Taking Care of Other People’s Money

Changing regulations and vastly different market-segment needs challenge the wealth-management industry.

How do people in Westchester get rich and stay that way? For many, if not most, it’s with the assistance of professionals in the wealth-management industry, which includes important parts of banking, insurance, and investment firms, as well as variously defined independent financial advisors. As with any business, county wealth managers face challenges, but overall, the outlook is pretty rosy.

“Westchester is one of the best marketplaces in the world for what we do,” says Cody Dolly, managing director and district agent of Northwestern Mutual  in White Plains. Wealthy Westchester is indeed fertile ground. The net worth of the average household in the county is greater than $1 million, and 58,000 households here earn more than $200,000 annually. At the top of the income scale, Westchester had 7,789 people who earned at least seven figures in 2014, second in New York State only to Manhattan, according to NYS Department of Taxation and Finance data.

That kind of wealth and income generates plenty of commissions, service charges, and asset-management fees for the firms and individuals involved. According to Terri Ferri, senior vice president and branch manager for Morgan Stanley in Purchase, “It’s one of the most important businesses Morgan Stanley has, accounting for about 50 percent of the company’s revenue.” That says a lot when you consider that Morgan Stanley is a global financial-services firm that also provides investment banking, securities, and credit services. The company this year consolidated its Mount Kisco and Purchase branches into a powerhouse, with 96 advisors and about 55 support staff — pulling in about $90 million in revenue, according to Ferri. “That makes us one of the largest branches of Morgan Stanley in the US,” she says.

Key to success in the wealth-management business is service, says Jeff Cohen, who is registered with Lincoln Financial Advisors, and is  partner in independent firm Siller & Cohen, which has a staff of 10 full-time professionals in Rye Brook.  “You can’t just be an investment guy or gal,” he says. “It’s all about the services people want: to combine their estate plans, their business-succession plans, their life insurance, coordinate with their CPAs. They want a quarterback to pull everything together.”

Every service business depends on people, of course, and those on the front lines in the wealth-management industry need a unique combination of personal skills, motivation, and knowledge. The Financial Industry Regulatory Authority lists an alphabet soup of eight designations, like CFP (Certified Financial Planner) and AFC (Accredited Financial Counselor), most commonly allowed by securities and insurance regulators, all of which require a substantial investment in professional education by the individual.  

To bend a cliché, financial advisors also need a good portfolio-side manner. “Continuing the education of our financial advisors is our competitive advantage,” Ferri points out. She explains that training covers both soft skills, like interpersonal communications, and technical ones, like updates on the latest financial-software tools. “Most of my advisors have been doing this for a long time, so they have all of these skills. We work to refine them.” She adds, “Our training platform allows them to take almost college-type training online, without taking time out of their daily practices.”

Since much of a financial advisor’s income is based on performance in some way, it can be a tough business in the early years, leading to a fair amount of workforce turnover. “[At Northwestern Mutual] We try to minimize that by screening pretty hard and doing a good job of selecting,” Dolly says. “We want people to know what they are getting into, but it’s a hard business. I’ll see hundreds of people this year and hire maybe 10.” Ferri explains that new advisors come from many different sources, including competitors, support positions within the company, and many mid-life individuals looking for a career change. Cohen says his firm works with six to eight college interns each semester; this year, they offered two of them jobs.

Another personnel challenge the industry faces is meeting the needs of different market segments through a diverse workforce. Peruse the online staff profiles of most firms, and you’ll find a sea of white, male faces, many topped by well-coifed gray hair. Westchester EEOC data for 2010 show that 76 percent of the more than 2,100 personal financial advisors working in the county are male, and 82 percent of them are white. 


Changing Demographics

The firms recognize the situation and have made some progress toward diversification. “Fifteen years ago, you wouldn’t see as many female branch managers as we have now,” Ferri points out. “The opportunities weren’t there. Today, our co-head of wealth management is a woman, Shelley O’Connor.”  

Women are a growing market segment, as well, with more of them taking an important role in the direction of their family finances or having full responsibility for their own. Ferri points out that wealth-management certification is evolving to meet that need. “One [certification] that is becoming increasingly relevant, particularly with female advisors, is the CDFA, or Certified Divorce Financial Analyst. It allows an advisor to help and guide a client who has gone through or is going through the divorce process. Having that expertise is definitely helpful.”

One of the more challenging markets to serve is the under-50 set. According to Jamie O’Connell, wealth director at BNY Mellon Wealth Management in White Plains, “We are on the cusp of one of the largest wealth transfers in a generation, as aging baby boomers are starting to sell or transfer businesses or other assets to the next generation. Those Gen-X and Millennial clients have different expectations and attitudes about their wealth and will seek wealth advisors who have evolved to meet them where they are.” She says her firm is meeting the challenge head-on. “BNY Mellon has seen these kinds of shifts before, and we are continually looking to develop new strategies that fit with the goals and values of the next generation. The idea of socially responsible investing is one example.”

Ferri says Morgan Stanley clearly sees the trend. “This business is always evolving. Our clients are changing and therefore our advisor base is changing. Right now, Millennials don’t have money to invest, but as they develop in their careers, they need advice also. It’s important for us to capture that market now, while they are young. They need a plan for their money, and we want to help them develop that.”

One way many firms are striving to better reach the younger market is through technology. “I am the parent of two Millennials, who look at things much differently than my generation does,” says Strategies For Wealth financial advisor Scot Karr, a registered representative
of Park Avenue Securities LLC. “They tell me they’re not going to have stock brokers, because they’re going to do everything online.”

BNY Mellon has wholeheartedly embraced that tech-driven approach, according to O’Connell. “In recent years, we’ve introduced a host of new apps for BNY Mellon clients, refreshed our website to make it easier for clients to find information, and we’ve also expanded our communications tools to include social media. Not only does this appeal to clients, it has been helpful in attracting talented professionals to join our team.”

Northwestern Mutual took a deep step into digital service a couple of years ago. “Our company bought LearnVest Planning Services,” Dolly explains. “They come up with new technologies to interface with clients and help them do planning faster.” Those technologies include services where, for a flat fee of $299 followed by a low monthly subscription, customers get a financial plan based on data they input online, telephone conferences with a certified planner, and extensive email support, as well as online tools and classes, to make them better financial managers. Obviously aimed at the entry-level market, LearnVest is one variety of “robo-advisor” that may portend big changes in the industry.

Still, says Karr, “Money management can be digitized to a large extent, but other products like estate planning, which includes life insurance and long-term care, still need advisors.”

“It’s a unique time when people want both,” in Dolly’s opinion. “They want a trusted relationship with someone to be thoughtful and think through their plan. But then there’s sometimes when they just want something fast. So we try to give them everything they want.”

Government regulation is a constant presence in the lives of wealth managers. Most recently, the US Department of Labor implemented the “fiduciary rule,” which requires financial advisers to act in the best interests of their clients in retirement accounts. The new rule expands the definition of who is a fiduciary to retirement plans and creates a set of impartial conduct standards. While pointing out the rule will increase their already-considerable paperwork load, our sources generally downplayed its effect on their business. 

“We are a fiduciary already,” says BNY Mellon’s O’Connell, “so obviously we are committed to it as a standard for anyone offering wealth, tax, and estate planning or private-banking services to clients. Putting the client’s interests first is a given for us.” 

Dave Donelson lives and writes in West Harrison and attributes his personal approach to wealth management to Ben Franklin: “A penny saved is a penny earned.”



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