Active Strategies for Relationship Growth. Brie Williams. Head of Practice Management IBG-25220

Transcription

1 Active Strategies for Relationship Growth Brie Williams Head of Practice Management IBG-25220

2 Potential Value to Alpha LOW HIGH Behavioral framework Two dimensions of value Effective Decision-making Process Tolerance for Pain Realistic Self-assessment Empathetic Communication Past Performance Focus Goal Prioritization Traditional Benchmark Focus External Source Reliance LOW Potential Value to Investors Long-term Goals HIGH The information contained above is for illustrative purposes only Source: State Street s Center for Applied Research, Folklore of Finance paper analysis (2015)

3 1 A risk-managed approach for an aging client base When financial decision-making grows harder

4 Oceanside High School Football Sailors practice, 1959 IBG-25220

5 We hope that the risks of cognitive decline won t apply to us but hope is not a practical strategy

6 Fear and uncertainty block the path but the fundamental problem is that avoiding the issue only increases risk for both the investor and their advisor. IBG-25220

7 Surprised Fearful Ah, Embarrassed You re kidding me? I see it as fading in the horizon, something gradual. The information contained above is for illustrative purposes only

8 Advisor Fear of backlash Investor refusal to recognize the onset of cognitive decline Client Fear of losing independence Only 27% are satisfied with information and support provided Information is Power When clients know they can talk to their advisor about cognitive decline, it shifts an abstractly trusted advisor to a genuinely trusted advisor. Sources: State Street Global Advisors Money in Motion Survey; State Street Global Advisors Expert Interviews, Surya Kolluri, Managing Director for Policy and Market Planning at Merrill Lynch 8

9 Why now? Provide planning rationale None of us know what tomorrow holds. Developing a contingency plan today can protect you from the financial impact of unexpected events. Let s approach this discussion as a proactive measure this is about taking action today to protect your assets and your wishes in the future. We may not ever need to use it, but having a contingency plan in place today means never having to worry about needing one in the future. If you were to ever become unable to make financial decisions independently, you would need to have a plan already in place. It s never too early, but it could become too late.

10 What if? Take the risk from one of life s most unpredictable events and minimize potential consequences BE ACCOUNTABLE Frame plan development as risk management To break through avoidance behavior, clients need to understand that it s never too early, but it can become too late Take an informed approach Incorporate contingency plan development as part of the broader wealth management framework Establish a protocol for your practice regarding late-life considerations PROTECT Guard against financial fraud and abuse As a strategic matter, establish protocols to address this potential threat situations are rarely clear-cut Educate and train your team and clients to recognize signs Harness the power of fraud detection technologies Protect your practice and your clients by proactively planning for changes in financial capacity and offer age-friendly services

11 2 Gender folklore and its implications Forces at work perpetuating the status quo

12 Embracing an untapped opportunity She is a powerful multiplier Source: Nielsen Media Research; NFL regular seasons; Live+Same Day, nationally-televised broadcasts only Information Classification: (CBS, FOX, Limited NBC, Access ESPN & NFL Network). Women 18-34, Women 18-49, Women

13 Gender folklore and its implications 61% 59% 62% of women feel misunderstood by our industry of self-guided female investors say they don t see the value in an advisor of women leave their advisor upon the death of their spouse Source: State Street Global Advisors survey, Assessing the Landscape: Female Investors and Financial Advice, 2015 IBG-25220

14 Time in the workforce Retirement risk Sources: Women and Retirement Risk, The Society of Actuaries Committee on Post-Retirement Needs and Risks, 2016; Employee Benefit Research Institute and Greenwald & Associates, 2015 Retirement Confidence Survey

15 Men and women think differently - this is not theory, it s science

16 Mindset to Risk State Street Center for Applied Research, Gender Folklore, 2016

17 Most active traders can see about half the return of their buy-and-hold peers Source: Brad Barber and Terrance Oden, Boys will be Boys: Gender, Overconfidence and Common Stock Investment. The Quarterly Journal of Economics 116, no 1, February Illustration from Oden s presentation, MarketWatch.com (How trading ETFs may lose you money, March 28, 2017)

18 The active trading issue is more pronounced along gender lines Most acute among single men, who many have less experience or greater risk tolerance Source: Brad Barber and Terrance Oden, Boys will be Boys: Gender, Overconfidence and Common Stock Investment. The Quarterly Journal of Economics 116, no 1, February Illustration from Oden s presentation, MarketWatch.com (How trading ETFs may lose you money, March 28, 2017)

19 While gender may influence components of financial decision making, individual investors will have their own unique experiences How clients set and aim for investing goals In their approach to investment decision making In the nature of the client relationship

20 Tracking the alpha female Move beyond misperceptions I spend time reading the information provided, and I get my questions lined up: Why this investment as opposed to something else? I don t need my advisor to tell me how smart he is. I need him to give me confidence in my own abilities. I want to be confident in my decisions, because it is my money. I ve worked hard for it. Give me time. But if you push me and ask me again, it will be no. So let me think about it. Respect my wishes.

21 An outcome-based orientation and a goals-based investment approach Translate observations into your own service model Overcome experience gaps to build stronger relationships Demonstrate an ability to understand and respond to her needs; outline how that is integrated into the relationship experience as well as the financial planning approach too late Be authentic and transparent both are directly correlated to trust Inform and educate around money concepts. Connect investment options with what they represent for an individual s purpose for investing Focus on the risks that matter. Highlight elements that are within her control to help her craft a risk aware strategy that can be maintained with confidence Factors that hold women back from hiring an advisor? $ 59% Don t see the need for one 35% Haven t found one they like or trust 20% Feels expense is too high Sources: Source: State Street Global Advisors survey, Assessing the Landscape: Female Investors and Financial Advice, 2015

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23 Potential Value to Alpha LOW HIGH Deliver a structured, client-centric process to expand the value proposition Effective Decision-making Process Realistic Self-assessment Tolerance for Pain Empathetic Communication Past Performance Focus Goal Prioritization Traditional Benchmark Focus External Source Reliance LOW The information contained above is for illustrative purposes only Source: State Street s Center for Applied Research, Folklore of Finance paper analysis (2015) Potential Value to Investors Long-term Goals HIGH

24 Appendix: Survey Criteria State Street Global Advisors Money in Motion National Study, June 2015 Analysis of Multigenerational Wealth Survey Data Earlier this year, the Practice Management group at SSGA contracted with CoreData to field a quantitative survey among 560 investors and 400 advisors on the topic of multigenerational wealth management. A subsection of the survey was dedicated to the topic of investing and the aging brain. We also fielded a nationally representative sample of 912 adults in an online, nation-wide omnibus survey who are responsible for investment decision-making of a portfolio of $200,000 or more. a2b planning reviewed the findings and analyzed additional cuts of the aging brain data, including gender and generation In-depth In-home Interviews with Investors and Caregivers a2b conducted 12 in-home interviews. The respondents were an equal mix of investors and family members/caregivers who represented a range of age, gender, marital status, level of involvement (for caregivers), investable assets and use/non-use of a financial advisor. All respondents were professionally recruited and compensated monetarily for their time In-depth Expert Interviews (via telephone) a2b conducted telephone interviews with 13 experts on the aging brain, both within and outside of the financial industry State Street Global Advisors, Assessing the Landscape: Female Investors and Financial Advisors, 2015 Fielded among a nationally representative sample of 250 advisors and 1,000 investors. All of the financial advisors had at least $20M in accounts under management and represent a variety of institutions and dealer types. All of the investors were female, between the ages of 25 and 84 and had a household investment portfolio of at least $200,000 ($150,000 for those aged 25 34). All worked full-time, part-time or were retired and at least shared in the financial/investment decision making for their household. To further contextualize our learning, we also conducted in-depth interviews with a range of leading industry, business and economic experts to help inform our key findings and practice techniques. They included: Phone interviews with 16 industry experts; In-home interviews with female investors with a household portfolio of at least $100,000 State Street Global Advisors' Women and Investing Omnibus Survey, April 2015 A total of 1,000 individuals completed the State Street Global Advisors' Women and Investing Toluna Omnibus. It was fielded online April 2 6, The sample is representative of the US adult population aged 18+. IBG-25220

25 Important Disclosures For investment professional use only. Not for use with the public. Standard & Poor s, S&P and SPDR are registered trademarks of Standard & Poor s Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation s financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA s express written consent. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information. State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, One Lincoln Street, Boston, MA Web: State Street Corporation All Rights Reserved. Tracking number: IBG Expiration Date: 10/30/2018 IBG-25220