The Evolution of the Advisor-Client Relationship

A Conversation with Joe Sweeney of Ameriprise

In this episode of our Wealth Management Leadership podcast series, SIFMA President & CEO Kenneth E. Bentsen, Jr. sits down with Joseph E. Sweeney, President, Advice & Wealth Management, Products and Service Delivery for Ameriprise, Inc., for an introspective discussion on how the advisor-client relationship has evolved in recent decades.

We look at the pivotal role that technology has played in changing the way firms, advisors, clients, and employees work, while emphasizing the value of a financial advisor to help investors reach long-term retirement goals and prepare for life’s unexpected challenges.

About SIFMA’s Wealth Management Leadership Podcast Series

The financial advisor-retail client relationship is critical to helping retail investors accomplish their unique financial goals, including saving for retirement, funding a child’s education, buying a home or creating a legacy.

In this podcast series, SIFMA President & CEO Kenneth E. Bentsen, Jr. speaks with wealth management industry leaders for an insider’s look into the advisor-client relationship. The financial services industry deeply believes we must boost retirement savings, enable Americans to save more, promote financial literacy and support a strong retail investor culture. This exciting new podcast series looks at how SIFMA member firms have enhanced the client experience by exploring innovative approaches to drive client engagement including teaming, exploring demographic trends and the role technology plays in wealth management.

Transcript

Edited for clarity

Ken Bentsen: I’m Ken Bentsen, President and CEO of SIFMA. I want to welcome you to another episode of the SIFMA Wealth Management Leadership podcast series, where we speak with industry leaders on different trends and approaches to enhancing the investor-client relationship.

Today we’re joined by Joe Sweeney, President of Advice and Wealth Management Products and Service Delivery at Ameriprise Financial, Incorporated, for an exciting discussion about the evolution of the advisor-client relationship. We’ll look at how far we’ve come as an industry and what the future holds in terms of new trends and approaches to better serve the next generation of investors.

Joe is an industry veteran with more than 38 years in the financial services industry. He currently leads more than 4,000 Ameriprise employees in six offices that span the globe; an overseas brokerage, advisory retail retirement, and all third-party product provider relationships. Joe is also a former SIFMA chair and continues to serve on SIFMA’s Board of Directors.

Joe, it’s great to have you here. You know, as well as I do, that the financial services industry is ever-evolving as we work to adapt new technologies, appeal to a more diverse client base, or attract new talent, all with the goal of finding better ways to serve clients and help them prepare financially for the future.

Before we get to current trends, let’s look at where we began. You started your career in 1983. Can you give us a snapshot of what the industry and the advisor-client relationship was like when you were just starting out? What was different and what’s remained the same?

Joe Sweeney: Well, Ken, thank you. It’s nice to be here with you today. And, quite frankly, it’s shocking that it’s been 38 baseball seasons since I started working at American Express. The economy in 1983 was coming out of the 1980/1982 recession, triggered by the tight monetary policy to fight the mounting inflation. Clearly, we don’t have tight monetary policy today — quite the opposite — but there are specters of inflation going on.

Technology was also not being used to the extent that it’s used today. I remember graduating from college. And, indeed, I typed many of my college papers on an IBM electric typewriter. You may recall the one that had the backspace that automatically whited out your errors so that you could go forward.

And PCs were just coming into the workplace. In fact, one of my first jobs was to program the Tax Reform Act of 1986 on a PC. And one of the things was to also work with other people in the department. And many of them had never seen a PC before, let alone how Lotus 1-2-3 would work. It shows you how old I am.

But then financial planning. Financial planning was literally sitting around the kitchen table and talking about insurance and investments. It was a sales type of role. And when I think back to 1983 and I think back to the summer of 2021, it’s fascinating. Back in ’83, just like in today’s operating environment, there was a great deal going on in the world that presents challenges. But with every challenge there is just an unbelievable opportunity.

The equity markets now are relatively strong. The economies are starting to reopen globally with some [fits] and starts. And there are shoots of green and, quite candidly very exciting, some opportunities for growth. But the thing that I always come back to, the thing that was really sort of a defining moment for me when I started my career was technology.

The technological advances that are out there today allow advisors the freedom to focus on the big picture thinking. It’s taking away the humdrum, the technical operational aspects of financial planning, and allowing advisors to focus on the human aspects of that relationship.

And as I think about that, sitting at kitchen table selling an insurance policy, selling a mutual fund versus today, where advisors are sitting down and having meaningful conversations. I was speaking to an advisor several years ago and he said something to me that resonated and I’ve kept it in my mind. He said, “A good financial advisor is an individual with the mind of a capitalist, but the heart of a socialist.”

And you think about that. There’s merit to that. Because today’s financial advisors, they’re thinking about investments, taxes, retirement, estate planning, real estate transaction, workplace benefits, and life goals. And understanding the hopes and the dreams and the concerns and the worries of those clients. That didn’t happen in 1983.

And so when I think of my own company, it’s been around for 127 years. And our company has remained true to its founding principles to deliver value, while evolving and innovating. And along the way we have invested hundreds of millions of dollars that enable our approximately 10,000 advisors to provide outstanding digitally-enabled service to their clients to help them keep their lives that they’ve envisioned for themselves and their family. But it has not been replaced by technology, it has been enhanced by technology.

So as you can see, Ken, over the past 38 years the industry has evolved, and no doubt we’re going to continue evolving. And quite candidly, I think the best is yet to come.

Ken: Yeah, that’s a tremendous walk through history in a short period. I’ve got to tell you, in my first job out of college when I was still in graduate school I spent a lot of time typing memorandums on an IBM Selectric. I loved the Selectric. But there were about five us in a really small room on Capitol Hill that were doing it and you felt like you were in the Hoover testing factory when everybody was typing. And you had one guy who knew how to operate the Wang, where you did your form letters and everything else.

But to your point on technology, it’s so important. How would you say technology has helped enhance the client-advisor experience?

Joe: Well, we all know the pandemic has accelerated the use of technology among firms, advisors, and clients, and more importantly, how people want to work. One of the things that stuck out in my mind was being at home and seeing the UPS truck coming almost virtually every single day, delivering what my wife, [Kathy], had just ordered the night before.

That was technology put into action on a real-time basis. And it’s those innovative technologies that, quite frankly, are making it easier for clients to stay informed about their investments, their goals, and reshaping their relationship with their advisor. As you and I have reflected about the IBM typewriter, you may also recall Telex’s. And I remember learning how to write Telex’s. Today my kids are always teaching me how to text.

But you think about that. That high-performing technology is essential. And it’s going to continue to be essential to meet the clients’ needs and drive growth and efficiencies in an advisor’s practice. I’m very proud of my company using technology. We were able to pivot almost instantaneously in March of last year because we have done all of our business continuity planning. We did our tabletop exercises. We participated, obviously, in Quantum Dawn and learned a lot of good things from the industry.

And we have been spending on average about $500 million-plus dollars a year on technology designed to enhance advisor capabilities and enable them to deliver the services that our clients expect, just like my wife, who goes online and wants it the next day. And I think we have also learned about the importance of being able to work virtually.

But let’s be clear, Ken — and you and I experienced this earlier this year when we finally got to see each other and our fellow board members for the first time face-to-face — nothing will change the deep relationships — that good, old-fashioned handshake — that can be created when you’re sitting across the table from a client, a colleague, or a friend and doing that in person.

Ken: I agree with you. It’s interesting. I’ve heard from others in the industry — and I’ve got to believe this is true with your Ameriprise colleagues — that the technology has been great to get through this pandemic. But when we get through this and we go back to the in-person, many firms are going to continue to leverage that technology to further enhance the relationship. That it’s going to be a value-add over time.

Joe: Oh, absolutely.

Ken: Yeah. But I do want to get to the handshake analogy. Really getting down to, why should an investor work with a financial advisor instead of using one of the alternatives? And what are the benefits for clients when they are working with an advisor?

Joe: It’s interesting. I’m somewhat — well, [it wasn’t the] sandwich generation. The last of my parents passed away earlier this year. But it was fascinating to sort of be the sandwich generation, to see what my parents were experiencing. They were children of the Depression. They grew up that way. And then seeing what my kids are experiencing now.

And I think those changing demographics are going to play a big role in how advisors engage with their clients now and in the future. And more importantly, what type of advice they’re able to offer in key life stages. As we have seen, there has been a race to the bottom on fee compression. And we saw that with robo-advisors.

I think, however, one of the things that won’t change will be the value of advice from a human advisor. That can’t be replaced. We’re humans. And I think we always are going to want to have that interaction. And, quite frankly, clients do want someone who understands their goals and their needs. And I think investors do benefit greatly from access to advice that is built around their individual needs and goals.

Here’s a very interesting data point, Ken. There are industry studies that estimate that professional financial advice can add anywhere from one-and-a-half to four percent to portfolio returns over the long-term that enable an investor to better meet their goals. But here’s what’s really fascinating. That most of this increase will come during periods of heightened volatility in the markets, when advisors step in and help their clients stay the course and keep their long-term objectives in sight.

Let me share a story. Go back to 2008/2009 during the financial crisis. I got a phone call in my office from my son, Daniel. And because the markets were tanking he was convinced that he should be selling. After all, everyone else was. I urged him to stay the course. But as you know, the great things about having kids, they’re smarter than you, notwithstanding the life experiences. And he was determined to sell, so I tried a different approach.

I knew my son liked sneakers. So I asked him, if he found his favorite sneaks at half-price would he purchase more than one pair? And being the sharp individual that he was he said he would. So I asked him, just because his well-researched mutual fund was down, why would he be willing to purchase more of that fund at a lower price.

Now, if he was working with an alternative or a robo, there would be no one having the conversation with him that would say no. No arm would come out of the computer and go on his shoulder and say, “It’s okay, Dan. Don’t panic.” And so even some of the darkest days of the markets you will be wanting to overreact because that’s the herd mentality, but that’s when you shouldn’t overreact.

And you need someone to guide you and make certain that you see that there is light at the end of the tunnel and that things do tend to work out. And so needless to say, my son didn’t take my advice. Although he did go out and buy another pair of sneakers when he saw them on sale, and he did ride it out, but he didn’t sell.

Ken: That’s a great story, but really enlightening advice. So let me ask you this. What is unique to Ameriprise that helps build these long-term relationships? And why are they so important?

Joe: Although we’ve been a public company for the last 16 years, Ameriprise and its predecessor companies have been around for 127 years. And during the dark days of the Depression our company had a reputation of never being a day late or a penny short. And that phrase became very real during the 2008 financial crisis. You may recall the Reserve Primary Fund broke the buck. And our clients used that retail money market fund to make everyday purchases.

But to ensure our clients were protected, we used $750 million dollars of our own capital to backstop the working capital needs of our clients during that period of time. We also reimbursed our clients the three cents on the dollar when the Reserve Fund was only going to pay ninety-seven cents back on the dollar. So Ameriprise will never be a day late or a penny short.

Over the next 25 years a significant amount of money is going to be in motion. It’s estimated that nearly $70 trillion dollars will be transferred from aging households to their heirs and charities during that timeframe. And engaging with clients and their beneficiaries not only pays dividends to firms potentially looking to strengthen their asset retention, but it also enhances clients’ overall satisfaction now.

But not always. And let me tell you a story. As you know, earlier this year my father passed away. And, clearly, I was saddened by my dad’s passing. But my sadness turned to disappointment and frustration by the multiple and confusing letters and forms that I had to complete. And the seemingly chaos that was coming from several of my father’s financial services providers, including a local bank that my parents had worked with for over 40 years.

And the lack of empathy and the amount of bureaucracy that my sisters and I felt, quite frankly, negatively impacted some of these brands. But more importantly, I think put a little ding in our industry. And at times I actually felt like I had to defend the industry in how the estate process was working.

But without the calming hand of my father’s financial advisor, I think, quite frankly, Ken, it would have been even more difficult to navigate. I’m glad that over the past few years my firm actually took the lead and got aggressive in focusing on the estate settlement process. And now, having gone through that process in my dad’s estate — and I might add, still going through — I’m happy that we’ve committed to make the estate process easier for our clients and we will continue to do so.

A dedicated, high tech support model can make all the difference in supporting people during, quite frankly, a very difficult and emotional time. But when I think about our industry I’m optimistic. Because our industry is so integral to many parts of our clients’ lives, that when we go through these experiences, like losing a loved one, or having another catastrophic event happen in one’s life, we take a step back and say, “What can we do to improve and make a more meaningful difference in our clients’ lives?”

Ken: I couldn’t agree more, having been through that with my parents’ estate. And, fortunately, they had planned very well and had good advice in that. And you’re right, it’s a complicated period no matter how much you, as a child, plan for it and know what’s going to come. It’s still extremely complicated. So that type of advice is [unintelligible] can’t say enough about it. And it’s so necessary.

As you bring in new advisors and clients, what are some of the trends you’re noticing? And what would you say to the younger and newer investors to encourage them to work with an advisor?

Joe: Let me begin with some trends. It goes back to the beginning part of our conversation. Obviously, the world is driven by technology today. One of the interesting things about being driven by technology is we’re now awash in data. We have to take all of that data, though, and translate it into useful information.

How we relate to one another has changed. The past 18 months, 500-plus days we spoke to people through a flat screen. That, to me, was shocking when you consider how up to that point we used to be able to communicate. People are texting. People are using video. What ever happened to that person-to-person communication? Even the heartfelt cursive letter has gone by the wayside.

As a result of this, I think we’re living in a very disrupted landscape. But I think advisors have a golden opportunity to evolve their role in providing not only financial advice, but [give] almost life guidance at the same time. And advisors must have conversations. And they’ve got to be able to listen, and they’ve got to seek to understand.

My wife, Kathy, and I celebrated our 35th wedding anniversary this year. We met in college 40 years ago. And we would have conversations in the coffee shop. And we called them heavy, deep, and real, or HDRs. Where there was no topic that we wouldn’t talk about at a level of granularity. Financial advisors need to do that with their clients today.

And quite candidly, there’s never been a better time for financial advice for investors of all ages, and income levels, and backgrounds. Over the years we have talked about our kids. Kathy and I have three kids ranging from 21 to 31. All three of them are now working with an advisor. They’re learning about budgeting, cash flow, investments. They’re actually also learning, although they find it hard to believe, squirreling away money for retirement.

They relied on us during high school for advice and counsel. But now they need to work with their advisor to navigate through life’s never ending changes and invest those hard-earned savings to reach their long-term goals. And they also need to be prepared for the curve balls that life has a tendency to throw our way, as we have experienced quite [poignantly] over the past 18 to 20 months, just as my wife, Kathy and I have done over the course of our marriage.

And then for new advisors, Ken, I have these suggestions. Best interest is key. Always act in your clients’ best interest. Get a professional accreditation. This is your craft. Make it your craft and separate yourself from others along the way. Develop capabilities that enable outreach, consultation, and a sales approach that is done in a compliant way. That is absolutely critical.

And be flexible so that you can meet the evolving needs of current and future generations. As you and I have managed to do and others, embrace technology. Technology is going to continue to influence our lives. The cloud and artificial intelligence, it’s here today and we should embrace it and use it.

And finally I would say this. The pandemic has had a lasting impact on the world and the client-advisor relationship. And, indeed, all relationships. I don’t know about you, but when I’ve taken some long walks with our dog, Bella, I’ve had moments of introspection. I know several of my colleagues and several of our advisors that have stopped to think about what is really mattering to them and impacting the way that they want to spend their time.

They want work-life balance. They want more time with their families and the people who matter. And they truly want and expect to work with an advisor who understands their goals. But the other thing is this — and this is much different than 1983 and an insurance policy and a mutual fund. Clients today and advisors need to be prepared to offer investments to align with their values. We’re seeing money flow into ESG and sustainable investment products. And I suspect that’s going to continue, and ramp up even more.

And finally, clients and advisors need to understand that clients want to be well-served by advisors and their teams. And it will be important for the advisor of today and tomorrow to create those cross-generational service teams with a diverse perspective that reflects the fabric of our country, as well as the backgrounds, so that they can properly serve the next generation of clients, as well as the generations to come.

Ken: You know, Joe, every time I have a conversation with you I learn something new and something insightful. And that’s true today. I want to thank you so much for spending time with us to give us your views over your long history in an industry that’s evolved so much. But, also, what you and your colleagues are doing at Ameriprise. So thank you so much for that.

Joe: Ken, it’s always a joy and it’s always an honor to have a conversation with you. And I mean that, my friend.

Ken: Great. Thank you. And for more information on the advisor-client relationship, please visit www.sifma.org. And thank you all for joining us today.

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Joseph E. Sweeney is President of the Advice & Wealth Management Products and Service Delivery organization of Ameriprise Financial, Inc. Sweeney joined American Express, former parent company of Ameriprise, in 1983 and has served in a number of senior leadership positions in his 36 years in the finance industry.

Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. Mr. Bentsen is also the CEO of the Global Financial Markets Association (GFMA), SIFMA’s global affiliate.