The idea that the wealth management industry never changes is mistaken, says Sallie Krawcheck. It changes — very slowly. And the head of global wealth management for Bank of America has some suggestions on how it can change for the better.
At a gathering of the Financial Women's Association (FWA) on Wednesday night, Ms. Krawcheck noted that the evolution of the industry has been “subtle, but tectonic.”
She added that wealth management was once a brokerage industry. “Now,” she said, “your adviser is not just someone you ask to choose a stock for you.”
Asked how Wall Street can regain the trust and confidence of investors, Ms. Krawcheck said, “[This] is not a marketing campaign. We have to operate in the best interests of the clients.”
For example, the former CFO at Citigroup suggested that advisers start speaking in plain English and “stop speaking our secret language to each other.” She noted that clients are thinking about things like health problems and paying for education, and “we're talking about standard deviation. We need to look at the client and solve their problems, and not stick in our comfort zone of stuff we learned in business school.”
She also noted that the proposed move to apply fiduciary standards to the brokerage industry is “a very good step.” She did caution that given brokers fiduciary responsibility would not solve all the industry's ills. “It's not the be-all and end-all.” But she added: “We'll have a standard that makes sense for all the regulatory requirements, the examination requirements, that will give some sense of moving forward,”
Ms. Krawcheck said that she is particularly worried about younger people, many of whom feel “they can't trust Wall Street and therefore are not investing in a way that will ensure their future.”
She dismissed the “baby investor” commercials that imply this group invests online, saying, “The truth is, a lot of young people are in the banks.”
Ms. Krawcheck also rejected press reports that all investors are unhappy with their advisers. “Recent Bank of America research showed that 85% of clients are happy with their financial advisers,” she said.