Jack Sharry: Everyone, thanks for joining us on this edition of WealthTech on Deck. Each week I speak with industry leaders on what they’re working on to move our industry forward as well as their businesses. We often talk about innovations, disruptions, and trends around comprehensive advice platforms. And we’ve done a couple of shows where I highlight the trends I see emerging based on my daily conversations with so many across the industry. And today, what we’re gonna do is I’m gonna weigh in on what I’m seeing unfolding as we speak, what these trends mean, and where I see things going. So our plan is to do these shows once each quarter, we will look at trends. And this is the first official quarterly update on WealthTech on Deck trends. So my colleague, Matt Nollman has been producer of over 75 shows that we’ve recorded so far over the past year and a half. And he’s going to host today’s show and play both producer and host, Matt, the host microphone is yours, take it away.

Matt Nollman: Thanks, Jack, glad to be here in the host chair, again, flipping the script a little bit. But let’s get right down into it. I know you talk to more people in the industry than I personally can keep track of, and we talk pretty much every day. So I’m really glad to dive into some of these trends. So why don’t you update us on three trends that have stuck out to you among all the different conversations you’ve had over the past quarter?

Jack Sharry: Sure, sure. So I’m gonna just give the highlights first, and then we’ll get into each one. Sure. So trend number one retirement, as we’ve known, it has changed. I was gonna say forever, but I think it’s gonna keep changing. But for sure. Number one is retirement, as we’ve known, it has clearly changed. And that has real ramifications and so on to be considered as we go forward trend to a recognition by most in our industry that taxes are the lever with the greatest impact on client and firm financial outcomes. We’ll talk some more about that. Trend. Number three financial advice, platforms are becoming increasingly bespoke. First of all, everyone’s building them. But now they’re becoming I’m hearing as I talk with folks, increasingly bespoke and are really the control center for each person’s retirement. We’ll talk some more about that. So those are the three trends. Again, retirement has changed, perhaps forever, a recognition that taxes really matter here that we’re ready to go. And then financial advice platforms are here to stay, and really becoming a central part of how people manage their retirement.

Matt Nollman: Very interesting. So I mean, Jack, that sounds like a really strong extensive list here. I know that retirement changing is definitely true. Watching my parents prepare for it, and how different it is from when my grandparents even 2030 years ago, were going about it. So it’s definitely evident in what I’ve been witnessing as well. So let’s unpack that one first. Sure. So tell us about how it’s changed some of the ramifications you discussed and where you kind of see it going.

Jack Sharry: Sure. So retirement as we’ve known, it has changed rather quickly and dramatically just over the past couple of years. It’s been changing for quite a while. But it’s clear that the way boomers are approaching retirement is quite different than any previous generation. And as a boomer myself, I can tell you that as boomers have done throughout our lives, we’ve broken a lot of rules, and we’re doing the same thing around retirement. So it’s more fluid than ever. And it’s being redefined seemingly every day. So in the immediate increased inflation and market volatility plus the threat of higher taxes have caused a record number of people who are retiring or considering retiring, they become unsettled, insecure about when and how to retire. We’ll talk more about that in a moment. Boomers went from a historic number of early retirements during COVID to now where a growing number of people are unretiring or semi retiring today. And we’ll get into that in a little bit. And also how they’re defining retirement has changed, as well all have important ramifications for our listening audience.

Matt Nollman: So we’ve had a couple of really interesting guests lately on the show talking about these topics in depth. So why don’t you unpack some of those conversations and what you took away from some of those?

Jack Sharry: Sure. So Jacque Reardon of Franklin Templeton shared on our podcast, what they found in this very interesting survey they’ve been doing called the Voice of the American Worker. And the key takeaway is that people that are considering retiring or who are retired, their chief objective, the chief goal is financial independence. It’s not traditional retirement as such. It’s how do I achieve financial independence and we also had Jason Fichtner. He does some interesting work with the Alliance for lifetime income. He’s the former number two person at Social Security and is now the chief economist at the Bipartisan Policy Center. He found the same thing he told our listeners on our podcasts that his Parents and grandparents had one job at one company their entire lives. And when they turned 65, they got the gold watch and retired to Florida. He said, retired isn’t the standard, that word retired isn’t the standard model anymore. People continue to work into their 70s and 80s. They have partial work careers, they do volunteer work. He also said the whole model was based on a three-legged stool to produce security and old age with Social Security. employer provided pension and personal savings. And that three-legged stool he observes is not quite wobbly, and I think no argument here. And with longer lifespans, will they just no longer starts at 65. That seems young to me at this point. But at least in the minds of most baby boomers, the 80 is the new whatever. But what I’m hearing across the board is that boomers want and need help at achieving what Jacque Reardon found in her Voice of America worker research, and that is that people are looking for financial independence. And they recognize they will quite possibly be living longer. So they really need to be able to do that for a longer period of time. And the experts I talked to say there’s a new balance between our people are spending their time in retirement or in their quest for financial independence. They want some work, they want some play, they want family time, of course, and having the comfort that they are going to be okay financially is their greatest concern as they live longer. So they know they need to use every lever possible to fully optimize decumulation, including how to maximize Social Security and reduce taxes across all of their accounts and holdings. And it’s clear, they want need tech powered savvy advisors to provide ongoing guidance on a fluid flexible gameplan. Because they’ve come to learn that while planning matters, life is also very uncertain, and unpredictable and stuff happens.

Matt Nollman: So let’s unpack the second trend. You mentioned now that we’ve dug a little bit deep on the first one in that the industry has come around to know that taxes are really the lever with the greatest impact on client and on firm returns. So talk a little bit about taxes, unpack their importance here and kind of just talk to the audience a little bit about what you’re seeing in that regard and how firms are approaching it.

Jack Sharry: So as you know, and as I’ve talked about on this podcast before, I have talked to two three executives, pretty much every day senior execs around the industry, and pretty much every conversation the most prominent issues in light of tough markets and inflation concerns is taxes. That’s the biggest concern for investors. Certainly, advisors have to deal with that, of course, and then the firm’s themselves and seeing a lot of work being done on that issue. Whether they know it or not taxes are the single biggest cost investors incur, and more than the rest of their expenses combined. So taxes are important people kind of intuitively know that but those are the facts. And the primary lever that can demonstrably improve financial outcomes is tax management. So tax efficient asset management is the cornerstone of a successful retirement accumulation and decumulation plan, the more efficiency that you can obtain the better. Now as an industry, our habit has been to address issues and problems with single products. Whether those are asset management products like SMA is You amaze ETFs, direct indexing, or on the annuity side, deferred annuities, investment, only variable annuities or a variety of ways realize that there’s a bunch of different products out there on the annuity front that are addressing and begin there’s single points of time. Also another thing that we see a lot of the the tech issues are being addressed with single tools. And increasingly what we’re seeing we’ll talk some more about this in a moment when we get to the platform discussion really is about coordinating all those different products and technology capabilities in a way to produce tax alpha. So when it comes to managing investment products, the traditional approach to tax Alpha has relied almost solely on tax harvesting. Tax harvesting is good but frankly insufficient, the most potent tax efficient investing practices asset location, placing the right investments in the right accounts, will deliver maximum tax efficiency and average tax returns and will outperform any practice that you might pursue in terms of achieving tax alpha. Vanguard, Morningstar, Envestment, PNC EY have all done studies that have affirmed that that basically, if you want to improve outcome, you work on tax efficiency. And I’d like to we’ve done a fair amount of research on this topic. It’s kind of where we live, it’s the cornerstone of what we do. And in studying this tax Alpha concept extensively, what we’ve come up with is there’s eight different ways to improve after tax returns. So they include asset location that’s primary, that’s number one, by far. There’s tax loss harvesting, which frankly, if you do asset location, well, you need less tax loss harvesting. Of course, I always find it interesting that tax loss harvesting is a strategy which basically owns up to the fact that you lost money, and you’re going to try to make a little bit better, but the idea is if you do asset location, you won’t need as much in the way of tax loss harvesting. There’s long term gain deferral. In other words, deferring long term gains to have a better outcome. There’s transitions. So basically, when you’re looking to move from one account or one firm to another, doing so in a tax efficient manner matters. This household rebalancing, not just single account rebalancing, but household level rebalancing, when that’s done, well, that’s another source of tax Alpha. There’s equivalents exchanging muni bonds for corporate bonds and say, a taxable account. And then there’s Roth conversions, which actually, after asset location probably has the biggest impact if it’s done well. And then an eighth tax alpha element we include, it’s technically not a text element. And that is security optimization. But when it’s done in coordination with all the rest of the other seven that I described, really has a powerful impact as well, since the government gives you a raise between age 62 and 70 of a percent per year. So advisers who use all these practices and frankly, you can’t do it without software could deliver tax alpha and can provide their clients with up to 33% greater returns over time. And that’s what we understand from our study done by Ernst & Young.

Matt Nollman: So Jack, to summarize, just said a lot of stuff about tax efficiency, but really, it’s about using the benefits of each account type to the advantage of the client to make sure that you are optimizing for the most returns using every principle of tax efficiency in a coordinated way, across all different accounts within a household. Yep. So you know, now that we’ve been able to nail down a definition about this, now that we’ve been able to unpack tax efficiency, we’ve talked about how firms are creating their own platforms. And taxes are obviously a major part in how firms are approaching the construction of these platforms, given the investment landscape, and a lot of the things that are on the horizon. Now. Trend number three is that that we’ve identified is that financial advice platforms are becoming increasingly bespoke, meaning every company is trying to create their own experience and compete using that as a competitive advantage. And those systems are becoming the control center for not only the adviser, but for each client’s retirement as well. So this is perhaps the biggest trend that we’ve been seeing, and all of the conversations that we’ve had. So why don’t you unpack that? Because I know you’re really close to this one.

Jack Sharry: Yeah. So we’re working with not every firm but pretty close to every firm of size on this matter of financial advice platforms, a lot of the elements of a financial advice platform exist, namely products and some tech tools, aggregation, tools, planning tools, and what have you. But when we talk about financial advice platforms, it’s really the coordinated elements. And it’s in the coordination of those elements, I should say, in terms of making for better outcomes. So it starts with a buzzword that I have to chuckle out a bit it’s hyper personalization has become the buzzword. Of course, I hear mostly used with single products, that somehow hyper personalizing on one product is somehow going to hyper personalize your life. But it is the buzzword of the moment, we completely support that it’s important. Because we’ve become all accustomed to hyper personalization in our online life. That’s just how things are going. Our industry, frankly, has been a bit behind the times. But we must move beyond the hype and actually deliver real measurable value to investors, and give advisors the tools and wherewithal to improve investor outcomes. So as advisors do this, of course, they will grow their assets under management more rapidly. So there’s a benefit. It’s a real win-win for all. So the move to financial advice platforms is real. It’s advancing quickly. These platforms are focused on combining technology and human smarts. It’s really that important confluence of digital and human advice I talk so often about, and when I talked about the human smarts, that has a lot to do with the compassion and understanding the real issues of the client, it’s more than just filling out a financial plan, but rather really understand that because very personal situation. And as advisors do this, they’ll be able to produce better and more satisfying outcomes for all frankly. So this means starting with listening to the real issues and concerns of the clients, the concerns about issues of health care where to live family issues. I find it interesting, in my own personal case, my advisor who I inherited and the advisor I’d worked with for many years changed firms. He frankly knows very little about me, he’s not asked and I’ve been offered, because I’m not planning to stick around to be honest. And when we do speak, he tells me about how my models are doing. So I have some models like so many these days. And I really don’t care, to be honest. It’s one of the leading asset managers, they have a great model. They’ve got a great track record. They know what they’re doing. I trust them. I know it’s gonna go up and down. But over time, I want to have more money. And I really don’t care about the particulars. I’m just that type of investor that I just trust professionals. I pick the best one I can and there you have it, so but I will be moving my account soon to someone who can help me with the kind of issues that really do matter to me at some point.

Matt Nollman: I was going to ask Jack, what do you care about in relation to this? And how does it come back together here?

Jack Sharry: Well, really what it comes down to is I have four children, and each has a significant other, and I’ve got a couple of grandchildren. And that’s what matters to me and how I set things up for whether to sell my primary home as an example to one of my kids, and how do I work that out with the other ones that aren’t going to maybe get the same deal. And there’s an inheritance probably coming someday that more than probably, it’s gonna come someday. Those are the kinds of issues that I’m concerned about. I’m set on income, I’m set on a bunch of things, but I want low cost, as I tried to explain this to the advisor, I currently work with what matters to be as low cost and tax efficiency. That’s what matters to me, because I know that those matters to my outcome. But beyond that, in my very personal situation, how do I set myself up for the next generation. So those are the sorts of things that I’m looking for in terms of what the advisor provides. And interestingly, he would rather talk about portfolio management, this and that, which I, you know, it’s just not what I’m interested in, you know, whatever. So, but what we’re seeing across the industry is that platforms are being built, certainly in a more bespoke way, where each firm is building their own unique platform and experience and looking really to gain and competitive advantage, but also to deal with all these sorts of issues for each individual client and what matters to them. So among the firms that we’ve talked to where we’ll be talking to in the coming weeks and months, our friends at Amanda Lott, we just did the interview, Head of Financial Planning, wealth planning at JP Morgan, private bank, she is outstanding, she really gets it, they’re really doing some interesting things. So stay tuned for that, but a very bespoke approach to their marketplace. And at JP Morgan, their wealth planning program is just second to none. As far as what I’ve seen, so far, we’ll hear about that shortly. We also have worked with a firm called Forme Financial fo r m e. Interesting, some folks that came out of Schwab and Blucora, which is tax-oriented broker dealer also came out of the old SunTrust are putting together some really interesting work for physicians. So it’s very specific to what physicians need. We’re also doing some work with our friend Rose Palazzo, who’s a MoneyGuidePro is the group head there, the work she’s doing with my blocks and ways that moving from planning only to implementation around income, and around how to coordinate with various models, lots of bespoke work, lots of important work being done at those firms and many more. So what we’re seeing with these platforms, and how they’re being operated is that there’s some really interesting work being done tailored to the individual investor. And we’re glad to be working with those firms and bringing that to the market.

Matt Nollman: Very interesting. Well, Jack, I mean, this has been great. As always, we’ve done a few of these, but this one was, I think, particularly illuminating in a couple different ways. So as we look to wrap up, why don’t you highlight those different ways a little bit and kind of dive into the three key takeaways that you want to share with our audience, maybe specifically related to tax alpha?

Jack Sharry: Yeah, so the three that we started with are the ones we’re going to close with, and that is a retirement as we’ve known it as changed. Taxes are the lever with the greatest impact on client and firm financial outcomes. And clients and advisors need to develop and embrace simple tools plus savvy ongoing guidance. So I referred to a recent McKinsey study that came out on decumulation, which I thought was quite well done. It pointed out that as an industry, we’ve done a great job of getting people to accumulate wealth through initiatives like automatic opt into employee retirement plans and financial education for people starting their careers. So really, on the defined contribution side, there’s been a lot of good work there around accumulation, and certainly on the wealth management side as well as those two areas converge and will continue to do so. Well, we haven’t done so well, McKinsey points out is addressed the imminent needs of pre retirees who wants to know how to turn their assets, their 401k’s their brokerage accounts, home equity, maybe inheritances into retirement paychecks and guide them to options that give them financial security. So two key points the article made or that households need simple and I emphasize simple conversion tools to convert all their account balances and assets into a simple retirement income stream. And the second that Robo advice is here. And Robo decumulation is next. I say this not to point out that somehow robos are going to take over advisors, in fact, robos will serve and have served and will continue to serve advisors in providing better quality of advice just because of the complexity that’s involved. You still need that human being to talk about in my particular case, as I mentioned earlier, my four sons and their partners and my grandchildren. Robo can’t pick up on that what matters to me, it’s not ultimately about whether I have the right kind of models or whatever. I’m sure you know, that’s all part of the equation but ultimately, how do we make sure we achieve what I’m looking to achieve so many people reach retirement without the savings they wish they had. So that needs to be considered. They need digital tools that point out to them how to turn what they have saved into retirement paychecks by maximizing the power of tax efficiency. And lower tax bills, of course equate to more available income over time. So I probably slipped in five different points there, Matt. But I think the point is that the future is around, making it simple and giving people more money in retirement.

Matt Nollman: Well, look, this podcast is about imparting some of the knowledge that you gained from some of your conversations. So I think we all appreciate a little a couple extra takeaways. And, as always, Jack, it’s been a pleasure. So as we look to wind down this episode, I definitely want to ask our favorite question. And every week, we look forward to the answers to this question from every guest. And you’ve been on here a couple of times, and you given a couple of great answers that I definitely appreciate. But I’m going to ask you again, what’s something you do outside of work that you’re particularly excited or passionate about, that people might find interesting or surprising?

Jack Sharry: Here we go. If this is my favorite question, both to ask and now to answer again, and it will be different. So I wrote a book over COVID called authentic, unethical persuasion. And over the past nine years, I’ve taught at Babson College, which is not too far from my home outside of Boston. And I speak to both undergrad and MBA students each semester, including over the course of the summer. So I speak to two different groups. In fact, I have one session coming up as we record this, it’s coming up in mid September, next week, actually, from when we’re recording this. And then the following week. The first one was with undergrads, I think the second session is with the MBA students. And basically, they read the book, it’s a core textbook for the sales marketing classes. And there’s also a sales leadership class that I teach on off semesters. And basically they read the book, they read a reflection, and then we spend an hour and a half talking about it. So far, it’s been zoom, or at least over the past couple of years, it’s been zoom. But in the coming weeks, it’ll be in person. And what I enjoy about that is it’s great to work with young folks that are trying to figure out how to be persuasive. That’s what the book is about. And of course, that starts with listening that you and I have talked a good bit about that. And so I’m a real ardent student of this thing, and just had a conversation with a friend on the topic this morning. I just think it’s my secret weapon. It’s my competitive advantage. And I love to share that with young folks. And I’ll be doing that in a couple of weeks. And I do that each semester. So it’s something I look forward to, we have great conversation, and I’ll let you know a little secret. When they do their reflection, they write a one-page reflection is 30 to 50 kids, students in each class, I read them all actually take notes on each one of what they write. And I have a little bit of a cheat sheet. So when they come up to ask questions, we have a conversation for an hour and a half. I cite what they told me, I demonstrate that I listened. And they’re kind of blown away that actually someone would take that kind of care. But I’m trying to give them the example of what I’m describing, which is I’m listening, I hear what they have to say. And then I address it in a way that will help advance their understanding of how to be more effective themselves and how to implement that as a practice in their own lives. So they really enjoy a lot of fun, and looking forward to the one coming up in a couple of weeks.

Matt Nollman: And just to pile on a little bit there. I’ve been the beneficiary of a lot of that knowledge and experience that you’ve had Jack and I’ve read through the book myself. And we’ve talked quite extensively about it. And I would just encourage any listeners who are on here, and who are maybe interested in advancing their knowledge about listening or how to even advance their own career because there’s a lot of lessons in there that Jack shares that can have a huge impact on not only your work life, but also on your personal life. So Thanks Jack for putting that together. It’s definitely benefited me immensely. And I just wanted to make sure that our audience knows how important it is to master these skills and put them into practice. So in closing this out just to wrap this up for our audience, if you’ve enjoyed this podcast as I know I have please rate review, subscribe and share what we’re doing here our WealthTech on Deck. We really appreciate it. We’re available wherever you get your podcasts, Apple, Spotify, what have you. So thank you again, Jack. It’s been a real pleasure to have you on here in the opposite chair today.

Jack Sharry: Yeah, it’s a lot of fun, Matt, I really appreciate it.