The Bar for Advisors Has Been Raised: MyVest CEO

Due to a variety of complex and interrelated factors, the services of financial advisors have never been in greater demand, according to MyVest CEO Anton Honikman. At the same time, advisors have never faced so much pressure to evolve and elevate the way they do business.

Especially when it comes to serving wealthy and sophisticated clients — i.e., those for whom wealth management professionals can do the most and who also deliver the most value back to the practice — advisors are being asked to do more and more.

As Honikman recently told ThinkAdvisor, clients are coming to expect their advisors to be able to connect and support all aspects of their financial lives, from building retirement portfolios to mitigating taxes to enacting estate plans. And, they are expected to do all this for a reasonable fee and in a way that serves the client’s best interest.

Wealth management clients also have more choices than ever with respect to the type of firm they work with as the lines blur between the traditional advisor industry silos and as more top teams break away from the big wirehouses to start their own independent specialist shops.

To put it directly, Honikman says, the bar has been raised for advisors competing in the marketplace today, and it’s unlikely that these trends will abate any time soon. The good news is that firms and advisors also have more places to turn for services and support.

As Honikman explains in the conversation below, all of these factors make 2023 an “incredibly dynamic time” for the wealth management industry and its practitioners, and those firms that are willing to question older ways of operating in favor of emerging best practices will surely find the most (and most lasting) success.

THINKADVISOR: Do you agree with the suggestion made by other investment industry leaders that the financial advisor’s client is expecting increasingly sophisticated service? 

ANTON HONIKMAN: I would say that client expectations are being elevated by their digital experiences elsewhere, like e-commerce and media.

New advice-consumption expectations include real-time alerts and just-in-time delivery of information, synchronous and asynchronous collaboration, data visualizations, digital fulfillment — and the smart, personalized curation of opportunities.

This raises the bar for advisory firms to invest in their tech stack to deliver on these expectations, especially for the next generation of clients and advisors.

Why do you think tax management is gaining a more prominent role in the overall financial planning and portfolio management processes? How does this help improve client outcomes? 

One big driver of tax-managed investing was the robo-advisors’ promotion of tax-loss harvesting.

One of the main catalysts for broader adoption has been the growing availability of technology that can make tax management more comprehensive, systematically applied and scalable than one can achieve with hand-crafted portfolios.

By “comprehensive,” I mean more than just tax-loss harvesting; it can include asset location, smart gain deferral, best tax lot selection, household wash sale management, transition planning and more.

Expanding on the prior question, do you expect more advisors and clients to utilize direct indexing capabilities as a means of achieving more tailored portfolios and greater tax efficiency at scale? 

I expect direct indexing to continue growing, but likely at a slower rate than initial expectations, because decent alternatives exist for most accounts that are high quality, tax efficient and lower cost, in the form of exchange traded funds.

As direct indexing fees come down, that comparison hurdle is reduced.

Further growth will be driven by expanding the use of portfolio management technology to enable a models-based approach to direct indexing as a sleeve of a broader multi-asset class solution.

With respect to the aggregator enterprises you serve, what are some of the biggest trends you see when it comes to the way advisors in the field coordinate with the home office leadership? Any common points of friction? 

A critical issue to address here is the fragile alliance between acquired advisors who are accustomed to flexibility and independence, and their new home office, who will increasingly demand consistency and scale. Their incentives may not be 100% aligned.

While this is an inherent challenge for most firms, I believe it is solvable.

Addressing these challenges in any meaningful way will have to include the implementation of more automated, repeatable portfolio management processes that also give each acquired firm and advisor the flexibility to tailor portfolios within centrally imposed parameters that can be configured by the program/advisor.

If you think ahead three or five years, what does the wealth management industry look like? Will there be more consolidation and greater competition among the leading providers? 

There will definitely be more consolidation as thinner margins drive the need for scale. Given this consolidation, one of the biggest opportunities will be addressing the omnichannel delivery of investment advice.

Investors increasingly receive and interact with their investments through many channels and accounts, including self-directed, fully advised, hybrid robo-advice, workplace retirement accounts, insurance and more.

This situation raises the bar for holistic advice that encompasses all of these channels and gives clients reporting, advice and ongoing management that encompasses their entire financial life.

This also leads to a competitive challenge for the remaining smaller firms to either specialize in a particular niche or offer more holistic services via outsourcing relationships with multiple providers.

What are the biggest challenges you face in running your own organization? Talent? The economic environment? 

One of our biggest challenges in running MyVest today is addressing the future of work in a far more remote context than ever before.

Given the significant changes facing all workplaces over the past few years, our playbook is still evolving to address topics such as return-to-office strategies, company culture, productivity, compensation, facilities and more.

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