Race to the Bottom Heats Up

Earlier this month Fidelity became the first investment manager to offer no-fee index funds. In a splashy TV and print campaign the mutual fund giant introduced the aptly named Zero Total Market Index and Zero International Index funds. At the same time, Fidelity announced that it was lowering fees on other core mutual funds by an average of 35 percent.

Then, this week JP Morgan became the first big bank to introduce an app offering free stock and ETF trading. The “YouInvest” service allows users 100 free trades per year and $2.95 per trade thereafter. For Chase Private Clients with at least $100,000 in holdings, free trades are unlimited.

Both events are just the latest moves in what has become an intense and persistent price war in asset management and brokerage. They evidence the cut throat competition among leading providers in the space and the rising demand among investors, particularly millennials, for lower fee products.

They also indicate a new approach to “selling” what are highly popular but commodified services. Fidelity and JP Morgan have both positioned their new free offerings as incentives or complimentary services encouraging clients to build and sustain a broader relationship with the institution.

For wealth managers, the price war is a mixed blessing. While it may increase client sensitivity to fee levels, it lowers the asset management fee for core products allowing the advisor fee to remain competitive.

3 Communications Tips for Financial Awareness Day (or any day)

Are you aware that Tuesday August 14th was Financial Awareness Day? If not, you may be thinking, “That would have been a great reason to reach out to clients and prospects.”

Your clients enjoy hearing from you. The informative insights and news you give them focus on improving their lives and financial well-being. Here are some tips to help communicate more effectively with your clients and prospects and stand out in this competitive marketplace.

Be where your clients are. Right now, 46% of all marketing dollars are spent on digital, including advertising dollars. Social media and email marketing are both excellent channels to help keep your brand top of mind. Email marketing is especially effective because it allows one-to-one conversations and the ability to segment your audience and provide unique communications to specific client profiles.

Many of your clients and their friends and families are active on any number of platforms, such as Twitter, LinkedIn, Facebook and Instagram, using them for business, personal purposes or sometimes both. Aside from communications, social media has become a valuable asset for capturing information about your target markets and understanding their behaviors, intentions, lifestyles, and the best way to reach them.

Provide relevant content.Sometimes it feels like attention is the scarcest of resources. By continually testing and measuring what types of content resonates best with your clients, you can increase your relevance and value to them. While blog posts are often long and thorough, studies show that people are absorbing content in timeframes that are fractions of what used to be the norm. That may mean offering more frequent, incremental messaging to supplement longer white papers or online insights.

Be consistent.Regularity is key to building awareness. Don’t confine your communications to special days like Financial Awareness Day. Be out there emailing, sharing and tweeting relevant content consistently and regularly (at least every week).

Engaging Survivors and the Next Gen

Two of the most efficient ways to grow an advisory practice are 1) to help your existing clients grow their assets and 2) through referrals. Yet, many advisors continue to ignore an opportunity that combines both: the surviving partner and the next generation. As many as 70% of survivors abandon the advisor upon their partner’s death as do 90% to 95% of surviving offspring. With an estimated $40 trillion being transferred to surviving family members in the next three decades, that’s a lot of lost opportunity.

A recent study by InvestmentNews Research in conjunction with Cadaret Grant, reveals that only 24% of advisors currently have developed a plan to engage survivors and the next generation, but of those, more than half report the plans have paid dividends. The report recommends putting a plan in place, one that addresses these three imperatives:

Engage the non-involved partner.

Often, one partner is less engaged than the other because of either indifference or deference. How to engage them?

•  Involve them in all substantive discussions and decisions to be sure their goals too are being addressed

•  Encourage their questions and provide answers that are jargon-free

•  Talk frankly about what will happen when one of the partner dies, and how that may change depending on who predeceases whom

Understand and work with adult children.

Two practical ways to foster engagement with children are to 1) have a younger member of the advisory team serve as a key link, and 2) waive the minimum requirements to become a client as part of a relationship focus. Once a dialogue has been established, there are a number of areas to engage on:

Strategies to pay down debt

•  For new or even established parents, 529 plans and other strategies for college saving

•  Insurance needs and the importance of wills, living wills and healthcare powers of attorney

•  Including them on your firm’s thought leadership and topical written communications

•  Providing links to financial information they’ll find useful for their children and for themselves

Consider the needs of your elderly clients and their families.

With a growing number of clients in their late 80s and 90s, many advisors may be, or could be, dealing with children of clients who themselves are nearing retirement. Many of them may not be satisfied with their advisor or may not have one at all. Providing useful information and assistance to their aging parents can be a valued service to them now, while at the same time giving them a sense of what you may be able to do for them in the future. Specifically:

•  Helping them detect and prevent elder fraud and abuse

•  Organizing financial information

•  Providing information on eldercare

•  Providing referrals to trusted elder-law attorneys

How Words Become “Official”

“Without knowing the force of words, it is impossible to know more.”


Words are powerful – they can hurt, insult, make you happy, fulfill dreams; they can even be legally binding. They are a critical part of marketing; the “right” words can make a campaign. But how does a word get its big break and make it into the dictionary? How did “jabberwocky” go from being the title of a nonsense poem by Lewis Carroll to a word in the Oxford English Dictionary? There is a well-defined protocol to determine if a word is worthy. Even with this rigor, both the OED and Merriam-Webster add several thousand words to their online editions every year.

Use it or lose it

According to Merriam-Webster, “a word gets into a dictionary when it is used by many people who all agree it means the same thing.” How else could a word like “fracking” make the cut? OED follows a similar process, although it highlights its use of technology in its process. OED also solicits suggestions directly from “the language community” and the public, so if you have a word you think should make it in, visit the OED community.

Sometimes old is new again

Dictionaries aren’t just looking for brand new words, like “selfie” or “hashtag.” Sometimes it’s all about a new meaning for an old word, such as mouse (no, not the one that squeaks) or cookie (unfortunately, the new type of cookie isn’t nearly as delicious as the traditional type).

But wait, there’s still more

Merriam-Webster cites three main criteria for inclusion:

•  Frequent use

•  Widespread use

•  Meaningful use

And the winners are

The dictionaries are regularly updated online to include new words added. For example, the OED updates its dictionary four times a year and in June 2018 added over 900 new words. Some seem a little more esoteric, such as “precariat,” a class of people whose employment, income and living standards are insecure or precarious, while some veer to pop culture, such as “spoiler alert.” As in spoiler alert, this is the end of this post.

Millennial Banking

There is considerable interest in how the financial services industry will change as it adapts to meet the needs of the millennial generation. We think a good example of what the future may look like is represented by Monzo, a U.K. based cyber bank founded in 2015 by millennials for millennials. Consider the following:

•  Monzo is an app-based bank targeted at those whose lives are oriented around their smartphones. It has no browser version of the app nor does it have any brick and mortar branches.

•  Monzo has grown rapidly using a peer-to-peer recommendation scheme. There is a waiting list of tens of thousands to get the app. Current users are given a “golden ticket” which they can share with a friend, allowing the friend to skip the line and join immediately. The allure of the “if you know someone, then you’re in” mentality makes people feel they are part of an exclusive community.

•  Monzo offers a trendy, bright coral debit card clearly underscoring the differentiation from traditional bank cards and announcing users as part of the Monzo family. The app is convenient, helpful, and user-friendly and includes convenient functions like rounding up charges and saving the differences in targeted savings vehicles. It also allows users to send payments and use other messaging apps to request payments.

•  Central to Monzo’s value proposition is the claim from the company that “We’re building Monzo together.” Monzo has created an active community of clients bound together through a social media-based community forum which allows participants to give feedback on services, offer new product ideas, connect with in-person and online community events, and find news about goings-on at the bank.

•  Monzo has a manifesto on its website called “Our tone of voice” which outlines how the bank is to communicate with the public and with clients. In general, it stresses transparency, simplicity, accessibility, positivity and client centricity. Technical language that separates employees from regular people is discouraged. Normal words are used in place of more formal terms. Ambiguity is replaced by clarity and an active voice is preferred to a passive, bureaucratic one.

Around simple banking functionality, Monzo has created a committed cyber-community whose members actively engage with each other and the bank to meet their common interests. This model we believe may presage the future of financial services in the millennial world.

Big numbers? Explain them with stories.

The Evolution of Wealth Technology

While many wealth technology providers claim they offer a total solution, recent data from the WealthBriefing 2018 Technology and Operations Trends in Wealth Management Survey and our own consulting experience shows that the “one size fits all model” may not fit all of the time.

Optima Group’s clients are increasingly turning to advanced technology for support of portfolio management and accounting, tax management, investment research and reporting. They are adopting new platforms for compliance and cyber security. And, CRM technology is becoming a “must have” as robust client retention and marketing communications gain importance in today’s competitive environment.

Leading wealth managers use technology to translate what they believe into what they do. So, technology needs to augment their ability to deliver and demonstrate their competitive edge.

So why aren’t the fully integrated technology providers winning all of the business? While they try to offer “everything” these core system providers may be a step behind – trailing specialty firms that offer advancements and enhancements that allow wealth managers to creatively customize and automate their practices.

In an era of open application programming interfaces (APIs), our clients are often selecting core platforms that allow easy bolt-on of additional technology, creating customized platforms that are designed around their needs. We think that these core-satellite solutions are the new wave of the technology future. Core platform providers will succeed if they allow bleeding edge and customizable technologies to work within rather than fight with their systems. And, satellite providers must allow open access through APIs in order to stay relevant.

Retirement: The First 8,000 Days

It’s a surprise to no one that retirement isn’t what it used to be. By 2022, a third of people between ages 65 and 74 will be working. People are living longer. A woman turning 65 today can expect to live for another 22 years, or about 8,000 days.

MIT AgeLab, published a piece recently titled “8,000 Days: An Entire Phase of Your Life Waiting to be Invented.” It maintains that unlike the three 8,000-day phases of life that precede it – Growing, Learning and Maturing – this last phase, which it calls Exploring, can be ill-defined, unstructured and, for many, unsettling. Most people plan pretty well to get there, but then what?

Instead of planning for retirement as a single state, MIT AgeLab suggests dividing retirement planning into its own four phases to “ensure that realistic plans are in place so that a couple’s or an individual’s well-being does not suddenly, nor greatly, change due to controllable factors.” These four phases are:

The value of wealth advisors is often measured in successfully getting their clients to retirement. But with retirement lasting up to 22 years or more, that might be only half the job, as this study shows. The four phases of retirement illustrate the many needs people have to get themselves through retirement as well, and the enormous value an advisor can provide in responding to those needs.



What the World Needs Now…is Another Credit Card?

On June 14, American Express announced the launch of the latest in its credit card lineup, the American Express Cash Magnet Card. This brings the total number of personal cards offered by American Express (Amex) up to 18 cards, filling these categories, some of which overlap:

The third in its suite of cash back cards, it comes with an unlimited flat 1.5% cash back on all purchases, no annual fee and a feature called Pay It Plan It. This gives customers the option of paying for large purchases over a three to 24-month period at a fixed monthly fee instead of interest. You can have different payment plans for up to ten purchases.

In this latest entrant to the extremely competitive credit card wars, this newest Amex card seems designed to go head to head with such cards as the Citi Double Cash Card, the Chase Freedom Unlimited card, both of which offer 1.5% or more cash back with no fee (there are also lots of cards with annual fees, including American Express’s own Blue Cash Preferred card, that offer higher levels of cash back). Unless you’re the Points Guy, it can be difficult, not to mention time consuming, to figure out which card is the best one for your needs.

Why a new credit card?

Amex has been aggressive in developing new products and offering new benefits and rewards to facilitate customer acquisition and retention, particularly after losing one of its biggest corporate clients, Costco, in 2014/2015 to Capital One Mastercard in Costco Canada and Citi Visa in Costco U.S. While the company was back at its pre-Costco loss levels in terms of stock price and other indicators by third quarter of 2017, quicker than anticipated, the impact continues to be felt in its new product strategies.

Keeping it all in the family

Individuals/families tend to use credit cards en masse if possible, with different family members selecting cards based on their situation. Younger credit card users might go for the low/no-fee more barebones card, while more established members of the family are willing to pay a higher fee for more benefits, frills and, sometimes, just for the cache of having the most premium card available. This card fills a gap on the no-fee simple cash back option that others offer, giving Amex the opportunity to capture more share of wallet and reinforce its value to its customers. And its special Plan It twist, plus some of the benefits that (for now) Amex offers, such as Shoprunner membership, car rental and travel accident insurance, help it stand out in a crowded marketplace.

Retirement Confidence on Shaky Ground?

That’s a central observation of this year’s Retirement Confidence Survey, conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Associates. While three in four retirees continue to believe they’ll have enough for a comfortable retirement, less than a third are “very confident” – down from 39% in 2016 – of this rosy outcome. Confidence around meeting medical expenses is also down significantly. Here are some of the notable findings, with our observations.

• Confidence in Medicare and Social Security has declined. Since the 2017 survey, retirees’ confidence that Medicare and Social Security will continue to pay as much as they are paying today has dropped by more than 10%. This is no doubt partly due to the steady stream of forecasts of when their funds could be depleted, but it’s exacerbated by the steady influx of new retirees – 10,000 Boomers are turning 65 every day – with ever increasing lifespans.

• Confidence in covering medical expenses has declined. While a reasonably healthy 80% of retirees think they’ll be able to meet basic expenses, only 70% think they’ll have enough for medical expenses in retirement, down 10% from a year ago. In addition, 44% of current retirees report health care expenses are higher than they had expected. For many, the reality of faltering health seems to be overtaking their earlier assumptions of sustained health. Much of this appears to be attributable to lack of knowledge and planning, as 60% of retirees say that workplace education on health care planning for retirement would have been helpful.

• The desire or need to work in retirement greatly exceeds the reality. While nearly 70% of workers who were surveyed report that they expect work to be a source of income in retirement, more than 70% of current retirees report that it hasn’t been and won’t be.

Even against a backdrop of favorable investment returns, retirees’ confidence is eroding. Why does this matter? Because as more and more people move from accumulating assets to living off them, more and more people will need the planning that wealth managers are uniquely qualified to provide.