Conversation with the President: Looking to the Future of Financial Services

Conversation with the President: Looking to the Future of Financial Services

Conversation with the President: Looking to the Future of Financial Services
George Nichols III
May 10, 2021

The past year has been full of challenges, trials, and major shifts in the political and economic landscape, from the onset of the COVID-19 pandemic to the tumultuous 2020 election season and the beginning of a new administration. Many of these developments have brought renewed attention and scrutiny to long-standing debates within the financial services profession on subjects from regulation to effective service models in an increasingly digital environment.

In this installment of “Conversations with the President,” I take a look back at where the profession and The College has been throughout our history and where I see the profession, and The College, going in an ever-changing landscape.

Jared Trexler: At The American College of Financial Services, we're always engaging on the conversations of the day, giving meaning to financial markets and the issues that matter. The paths and partnerships for those conversations are guided by President George Nichols III, the 10th President in The College's story history. Today, George and I are sitting down for another installment of "Conversations with the President."

I want to talk about the comings and goings, the main issues of the day in financial services. We obviously have a new President of the United States who's an old hand in Washington. Joe Biden's administration to date has been squarely focused on the vaccine rollout and economic rescue package. But President Biden was VP when then President Obama's Department of Labor enacted the Fiduciary Rule. It's been dead, alive, and in between since then. But do you have any thoughts, George, on if President Biden will step back into this debate? And no matter if and how he or his team does, does it even matter? Or is the public's expectation for their advisor already a quasi-best interest standard?

George Nichols III: Jared, let me start with the last statement you made. I do believe that the American people, the average consumer, has a high expectation from its advisor of the best interest standard. They want their advisor to be thinking of their needs more than the advisor's needs. It's amazing and exciting from our perspective that Dr. Huebner was thinking of the best interest standard back in 1927, 93 years ago, when he was telling agents that it was important that you put the interest of your client before your own. Now, on your question of President Biden and the Biden administration's re-engagement into the best interest standard, I firmly believe they're going to step into that. As you stated, it came up, it died, it's now somewhere in between, but I think that everyone has this strong belief that the Biden administration is going to re-engage and resurface many of the ideas that we saw in the Obama administration. And the question will be that now with the American public's view that yes, I want the best interest standard, how far will regulation go to implement that? Also, the impact it will have on the financial advisor and the relationship between the advisor and the client that will determine probably what the ultimate policy prescription will be. I also think it's important that people remember that there's an organization called The Consumer Financial Protection Bureau, the CFPB. Now under the Trump administration, they really focused on financial literacy and consumer information. I think you're going to see this swing back to now it's really laser focused on the advisor, the advisor's role, and that relationship between the advisor and the consumer.

Jared: George, those are all great points because I believe a best interest standard takes on many forms and incorporates many things, and that includes technology and how it plays into an advisor's practice and how they deal with clients. You were recently part of a College initiative tied to artificial intelligence and its impact on wealth management, you're a former insurance regulator, a 30-year financial services veteran. What's your main takeaway on fintech's increasing impact on the profession?

President Nichols: Given my long history in the financial services space, I first have to state that I’m very excited about the innovation that I expect that will come out of all these technological advances, and it even includes AI. When you think about the efficiencies that are created, when you think about the amount of data that will be available that will inform our decisions, that will help us operate off of an evidence-based approach, that's exciting and it's very consistent with what we're trying to do here at The American College of Financial Services. I'm hoping that the efficiencies that actually come of this, the innovation that comes of this, will also impact the cost structure that companies are operating under and that is often passed on to the consumer. I hope it’s less expensive for consumers to benefit from financial products and services. Now, on the flip side of that, though, I'll tell you the things that I'm worried about. One is, you have to recognize that as we look at big data, as we look at AI, these are all driven by human input, and we know that input is flawed and we know that in many cases it’s biased. And there are ways to address that. And what I'm hoping is that as companies really embrace AI, technology, big data, that first they’re making sure is that they put processes in place that anything they know that potentially is a bias, they’re solving for it. Second, if they don't know there's a recognition that they must be watching out for it, and that there are checks and balances in our system to always test, to make sure there's not some disparate impact on the average consumer, whether it be racial or gender based.

Jared: So George, we've talked a lot today about this holistic advisor-client relationship, working in the client's best interest, leveraging technology to be more efficient and effective and providing real, tangible value to those clients. The advisor-client relationship hit a roadblock in 2020, COVID-19, but we now see a potential light at the end of a very dark tunnel. The pandemic has completely changed the way we work, engage, and even grocery shop. It's had a significant impact on how financial professionals conduct client meetings, attend conferences and expand their skills and knowledge. Even as we slowly reacquaint ourselves with some form of pre-pandemic life, what changes do you believe the profession will incorporate long-term from this pandemic?

President Nichols: First, I think anyone who's invested in Zoom, they should feel really good about their long-term investment, because I don't think Zoom is going anywhere. I believe that it's here to stay and that even when we get back to traveling, there is still going to be, if nothing else, this hybrid system where we're incorporating, "You know what? Instead of me really coming out to see you the first time, why don't we do a Zoom call?" So, I think that inner connection that we have now over our laptop or our computer, I think that's here to stay, and I don't see that changing at all. The second thing though, is we really are going to have to think about the changing dynamics in relationships. If I'm meeting you for the first time, even over Zoom, in order for me to really make that connection, I still believe, I still feel it's important, that somehow you and I are having a face-to-face interaction. Now, that's where I think maybe this hybrid model comes in, that, you know, the first couple of times it could be a Zoom discussion and then after that, I really am going to want to engage with you. I think about learning about employees’ personal lives, being able to view into their living rooms, into their household, and the things around in their life that I probably would’ve never learned at work in the work environment. So that's a good thing. But when I think about this connection to people, I still think it's important that when we're together face-to-face, we can really get a sense of the depth of our commitment to try to be a solution for the things that they may be trying to accomplish. And I don't know that we’re able to transmit that by Zoom, it has to be done face-to-face. I think that's a very important component. The last thing which really ties back into something I said earlier that's important to The College in terms of our future offerings, it’s getting back to defining this relationship. Many advisors define the relationship as, "I'm really a great salesman. I can talk you into doing anything." But when I think about where people are going tomorrow, it's about what is it I'm trying to do and are you really, really helping me get there? And a lot of us haven't worked at all at answering what we’re trying to do. And it's not about the product that you sell, it's about understanding me and understanding why I want to leave a legacy, why my retirement is structured this way so I can live this particular life. And it's not just about the dollars and cents. And so for us, we really have to do a lot of work around that. And I think that’s one of the things that really sort of came out of the COVID-19 pandemic, that's going to become more and more important and probably sooner rather than later, based on what we were initially thinking.

Jared: Such great points as we talk about this advisor-client relationship. Even though COVID-19 may wane, it will have a lasting impact on our profession and the way The College interacts with financial professionals and consumers through the delivery of applied financial knowledge. Thanks so much, President Nichols, I really appreciate your time, and thank you all for listening to another "Conversation with the President."