Some advisors might see new technology, like robo advisors, and demographic shifts to be challenges to their practices. But Gabe Garcia, managing director, head of relationship management at Pershing Advisor Solutions, sees these threats as a chance for advisors to enhance their practices and tap new opportunities.

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Eric Grey: I’m Eric Grey and I lead the RIA distribution effort here at Capital Group. Today my guest is Gabe Garcia, the head of relationship management and consulting at Pershing Advisor Solutions here to share a couple of thoughts. Welcome.

Gabe Garcia: Thank you, Eric.

Eric Grey: Gabe, clearly investment shops are seeing a lot of new entrants, from discount shops to robos, and are really anticipating changes to the industry. How are you seeing this affect the RIA community as it exists today and what are you seeing some of the best shops do to respond?

On the effect of technology on advisors.

Gabe Garcia: I think that as robos, in particular, entered into the marketplace, they were viewed as a threat, and a few years into their entrance into the marketplace, I don’t think that that’s the case. Much like the deregulation of commissions or the onset of mutual funds supermarkets or the first online discount brokers, I think that the robos, or better known digital providers, in the space today are really advancing the industry and helping advisory firms think about their client experience differently and how to become more productive and scalable in what they do every day.
When you think about the next generation of investors, they’ve grown up in a world of Amazon, Instagram and Snapchat. And the digital experience, the real-time feedback and the ease of business that those technologies have provided in the marketplace are going to be critical for firms to be successful in the future. So, I think the robo platforms are really catalysts for the next stage of evolution. That doesn’t take away from the value proposition but clearly enhances the value proposition from how they’ve brought technology into the experience they’re providing their clients.

Eric Grey: In our business we hear an awful lot about [baby] boomers and an awful lot about millennials, whether it’s incorporating them in our business or recruiting them as new clients. You shared a lot of passion with me in the past and this idea: Don’t forget about Gen X. Can you share your thoughts there?

On the importance of Generation X as a source of clients.

Gabe Garcia: So as a proud Gen Xer, we tend to be overlooked. We tend to be categorized as a bit skeptical, and I would say that’s not too disingenuous. The reality of it is that there’s roughly 80 million baby boomers and 80 million millennials and 50 million [Gen] Xers, such as myself. So when we talk about the next generation, typically the mind goes immediately to millennials, Gen Y, and certainly they should not be overlooked. In aggregate they represent tremendous purchasing power. But the reality is there is a disproportionate amount of wealth in the under 50 demographic that’s held by the Gen X population. They resemble boomers in all of their consumer behaviors, but they’ve also grown up in a technological age like the millennials. So, as you think about the next 10 years and how you're going to replenish the baby boomers’ assets in the businesses that you’re running, you really need to think about how the [Gen] Xers can be a key component of that.
They’re in their peak earning years. They are in a position to begin to be needing financial advice, whether it’s for themselves for college needs or taking care of elderly parents, quite frankly. So the complexity of their situations are right in that sweet spot, if you will, of where professional advice providers can really help outcomes be achieved. And I think that if you’re not paying attention and thinking about your branding, your messaging and your experience for the [Gen] Xers, you’re missing a tremendous opportunity.

Eric Grey: One of the things that we’ve talked about in this industry, and it surrounds all of these topics: price compression, value of services — provided the pressure that this places on margins is this idea of the balance of our value that’s derived from investment management versus wealth or financial planning. How do you see that in the industry today, and what do you think that looks like as we progress into the future?

On the balance of advisors’ value between investment management vs wealth or financial planning.

Gabe Garcia: Investment management has been a core capability for this industry irrespective of what segment you look at. Certainly many of the practitioners today put a lot of value on that expertise. And it's important. It drives the outcome. But the reality of it is, you look at buying behaviors and you interview investors that work with advisors of the top seven needs that they're looking to fulfill. The number sixth one is investment performance. They’re looking for many other things. So that’s not to devalue the need of having investment performance and creating alpha, if you will, for clients. But that cannot be the sole driver of the decision that investors are looking to make today. It is a very key component. You cannot afford to have poor performance, but really it’s about goals-oriented outcomes. And also the other things that the complexities of their lives brings to the table. Whether it's taking care of elderly parents, philanthropic needs, cashflow management, tax strategies, estate. All of these things are time consuming. They’re complex and people with expertise can bring a lot value to the individuals that they serve.

Eric Grey: Gabe, thank you.

Gabe Garcia: Thank you, Eric.

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