Blair duQuesnay, CFA, is an investment adviser at Ritholtz Wealth Management, LLC, where she is a member of the investment committee. She is also past president of CFA Society Louisiana, and she has been involved with CFA Institute conferences as a delegate, a panelist, and as a moderator. At the 72nd CFA Institute Annual Conference, hosted by CFA Society of the UK, duQuesnay will be moderating a session on private wealth management led by Philip Marcovici. She agreed to answer a few questions ahead of the event.
Peter M.J. Gross: What are the most disruptive forces shaping private wealth management today?
Blair duQuesnay, CFA: The conversation about disruption generally focuses on technology and fee compression, but I think it misses another crucial element – changing demographics. Our clients are changing. More of our clients are women, more come from diverse backgrounds, and more are millennials. In North America, the average is adviser is a 59-year-old man. How will we relate to and connect with the next generation of clients? I think if wealth managers are not thinking about this question they are already behind the curve.
How should the financial services industry change to address disruption now, and in the future?
First, hire more women and younger advisers. Allow younger advisers to take responsibility for implementing new technology and digital marketing strategies. Most importantly, be open to change. It can be very difficult to change behaviors and processes that were successful for the last twenty years. But change is necessary, and technology is moving faster each day. The wealth management firms of the future will use technology to create operational efficiencies unimaginable a few years ago. Technology will not replace the need for clients to receive skilled advice from a professional. Our clients’ needs are also increasing in complexity. I think it will be important to have employees on staff who specialize in tax, behavioral finance, family governance, insurance, and possibly financial therapy.
You’ve written about seeing a generational shift in the financial advice business — can you talk more about some of the specific changes that you have seen?
I see the financial advice industry entering its second generation. Advisers retiring today started their careers when their primary role was to take orders for security transactions. Financial planning was only for the wealthiest families, and it was handled by their attorneys and tax professionals. Individuals retiring today are among the first generation to save for a 30-year retirement. Meanwhile advisers have transitioned from order takers to full-fledged wealth managers. We see that a significant percentage of CFA charterholders work in private wealth today, which was not the case 10 years ago when I earned my charter. When I attended the University of Georgia, there was no course of study in financial planning. Now my alma mater boasts one of the top financial planning degrees in the US. As our clients’ needs have changed, the field of financial advice is adapting to meet the challenge. I see an opportunity for a true profession to emerge from a career that was once primarily a sales role.
What is the most challenging aspect of working with private clients?
The human brain is not wired to make good long-term decisions with money. The things we need to do to be successful investors do not come naturally to people. We all have money scripts that shape the way we respond to and act with money. Each client brings a unique set of circumstances that color their thoughts about money, family, and life. The most difficult thing to do is to help each client determine their goals. Many have spent their life checking off boxes – building a business, funding the children’s education, securing retirement savings. But most clients have not stopped to ask themselves what constitutes a fulfilling life. What will maximize their happiness? This is the fundamental question for every adviser to help their clients answer.
How do you help private clients recognize their own behavioral biases? Have you found any techniques that work particularly well?
Daniel Kahneman said that even though he was the first to record many behavioral biases and wrote the book, he is still unable to overcome them. I sometimes point out behaviors to clients, such as mental accounting or recency bias. We spend a lot of time thinking about how to help clients overcome these mistakes. I must credit the founders of my firm, Ritholtz Wealth Management, with designing our investment strategy, financial planning process, and even client fee schedule to circumvent behavioral bias. We have a Milestone Rewards program that reduces every client’s fee by about 15% once they have been with us for three years. This rewards our clients for sticking to their own financial plan.
You’ll be at the 72nd CFA Institute Annual Conference next month. Do you have any advice for first-time delegates?
Enjoy! The speaker line-up is unbelievable this year. I am excited to hear from Daniel Pink and Mohamed El-Erian, but there is so much great content on the agenda. If you are following the wealth management track, you won’t want to miss the session I am moderating with Philip Marcovici on Tuesday. Take advantage of the book signings and meet and greets. The networking dinner on Tuesday is a highlight for me. And don’t skip the exhibit hall.
All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image courtesy of Blair duQuesnay, CFA