accomplishments. As you look at the industry.

Speaker 3:2:20

Yeah, it’s. I’ve had a lot of fun roles where I’ve got to work with a lot of great companies and, admittedly, we’ve sold a lot of deals. But I think, like the things I’m most proud of are probably the mentorships that I’ve had with a lot of the individuals along the way and I I take great pride in in taking some time with some of the younger folks on staff that could be interns, people, people early in their careers and just helping them look around corners and and figure out the next step of their career.

Speaker 2:2:46

You know, I think that’s a really under valued piece of our business and, and you know, as I get older and you know, whatever you know I that’s more and more of an important place in what I do. And that’s it is. You’re right, it’s unbelievably rewarding.

Speaker 3:3:06

Yeah, I’ve worked with loads of great leaders I think of Lauren Brockhouse, drew DiMarino, aaron Klein, lori Hardwick and they’ve taken some time to help me take the next step in my career and just try to pay that forward.

Speaker 2:3:20

So I think that’s always a great place to start. So how did you get into the wealth management space, Right, and then kind of what you know what drives your true north.

Speaker 3:3:30

Yeah, I don’t think you actually know this. I graduated in 2008 when the economy lost a million jobs. So the month the month I graduated and I remember I was, I was dating my now wife and my father-in-law is just asking me, like what are you going to do, you know, and like how are you going to pay the bills? And I remember going on LinkedIn and I was in Boston and I got a job at a startup that was selling high risk auto insurance to New Jersey residents. So imagine, you’re the very worst.

Speaker 3:4:02

Drivers in New Jersey were like my ideal customer profile and I was as green as the summer grass and the Minnesota nice in me was coming out. I had to learn how to kill all of that as quick as possible. But what that did was it set me off on a few years of working with startups and being in the insurance space, and then I had an opportunity to join AdviceSend, where I flipped from insurance. They had an insurance side and a financial planning side and I flipped to the financial planning side on the advice of my wife and a few other folks, and I never, never looked back from there, and so that was kind of how I got started was a variety of startups in the insurance space and then really found my place in FinTech, probably about 12 years ago.

Speaker 2:4:41

Got it. I always find it fascinating how people kind of came into this industry Right and uh, who? So another question I have is so who’s been? Really it was who who’s had an influence on your career?

Speaker 3:4:53

Yeah, I mentioned some names earlier. I think, um, lauren Brockhouse and I built sales teams and just really hard culture Uh, and I learned a lot through that experience of how to get successful teams when maybe the product isn’t as good or the culture isn’t great and how to change that. Drew is someone who really helped me how to develop reps and just focus on the future is bright, like when you. When you can see that the future is bright in your organization and a leader helps you see where you fit into that, you tend to have a lot of success. I think I mentioned Aaron. He’s a world-class communicator.

Speaker 2:5:27

One of the most unbelievable Marcom guys I’ve ever met. Yeah, but like he runs a great business as well.

Speaker 3:5:33

Unbelievably and but I think what like behind the scenes, there are times that he and I didn’t always agree on product strategy or didn’t always agree on choices that you have to make. You work at a startup and there’s resource constraint and because we always knew each other’s position and because he was a great communicator with the staff, you can work through some of those difficulties in a really meaningful way.

Speaker 2:5:57

Yeah, I mean the picture always has to be rosy. And it’s interesting because I think that also what I’m hearing is that there was open communication, meaning hey, you know, you didn’t have to agree with everything Right, and you could have discussions and maybe have a different opinion. That is taken into account.

Speaker 3:6:16

Just disagree and commit, and I love working for leaders like that, where you know where they stand and they’re not mincing words, you know so.

Speaker 2:6:27

The interesting thing that I look at there too is kind of the challenge, right, because you know, we see, you know occasionally folks that you know in my own situation, right, I wanted to be where I could have an open dialogue and not be overly limited, so anyway. So let me ask you this, right? So we’ve talked a little bit about influence on your career. Let’s shift gears a little bit. I’m curious how do you see the retail wealth management marketplace changing?

Speaker 3:6:57

Yeah, I think this one’s really interesting to me because I see four things going on simultaneously. I’ll be pretty brief on this. The first is there’s just a flood of capital into the RIA space and there’s a flood of capital into the fintech space, and so I think that’s slowing down, but in some respects it’s not, and we’re going to continue to see that because of the opportunity that’s coming. And that’s the 84 trillion in wealth transfer, which everybody knows about that. Everybody talks about that. So those are the two of the four.

Speaker 3:7:26

The other two things that are really interesting to me are 37% of advisors are going to retire in the next 10 years, so you have this dynamic where, in order for wealth to transfer, clients have to die and your advisor is likely to retire. You know a third of the advisors that are going to retire in the next 10 years, and so all of these relationships are are going to flip in some respect. And then, if you think of the market the fourth thing the market is being close to normal returns, not this crazy run on equities that we’ve seen in the last 15 years. I think there’s going to be a lot of pressure on firms and I think there’s going to be winners and losers. I think RAs are going to. They’re going to be investors that want the returns that they’re not getting from firms that aren’t growing, and so I just see a lot of pressure in the space from those four trends.

Speaker 2:8:09

So it’s interesting, that last one, and on your four trends, I agree. I think you hit it spot on that fourth one. I think we’re already starting to see that. I think that we’re starting to see some pressure be exerted on some of these firms, that we’re looking to roll up practices and uh with interest rates and and the like. I think there’s a little bit of uncomfortableness out there. We, we real quick.

Speaker 3:8:34

We. We talk about that right, like the average firm, is only growing 3% Right, organically Right, and so something’s got to break there.

Speaker 2:8:41

Right, and you know, and the interesting thing, a lot of the growth and I heard Joe Durant say this, I was down at Trade, pmr and at their conference and listening to them talk about, listening to Joe talk about that growth has really been driven acquisition Any real growth is acquisition. So there is a bit of coming to Jesus, so to speak, that we see a bit of coming to Jesus, so to speak. That we see Let me flip to kind of what I’ll call part two of the initial question I asked you about where do you see it going? So, within the wealth space, right, and it’s a changing dynamic. How is technology fitting into the equation? Because, as I’ve looked at this, I’ve seen more tech immersion really in the last three to five years than I’ve seen in the preceding 20 years of my career. Right, I’m curious about your thoughts there.

Speaker 3:9:33

Why? Chuck a little bit. I am the technologist here. I spent the bulk of my career on the technology space and yet I kind of laugh.

Speaker 3:9:39

Like what Michael’s map has five hundred and sixty firms on it now. Like if I’m an advisor, how do you even sort through? That Planning category has got? I know that there’s like three or four main ones, but like the planning category has got like 30 entrants now and like you don’t know who has a SOC to. You don’t know what the cyber looks like for different firms. How do you integrate them? The life cycle of the client, all the way from marketing through compliance review, has got like 20 different pieces of tech on it. So it’s impossible. And at the same time, I chuckle, just because everybody’s throwing an AI solution at you. And we’ll talk about AI, I think, later on a little bit, but it’s like in 2022, everybody hooked up ChatGPT to their tack and said we’ve got a silver bullet for you, right? And um, no one’s actually talking to the advisors and saying what’s the problem we’re trying to solve here? It’s just we’ve got chat GPT, that we’ll. We’ll solve it for you.

Speaker 2:10:35

We are. We are Um, and it was funny cause we had a uh, one of our, one of our customers, um CG financial, up in Michigan, had a roundtable that we hosted for them and we asked the question what do you see happening with AI? And they really hadn’t thought about it. It hadn’t permeated down into the day-to-day operations of the organizations yet. Furthermore, I hear, as we’re talking to different folks in the industry, we’re hearing Furthermore, I hear, as we’re talking to different folks in the industry, we’re hearing hey, ai will have an impact, but it’s going to be a couple, three, four years till it starts to really permeate in.

Speaker 3:11:17

I think I’ll be quicker than that.

Speaker 2:11:19

Ah, all right, All right, so it’s interesting. So we kind of talked about this broad changing dynamic within the wealth management landscape. You know, where does Fidelity Labs see the most opportunity for an impact?

Speaker 3:11:33

Yeah, I think Labs is building businesses that advisors can use. Today we are looking at AI technologies that can augment how advisors function in particular areas, and so every facet of the advisor’s workflow will eventually change with AI. We’ve picked marketing and compliance as two areas to focus in on the two businesses that I work with closely in the labs business are Catchlight and Safer. Again, you go back to market returns and how hard organic growth rates are. Catchlight wants to fix that. They’re helping advisors primarily in two ways predicting the likelihood that a lead will pay for financial advice and then, second, they want to provide a whole household picture just based on a name and an address. Right, and so I think that, from the AI perspective, they’re not changing or marketing strategies. They’re augmenting the advisor to be much more efficient in how they deploy resources, technology focus, effort.

Speaker 3:12:29

Um, if you had a list of a hundred people to call, we’ll tell you the top 10 to call that are likely to pay you for your advice, right? Um, safer is taking the compliance route. Um, huge problems in compliance departments around. Um, the time it takes for ad review, the time it takes for know your customer. Uh, adverse media screening. Um, safer has already built a co-pilot for these firms, uh, so they don’t have to spend endless amounts of time. Um, like the, for example, you could just submit this recording to safer and in two minutes they’ll tell you every everything wrong that we said that was promissory. Uh, every disclosure we need because we talked about ESG, whatever that looks like, they’ll look up your, your disclosure library and tell you everything. Yeah, we did. We did wrong today.

Speaker 2:13:11

Got it, got it. Well, you know it’s. It’s fascinating because you know, as I was grateful that you had me join you at the Consultants Day back in April that Fidelity hosted, fidelity Labs hosted, and it’s interesting, you know, in our conversations and Joel Brackenstein was involved and it’s funny how he was talking about marketing being one of the one thing advisors are really struggling with, right, and they see that opportunity. So I think you know what you’re working on with Catchlight. It’s absolutely spot on. And the other interesting piece is you talk compliance right. So when we had our compliance roundtable earlier this year and we had, you know, 20 CCOs in the room, they were all eager, eager beavers for AI, but they didn’t have the business, the use case, the business use case. You guys are bringing a business use case. I think that’s uber value.

Speaker 3:14:05

I think that’s where FinTech providers I think that’s one of the things we do well and FinTech providers on a whole could do better is pick in the targeted use case of saying this is where we’re going to start to point technology, this is where we’re going to start. The co-pilot focused in on safer to do that with ad review. Then they expanded to some applications with larger language models. Now applications with larger language models. Now they’ve expanded to adverse media screening and you got to pick the problem first. You know any FinTech provider and say what are we good at? Well, fidelity has got 30 years of ad review. Like that’s a good place to start in terms of data, and so I think when you look at the co-pilots that will come out in our space you really have to look at your business first and say where can we use the most help, and I you know it’s you bring.

Speaker 2:14:54

A great point is that I think, as a whole, we see a lot of providers will go in and say, hey, we got a great solution, but they don’t bring the business case. So it’s just something that we see a lot. So when you’re studying the business these days, right, who are you following and who are you paying particularly close attention to as they’re sharing?

Speaker 3:15:12

their insights. It’s funny, I much rather talk to the advisor or the managing partner of a firm than anyone else, and I think we there’s a lot of sorry Chip, there’s a lot of. There’s sorry Chip, there’s a lot of. There’s a lot of talking heads, and the two of us maybe in that, but there’s there’s. Nothing is better than sitting in with an advisor and watching them use your technology in person, and I’ve done that at every stop at every organization I’ve worked at. I went out to an advisor my local market and said, hey, can I sit in and watch you use the technology? And you will learn more from 15 minutes with them, uh, about the problems in their business unrelated to your technology, um, than you will anywhere else. And so I’ve had the benefit of of a larger network. But I love finding um managing partners of mid-sized RAs and sitting down with them in their office to say what keeps you up at night, um night, and I think that can be better than some of the books that come out and things like that.

Speaker 2:16:09

You know, I spot on, agree with you. We consider ourselves a hands in the dirt firm and when we go into whether it’s a broker dealer, an RIA, that’s where we just get Uber a month a plethora of it. So five years from now, how is an investment advisor’s practice evolved? What are the key levers that they’re going to pull to grow their businesses? I’m kind of curious what you’re thinking as well as how are they going to stay out of the regulators’ crosshairs? It’s a pretty crazy marketplace right now, with a lot of disparate options and ways that these advisors have to run their business. What’s five years?

Speaker 3:16:50

I would look like two things. The first is, uh, I think advisors still struggle to articulate their value proposition in a way that clients want to hear it. Today, I think we talk about holistic financial planning. Very few firms are really good at clearly communicating. We do tax, we do estate, we do investments, and I think a lot of people just talk about I’ll manage your money, but it’s it’s not about. It’s about how they articulate what comprehensive planning looks like at their firm. I don’t think enough firms do tax frankly or associated with tax, and I think that’s an area to deliver tangible value in a way that a client could explain it to their friend very easily.

Speaker 3:17:27

The second thing that’s really interesting to me about you say, five years out, the industry is gonna change in terms of unstructured text, and what I mean by that is there are so many AI solutions coming out that will provide the ability for advisors to take meeting notes, and that technology is going faster than the regulators can keep up right, and so there’s this natural push and pull from a regulator or an advisor wanting a call transcription but also not wanting to take notes, and all of that unstructured text in this conversation can be pumped into a data lake and the best firms out there are going to.

Speaker 3:18:03

They’re going to get into this hairy space where they’re going to figure this out and they’re going to take copious amounts of unstructured text and they’re going to build beautiful, bespoke technology experiences for clients. Client servicing will get better. There will be emails that will be drafted based on the last conversation. Like the world will change in huge, meaningful ways. But it’s the firms that lean into this, this space of saying how are we going to navigate having call transcriptions? Where are we going to store this unstructured text? Which technology providers can we work with to take all of this mess of language and text and turn that into something beautiful on the client side?

Speaker 2:18:42

Right, you know, and it’s interesting because just within our framework here, right, we want to have show notes, right, so obviously those have to go through, you know, make sure the I’s are dotted and the T’s are crossed, and hey, yeah, that works. It’s interesting because at our compliance roundtable, this was a subject, right, and a lot of firms are shutting off any way of automatically gathering that, but they’re starting to think about it as hey. Well, we also need that to make sure that our advisors are saying the right things and doing the right thing. Truly, a teeter-totter there, and it’ll be interesting to see that play out that our advisors are saying the right things and and and doing the right thing.

Speaker 3:19:24

Yeah, truly a teeter-totter there. Um, and it’ll be interesting to see that play out. Yeah, it’s um again. There’s parts of the labs team uh, you know safer is focused on that um that are that are just they’re figuring that out internally at fidelity and, um, looking to figure out how do we bring that to larger, larger parts of the market. Because once you figure it out, you can make a meaningful impact on the amount of time an advisor spends on things unrelated to answering the core question that a client wants to know, which is am I going to be OK, is Meg going to be OK when I die? Are my kids going to be OK? Because, at the end of the day, we talk about technology for as long as this podcast will go. Because, at the end of the day, we talk about technology for, you know, as long as this podcast will go. But it’s those questions that advisors, you know, those make or break client relationships and those are the clients, you know. Those are the questions that clients want to hear.

Speaker 2:20:07

Well, and I’ll add to that and you know I’ve talked about this often is on the back. You know, basically, when a beneficiary takes over an account, a lot of times they leave that advice. Right, that shouldn’t be happening, right? We look at that. We look at advisors in their own succession planning Not always the best, right. So these are all things I think you’re that that we’ll see some solutions to.

Speaker 3:20:38

Here’s what I’d like to see in the next five years. I’d like to see more firms tackle how to provide value to the beneficiaries the clients before money’s in motion. We talk about money in motion all the time, and yet we do nothing with the next generation of investors before someone’s dying. And it’s a shame, because we could do so much there to provide guidance and support to people who are going through a grieving process or to set them up for success before they’re dying. Because we talk about the great wealth transfer, that means that tens of thousands of people have to die every day for that wealth to transfer, and we lose sight of that sometimes in the industry, and I think we could do more there.

Speaker 2:21:07

Well, even starting with financial literacy right, Just teaching kids about money and as we get older those are harder conversations to have. It seems. All right, we have had fabulous conversation, we are kind of at the end of our time and I always love to provide you the foghorn blast. So, Patrick, you got 60 seconds to share your thoughts.

Speaker 3:21:30

Well, I think we started with this and I think we’ll end with it, which is, I think mentorship is vastly underrated in our space, and I think of some of the folks I had mentioned before, and how grateful I am to have run across them in my career. I’d encourage anyone listening to find someone who’s maybe eight to 10 years younger than them and make an impact on their career. You’re just old enough to see around corners that they can’t see, and you’re still young enough to know how it feels to walk a mile in their shoes, and so, uh, I think it’s the most satisfying feeling. Um, it’s fun to work with, uh, the next generation of leaders in our space, and, uh, to maybe give them some guidance that you, you would receive along your way. So, find someone in your network, uh, take an extra 10 minutes and reach out to them. I love it.

Speaker 2:22:12

Absolutely love it. Patrick, thank you for joining me on the beacon flash podcast. I loved our conversation. Yeah, you’re awesome, Chip. Thanks. All right, have a good one you too. Today, our guest has been Patrick Cannon from Fidelity Labs. I so enjoyed his perspective and insights. His mentoring actions are helping a number of up-and-comers in the industry. His dedication to learning directly from advisors is an awareness and learning opportunity for all of us, given the advisors are the ones that we serve. And finally, Patrick’s point on helping advisors elevate their practices and retain beneficiaries with proactive programs like financial literacy was spot on. Again, I want to thank Patrick for being on the show. May all of you have fair winds and following seas Till our next Beacon Flash podcast. This has been Chip Kispert, and I’m wishing you well.

Speaker 1:23:04

Thank you for listening to the Flash Podcast. We’ll see you next time and be sure to click subscribe to get future episodes.