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Balancing Technology and Personalization and Giving Digestible Advice with John Thiel

In this episode, Jack Sharry talks with John Thiel, former Head of Wealth Management at Merrill Lynch and longtime advocate for comprehensive advising.

John began his career in public accounting where he realized the impact of tax law on financial planning and decision-making. He was eventually recruited into the insurance business and, while it wasn’t popular at the time, John became an advocate for financial advising as he rose through the ranks at Merrill Lynch.

While the industry has made and continues to make great progress, advisors still have a ways to go when it comes to implementing a goals-based approach and finding synergy between technology and the advisor-client relationship.

John and Jack discuss creating efficiencies for the client as well as the advisor, how advisors can address a rapidly retiring demographic, the impact of COVID-19, and why human advisors are always irreplaceable.

What Mark has to say

“We really need to have a decumulation strategy that is simple, direct, consumable, and that people can execute in a relatively easy way. And it’s gotta be transparent, so people understand this isn’t some black box.”

– John Thiel, Executive Advisor

Read the full transcript

Jack Sharry: Hello, and welcome to WealthTech on Deck. On our podcast, we focus on where well tech is today, and where we see it headed in the future. I’m fortunate to talk with industry leaders every day about their views on the future of digital and human advice. And we’ll do that again now. So thanks for joining us. Today we’re talking with a pioneer around goals based wealth management. John Thiel is the former head of wealth management at Merrill Lynch, where he was an early advocate of taking a comprehensive view of advice at the household level. Today, he is on a variety of boards, where he has a front row seat on what’s happening in our industry, and what’s next and wealth tax. So John, thanks for joining us, it’s great to spend some time with you, jack, thanks for having me. Good to have you on board. So, john, before we get started on your perspective on wealth management, I know you’ve got some thoughtful and strong views on matter. We’ll talk about where it is now. And we’ll start talking about where it’s going. But let’s, let’s first talk a little bit about your background, because you’ve been around our industry for a long time, you’ve led large organizations, obviously, Merrill’s no small player in this this little thing. And you’re serving on some boards now that are looking at this issue around wealthtech, and around future of digital human advice. So tell us a little bit about your background, and then we’ll get into what you’re working on today.

John Thiel: Thanks, jack, I appreciate it. And it really, my background really did inform sort of where I, my point of view ended with, with my career in the sense of the goals based I started in public accounting. And I did both tax and audit work and really understood the impact of tax, I also learned early that when you make a planning decision based on tax savings, it typically doesn’t work out well. The economic, you know, thesis has to be there before you consider taxes, I got recruited into the insurance business, where, you know, when you try to sell life and disability insurance to individuals, you really understand how you’ve got to take something that’s not perceived well, and really help them understand that you’re funding a liability, you’re not, you know, talking about death, and then planning set introduced to that. And then when I joined Merrill Lynch, it was very interesting to me, no one wanted to do financial planning in 1989, it was my, that’s what I did. So I really became an advocate of it and went around and spoke. And the point of all that, really, is that those three experiences really helped me understand how we could really help people back then planning was static. So you didn’t have any kind of dynamic assumptions returned sequence of returns didn’t get incorporated. And while it was better than nothing, it really wasn’t accomplishing what we needed to. And then we had a couple crises along the way that proved that that really was important. And you had to be more dynamic than than that. So that’s where I started, I stay involved the industry, as you suggested, I’m on the board of Franklin resources, which is Franklin Templeton, I sit on the board of the Finrep, financial Investor Education Foundation, where we really focus on literacy and education, especially in communities that have, you know, difficult time accessing that kind of education. I’m on the advisory board of a field, which is, which is obviously an important company, as we think about really getting to after tax returns and some of the dynamic parts of that planning process that will lead to better outcomes. I serve a lot in philanthropy, I served for the the FSU Foundation, foundation. I am a trustee at Florida State University as a trustee. And then I also am very involved with raising money to find a cure for cancer, but the V foundation and spend a lot of my time. So I while I’m quote unquote, retired, it’s the new definition of retirement, I’m pretty busy. But all doing things that are important to me and all part time, which allows me the flexibility to plan to make sure I get the, you know, sort of the downtime that everybody dreams about.

Jack Sharry: That’s great. So talk a little bit, if you will, about your assessment of what’s going on today. So, obviously, deep background at Merrill and in the insurance business before that, and now serving on a variety of boards, looking at how advice is rendered, whether it’s from a product company or a tech company or just financial literacy, the broad topic of how you inform clients about how to achieve better outcomes. Certainly advisors are all part of that mix. To talk a little bit about your assessment what’s going on today. We’ll talk about the future and a bit but talk a little bit about what you see today and any observations about what’s working maybe what’s not working around the rendering of advice.

John Thiel: I’m pretty hopeful i i think the industry has made progress is making progress while we’re not there yet. I do see those you know, green shoots and and and personally in both new obviously listening and talking to other people. One of the things that I think has helped is the notion of digitization. And I think about efficiency. And obviously, we always focus on efficiency for the adviser and for the firm. But as a client, it’s important for me to be efficient as well. So I think onboarding and some of the things that lend themselves to digitization, obviously, going mobile first, with a lot of the new innovation is an important component of all that, and I do think that we’re making progress there. And that feels good to me. The other thing is that more and more people are saying they’re tuned into and their, their fundamental basis is a goals based approach. Now, I don’t always see it play out in the way we interact with them, or how, you know, a client might see performance returns and things like that. But at least they’re all talking about it. And one of the other things that I think supports the fact that that is moving that way is the use of models. And I think a lot of firms, rightfully so and advisors, more importantly, so realize that quote unquote Robo advice or whatever one wants to, to put a moniker on it, it really is an efficiency play, to have someone run a model that is really tailored for and built around risk, appetite, risk, tolerance, risk capacity, and return expectations, and then deliver that in an automated fashion and regularly report on progress, I think is really important for the firms and the advisors. But it’s also very important for clients to know that they have a discipline that discipline followed, they can see it and then most importantly, assuming the firm reports to them. The fact as to whether they are still on track for any of those dynamics, I think is really, really important. And I do see a lot of that. And I’m I’m hopeful that that’s going to continue.

Jack Sharry: So you know, I’ve talked a little bit about this. And I know you’re not a big trend follower from the standpoint of just buying whatever the media is dishing out at any given time. But the numbers do indicate that more people are retiring. we predicted this for long ago. And it seems to be happening. And as I read it earlier than expected either because people choose to retire earlier or the highest paid folks tend to be laid off first, when when companies downsize, we know that to be true. So more people are retiring more money is emotion. McKinsey tells us big increase there. And now, of course, once you’re in retirement, there’s no going back to the paycheck stop, the expenses continue. And you’re in that position now in terms of just being retired and trying to figure out how what’s the best way to spend assets and make sure you’re being efficient. So maybe talk a little bit about your view on. While models are great, they tend to be more by account as opposed to by household. So talk a little bit about where you see the world, where it is now and where you’d like to see it go as things unfold in the next in the coming years.

John Thiel: Sure. So I’m going to take a second step back and make sure that we’re on the right definition of retirement, that’s going to be different for everybody. For me, it’s not in the classic sense that I’m going to collect, just to save, you know, the returns from my savings and eventually Social Security, I am actually out doing things to make a little bit and to stay engaged. I’m a partner and advisor, senior advisor in a firm called my next season, we help executives mostly transition from that crazy, hectic life into whatever’s next. So I think more and more people of all means are really deciding do I want to work full time. And if I don’t kind of do something that keeps me busy, that gives me purpose and perhaps might bring in a little of income. And I do see that ramping up dramatically. Because I think people realize quality of life COVID I think did in a very positive way with all the negative implications that brought? Was it in the allowed people to examine their priorities and really sit and think about what’s important in life? And do they need all of the stuff? or could they redirect those resources towards something new in their next chapter. And so I do see it and it’s going to happen more and more. One of the big psychological transitions that has to happen is to that notion that you no longer get a paycheck. And while here I was running Merrill Lynch, I could intellectualize drawing off my portfolio very easily. And I have all the analysis I needed and I fortunately had sufficient assets to support my lifestyle. But I will tell you six months in as you’re starting to, and you get a little market downdraft and you’re drawing on your savings, if he feels really bad, just because if you were a saver, you just don’t want to see that and and we all laugh and in, the professionals can slough it off. But behavioral finance is to me as important as anything where human beings were led by behavior and emotion, not by logic. And so I think that we need to do more and more and it’s if we talk about what needs to happen, what needs to happen is we really need to have a decumulation strategy that is Simple, that it’s direct, that it’s consumable, and that people can execute in a relatively simple and easy way. And it’s got to be transparent. So people understand this isn’t some, you know, black box that here’s where the returns are coming from. Here’s where we’re pulling it from, here’s the decisions that were made, you know, to make the recommendation of where you would draw it from, and then literally, maybe send them a paycheck, if that’s what they want Give, give though, those retirees or those people in that stage of life, the option to choose a preference on how they want to receive the income in when they stop receiving a normal paycheck.

Jack Sharry: Chris, you and I have talked a little bit about this. But I feel we’ve been at this way you just described for quite some time and telling the world that the future is coming. It’s coming. It’s coming when and I’m not sure whether it was just people get sick of hearing about us instead of doing agree, or it’s just the fact that so many more people have started to retire. But clearly people are in that mode. When I say people, it’s really baby boomers are in that mode of trying to figure out how to draw that paycheck, how to pull it together. And I know you’re involved with a couple different companies around this. But the idea is how to how do you apply digitization digital advice with human advice? Because you need both your behavioral comment, maybe talk about that, that what I call the confluence of human and digital advice. What does that look like? What needs to happen? Where are we headed? What’s next? What’s your prediction on what how this unfolds in the coming years?

John Thiel: Yeah, so I’m just going to go back to the might ever 15 or 20 years ago, and we all had our, you know, platinum gold and silver service model. And basically, depending on the wealth, or the sophistication of the client, they got one of the three. And the great thing about technology is and by the way, I don’t think they necessarily wanted it that way the clients, but that was the you gave them three choices. And, and that’s what they got. And I think now with digitization, they realize the client, but also the firm’s ability to deliver in a more mass customized way, is really improved. And so I think, as we think about how that’s going to be done, we’re going to have to capture preferences of clients, I think, to differentiate ourselves. And then we’re gonna have to be able to allow them to participate in the process, ie give them access to some of these tools, they’re still I think there’s a reluctance by many firms and advisors to allow clients to use the tools that the advisor is using or the firm is using to deliver these recommendations. And I think that’s a big mistake. Because, honestly, who are you to tell me, I’m not capable of running these scenarios and understanding them. And oh, by the way, it could save you for your firm and your advisor a ton of money if I was doing it, too in the morning when I couldn’t sleep. So I do think that that has to happen. Now, there’s a regulatory reality that you mentioned, that I do think has to be addressed. And this happens everywhere. And it was one of the chat. It’s one of the challenges with with goals based if I want to create a portfolio, and I want to optimize the asset location. So putting the most efficient assets in the, let’s say, at least efficient tax wrapper, or vice versa. That’s difficult to do because FINRA, and it’s you know, it’s not FINRA’s fault. This is the way the law is written because the law is written that they have to determine suitability, at the account level, not at the household level, it prohibits firms from being able to implement a strategy that really fits best for that client as you think about the types of friction that they will incur in doing that, so that that’s going to have to happen, we can manage unified households. But if the regulatory regime won’t let you implement inside that unified household in a way that’s best for the client, then I think it’s gonna it’s a challenge that we’re going to have to overcome as an industry. And we’ve got to bring along our, you know, the FINRA and the SEC to recognize how people behave versus what was written down so many years ago.

Jack Sharry: The good news is lots of firms are working on this issue in terms of building capabilities. And there’s a bit of an arms race, and it’s less about the individual arms, if you will, it’s more about how they come together, and my sense and see if you’ve done either pushback or agree, but I’d like to hear your thoughts. And that is that as you pull all this together, the client wants to be a part of it. Technology. My sense was sort of tee it up. So the decision making the decision support is in place around alternatives or possibilities. And also, I’m a big proponent and advocate around quantifying the potential benefit if you do it, right. Here’s what could happen this way or that way, depending on what, what might be applied. But weigh in on that because technology will be an enabler, but it’s not the end game. So maybe talk about that. Just that combination also, maybe how that plays out with our friends at FINRA FINRA, because that’s clearly something or indices gonna have to confront?

John Thiel: Well, I’ve obviously I built my career around the intimacy of a relationship with an advisor and a client so I applaud the efficiencies that technology brings I never suggested that it would replace a human being because there are times when things don’t make sense that happens more often than not, I mean, you just have to look at today when you got an inflation number coming out and then just the knee jerk reactions, which whether they proved to be accurate or not really can unhinge clients thinking and, and really helped them make them I should say, re evaluate what’s the appropriate long term strategy, the noise, if you will, what advisors can do, obviously, is to help them navigate through that there was literally a text chain between my two sons, my middle son’s an advisor, my older son’s a technologist, and he was ranting about inflation and other costs. And my other son was just trying to, you know, kind of talk him off the ledge, I weighed in and said, you know, you could move from Washington DC, if you’re really worried about cost of living, go live somewhere cheaper. But the fact of the matter is that that was just a simple example of how really intelligent people can get twisted. And that’s what technology can do. I remember talking to the founder of a technology company six or seven years ago, and they had all this q&a, and they had FAQ, frequently asked questions up and all their answers. But they opened up a line and people called and they were frustrated, because that was costing them too much to service. But they finally realized that just being able to call and talk to someone, and it could be a 12 second conversation, ease that person’s point of view and their concern. And so they adopted that as part of their service protocol. Just getting back as we evolved as human beings and communities. That is we are not going to evolve that quickly, just because technology allows us to. So that’s why I think those two things together are an unbeatable combination creates efficiency, leverage technology around its, you know, the learning ability and the ways to monitor and manage portfolios, and put that in with the planning, the advice, the asset, location advice, the withdrawal, strategy, advice, all those things. And you have, to me a perfect combination. Yeah,

Jack Sharry: I couldn’t agree more. Technology’s hurrying up to provide a greater ability to provide tools that enhance the decision support process, because that’s how I view that view. It is it’s about making decisions. And that’s very much as you’ve highlighted, I concur, is just having that human interaction, that sort of testing out ideas. What about this? What about that? or What haven’t I thought about that? Maybe we should consider. But of course, the The other issue, I’d love to have you comment on this, you know, we get the inflation numbers that were just came out today, when we’re recording this podcast, and people get scared, and then frankly, often do the wrong thing or hurried to do the wrong, you know, what may turn out to be the wrong thing, just as a reaction. So maybe your comment about that behavioral aspect that will always be in place.

John Thiel: Yeah, just when you think about the economy of the United States of America, historically, currently, prospectively, intraday reports really aren’t going to be able to accurately predict what’s going to happen over and over and over in the future. These are data points, they’re important to consider that you want to reflect upon them, but in no way should you change your investment strategy. For a headline number like that, it’s going to be decomposed, it’s already been decomposed. And it’s not nearly as bad as it was expected. And now while media wants to capitalize on any kind of volatility or news, because that’s how they make their living, that doesn’t mean that individuals should react to it. And if we go back to that long term strategy, and and how it’s enabled, and obviously bouncing against your not only your risk tolerance, but something that we we don’t have time to talk about, but it’s your your risk capacity. So how much risk can you take? And if something went wrong, would it derail your plan? We don’t talk about that near as much as we should, because that, to me is a bigger risk than whether I can stand up 10% up or down.

Jack Sharry: Just a book I’ll recommend to you on our audience, a good friend and colleague of mine pointed out is Robert Shiller, his new book on narrative economics, how stories drive behavior for another day, but I highly recommend that it’s really sort of informs my thinking about how you serve people because they, the news of the day, or the news of the hour lately, or just the minute tends to encourage bad behavior, frankly, always has, it seems almost worse now.

John Thiel: Well, I taught Dale Carnegie for eight years stories are incredibly powerful communication tool that can be used for and against a point of view. Think of all the greatest speakers that you’ve listened to in your life. They’re all great storytellers. So for the advisors, they need to have the story to tell people about how staying staying with your plan and working through past historical bouts of volatility have turned out well to counteract perhaps the other the narrative economics that he may suggest in his book.

Jack Sharry: Interesting stuff for for another day. Well To actually my colleague who’s such a fan, he per se runs a large digital marketing agency in Boston and talks about it a lot more with his clients on that very topic about how do you drive story to benefit, obviously, your clients as well as your firm’s for another day.

John Thiel: One other thing I think the industry still needs to help people with was the notion that we still, even with a unified managed household, we really are just looking at one asset or two asset classes, but it’s really just investments. And I really believe, and we are heading this way at Merrill Lynch, it would have taken some work with the SEC and FINRA, but I, we actually wanted to change the first four pages of our statements, if people would provide it. And my theory was, if you provided if you had a format for personal financial balance sheet and income statement, that people would give us the data, because they want to fix it and make it accurate. But I don’t think people think about all the assets they have in cute, including human capital, in their planning discussions. And I think it’s something that we need to help introduce with technology, it seems completely plausible. And again, we don’t get paid a lot of money to do that always as advisors. But I think if you really want to do the job for clients, we’ve got to take an even more holistic approach that just the household.

Jack Sharry: Well, that sounds like our next podcast discussion. So we’ll have to hold that aside. But I couldn’t agree more. I know when I think about my own personal situation, all those factors you just talked about are just part of my, my calculation may not be on my my statement, but it’s very much part of my thinking, or at least my decision making process. So. So john, as we wrap up, if you’d be kind enough to share three key takeaways from all the things we’ve talked, we’ve covered a lot here, but three things you’d leave our audience with that might be beneficial as they conduct their day to day.

John Thiel: So it would be my hope for the industry. Number one, always the most important, you got to continue to build trust with the investing public. It’s something that can never be taken for granted, what’s better now, but it’s still not where it could, it should be to. It’s not about complexity, it’s about being presenting things in a way that simple to consume, and to understand and as good as we feel about presenting complexity. And I was just reading an article about two firms, digital firms arguing about their algorithms and the outcomes and the predictions. And I could see people just glazing over thinking about this argument. So simple as important. And then, as always, alpha is important, but outcomes are much more important than alpha. So get me to where I want to go. And allow me to fill in the blank with my financial resources. And I’ll be a happy satisfied client.

Jack Sharry: That’s great, terrific, good words to to go out on one last thing, though, as we’ve done each week with our with our guests on our podcast. So what’s something that you do outside of your day to day work life, and you do for fun are passionate about or something you’re particularly interested in, you’d like to share with our audience?

John Thiel: Well, there’s several, but I think the most important, I’m passionate for helping people who who are afflicted by cancer. And so he literally in the last two weeks, one last night, I tried to make introductions, allow people to get to the most capable care in a very quick and efficient way, so that they can, you know, begin the process of battling beating and thriving after cancer diagnosis. So I personally feel very good that I can help people take a very, very concerning challenging issue and at least make the path towards healing easier and simpler and focus on outcome. So the same advice for those.

Jack Sharry: That’s great. Well, thank you, I know you’re on the board of the Jimmy v foundation. And I’m sure that’s where a lot of that work takes place. So that’s appreciated as as a citizen. So thank you very much for that. So, to our guests, I want to say thank you for listening in. I also want to thank john for a great conversation and it illuminating for sure, for those of you who are listening to our podcast, if you would be kind enough to rate review and share what we’re doing here at will tech on deck that would be wonderful. We have a great audience and listenership and you’d ever expand, so please share the good word. And john, thanks again. It’s been a real pleasure really enjoyed the conversation. I appreciate the opportunity. Thank you. Great. Thanks, John.