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In an era where everyone claims to be at the forefront of digital disruption, Neesha Hathi, Head of Wealth & Advice Solutions at Charles Schwab, joins Financial Planning's Brian Wallheimer, to unpack how Charles Schwab is leading the charge to take innovation to the next level in wealth management.
Brian Wallheimer (
Good afternoon from here in New York. Good morning to our guests and those further west of us. Welcome to Leaders. This is a forum that brings together innovators and senior voices in wealth management to share their views on the most pressing topics in the industry. I'm Brian Wallheimer, editor in chief of Financial Planning Magazine. We're an Arizent brand and today we're talking with Neesha Hathi, managing director and head of Wealth and Advice Solutions at Schwab about disruption and innovation in 2024. I want to give a second for Neesha. Do you want to tell us a little bit about yourself, what you do?
Neesha Hathi (
Sure. Well, great to be here. I work at Schwab and I worked at Schwab actually for almost 20 years, which is amazing. I currently am in a role where I lead what we call wealth and advice solutions, which is there's kind of three main parts of wealth and advice solutions. All of our offers direct to retail, client investor advice. So anytime we provide advice to a retail investor, all of our specialty advice teams like financial planning or tax trust, estate income, anything like that. And then the third part of the team is really all of the relationships we have with asset managers that we use to keep our shelves well stacked for clients. So mutual funds, ETFs, SMAs, basically all the investment products that we offer to our clients. So that's my current role, but I've been here as I said, almost 20 years. So I've had leadership roles in advisor services where we work with registered independent advisors, investors services where we serve retail clients. I was our chief digital officer for five years, so I've been around the block.
Brian Wallheimer (
Awesome. Well thank you and welcome. We appreciate having you here today. I want to give a quick reminder to those in the audience. If you do have questions, there's a box. I'm sure you got those instructions earlier, but please do send those questions through. I'll try to get to them as many as we can and kind of in the proper location for those questions. Neesha, we're talking about disruption and innovation, wealth management. I think the best way to start that off is to talk about ai. Wealth management seems to see AI as a positive disruption, an opportunity to outsource tedious tasks like emails and onboarding and those sorts of things, and an ability to free up time to spend with clients. What other roles do you see AI playing in the industry going forward?
Neesha Hathi (
Well, I think AI is a good place to start. Everyone's very intrigued by it. I mean, I do think that a lot of the applications that we're talking about right now in wealth management are around what I would call supercharging the advisor. So essentially kind of enabling them either through automation or through amplification. So automation are some of the things that you mentioned. And actually while we could kind of say, well, that's not a very exciting use of AI, it's actually if you talk to financial advisors, I think the most recent JD Power survey satisfaction survey that surveys financial advisors, a third of them talk about not having enough time to spend with their clients. So some of these automation things, they may not seem so exciting, but they're actually really about efficiency and that's really important. I think the other piece is this opportunity to amplify, supercharge the advisor by amplifying them.
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And I almost think of that. I heard someone call it having a really smart person in your ear to alert you of the things that you might not notice or just make it easier for you to be able to have that really meaningful conversation with the client. So I do think a lot of the use cases that are being talked about applications of AI right now are around where there's a person in the middle, an advisor in the middle, a professional in the middle. But I do think there's lots of other use cases that are going to be exciting, and I kind of believe that we probably haven't even found the most innovative and compelling use cases in wealth management yet. We are kind of early in the journey. I would say one area that I think is pretty exciting is personalization, because we all know that's a big theme around wealth management.
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And if you think about the opportunity that we have through ai, whether it's automation or even just specific, forget gen AI for a second, but even if you think about natural language processing or something like that to be able to, we have a new experience that we just launched called Schwab Investing Themes, for example. And in Schwab investing themes, we use NLP to mine through all kinds of documents, public company documents, patent findings, filings, clinical trial data in order to find companies that meet a particular theme. Now, if you think about that, doing that without NLP, that would take forever and that would require us to have a much more expensive value proposition. With something like NLP, you're able to do that very quickly, very efficiently, and then that allows us to enable a personalized experience for our client and let them provide, pick a theme that's really very relevant to them.
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Another example I think is really interesting to think about is in the area of financial planning, our whole industry knows that financial planning is something that's a little bit linear in its process, tends to take a long time. There's data entry and things that have gotten better, but there's really, I think, a real interesting opportunity if we think about what we can do with gen AI and really kind of innovate in the area of financial planning. And these are the kinds of services that create personalization, right? Financial planning creates personalization around a portfolio to really tailor the wealth management experience.
Brian Wallheimer (
Sure. It's funny you talked about how some of those tasks are boring, but we actually had a presentation here in our office yesterday about AI in the newsroom, and one of the things they showed us was creating slideshows and things like that, PowerPoint presentations in seconds. And I was like, look, that might not sound that exciting, but if you've ever labored over one of those for several hours, everybody perked up. Everyone's like, we can have that done now? That is kind of exciting because at the end of the day, wealth management is still a relationship business. And if you're getting those things out of the way and not spending hours on a report or sending certain emails, if you're reviewing those things as opposed to creating them out of whole cloth, you get that time back.
Neesha Hathi (
Yeah, yeah, it's so true. There's another study we do with our registered independent advisor clients called the Independent Advisor Outlook Study and the one that we just did, it's interesting. So these are small to medium to sometimes large RIA firms at this point who are running their own businesses, and they have a very similar philosophy, I think to the one we have at Schwab, which there's no tech for tech's sake. Tech has to solve a problem, it has to solve a client problem or a business problem. And when you talk to them, there's a lot of enthusiasm around what I would call automation, this whole idea of just make it easier for me. Sorry, I'm losing my light in here. Make it easier for me. Let's see. There we go. Make it easier for me to actually get what I need done. And actually in this most recent survey, almost 70% of them said that if you could automate something, if they could take some tasks off their plate, they would spend it with clients. And to your point, that's, I mean, it's a relationship business. They recognize the value and the impact that they can have when they spend the time with clients versus doing something in the back office.
Brian Wallheimer (
Absolutely. Absolutely. So what's keeping wealth managers from a more broad adoption of AI right now? I mean, we talk here a lot. We see a lot about statistics about the average age of an advisor. They're nearing 60 years old. I imagine there are a number of them who are probably just waiting out the clock on ai. If they're nearing retirement age, maybe it's not a thing that they want to learn. I know that I'm getting to the age with my children where I don't want to learn all of the things that they're into right now. I've gotten there, but there's that. And is that in play? Are regulatory issues at play and how do we get past those?
Neesha Hathi (
Yeah, I mean I think there is for sure a balanced and measured approach that I feel like we see advisors taking, but I think that's a positive thing. And in some ways what I feel like we see is this enthusiasm for what AI can do, but also this mentality of I've got a business to run. I've got clients take care of. If this is really going to help me, then I'm interested in it, but I want to know that it's going to work. And I do think with ai, we are very early in our journey with AI, and so I think there are advisors who kind of are taking a wait and see approach, and I don't think that's bad. I mean, in some ways I was thinking about this in some ways. Reminds me when the robo revolution came about in the wealth management industry, there was some kind of, especially the media speculation sometimes is about this is just going to dramatically shift the industry and all of a sudden everyone's going to use robo.
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And I think many advisors rightfully so said, no, no, no, this is a relationship business and started to see the technology as enabler of what they do. And I do think that going through that cycle with robo almost has better equipped this industry to look at these technologies. Now AI is much more profound in the impact that it will have over time. But I think it allows everyone to take a measured approach. And so I think that's healthy. I do think though that advisors will have to at least get savvy because what is going to happen is we're going to have these larger providers, so think these enterprise software providers, so Microsoft and Salesforce and Google, they are going to integrate AI into their platforms and many firms are using those platforms. And so these firms are going to have to make a choice about am I going to use this capability or not?
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And that is where I think getting savvy and having the right talent on the team to be able to make those decisions and be able to balance the efficiency and operating benefits with the technology risk. But then also the comment you made around regulatory risk and understanding what is it that I'm taking on here? How is this technology being used? Am I sure, do I understand how the technology is being used? I think there is a task there for advisors to be able to think about. I don't think though they're going to be able to avoid it because these enterprise platforms are being used by everybody. So we're going to kind of all have to embrace that over time.
Brian Wallheimer (
Sure, sure. I mean, I think it's like anything, right? The answer's probably somewhere in the middle. You can't just not adopt AI in any way, shape, or form because you'll be left behind and it's going to be so pervasive in all of these platforms. And you probably don't want to jump in completely right now because it seems like you could run some risks, right?
Neesha Hathi (
Yeah, absolutely. There's a lot to learn here and I think taking a measured approach is good, but I think investing, I say even to my team here, investing into understanding the technology really and using it, trying it, getting savvy. I think that's a really good first step.
Brian Wallheimer (
Sure. Who do you think stands to benefit the most from ai? Is this the sort of thing that gives smaller firms a leg up, allows them to compete on a larger basis with larger firms, or does it take a large firm to scale this up well enough to actually put it into play?
Neesha Hathi (
I think it's an and not an or actually. Because I think when you have a larger firm, you're going to have the scale, the resources, expertise to do a lot with the technology. But if you're a smaller firm, you're likely to my prior point, using some of these SaaS solutions on public clouds that can bring the power of AI to a small advisory firm. And I think a lot of those firms are going to continue to introduce more capability to smaller firms. So I think it will be an and. Larger firms will embrace probably and have more expertise to do so. But I do think smaller firms are going to be well positioned. And there's some great little startups out there that are doing some interesting things with AI already, gen AI sifting through tax documents and trust documents and all kinds of capabilities that would be really nice for a firm of any size to be able to leverage. And so I think it's going to be beneficial for a large and small. I will go back to what I do think will be challenging is sifting through all of it, figuring out what is really impactful, how would I integrate this technology into my workflow or into my tech stack, making sure it's impactful and not a distraction.
Brian Wallheimer (
Absolutely. Absolutely. I know you and I talked earlier and we talked about willingness to pay for financial advice. There are more people coming to the table, more people wanting that. What can you tell me about that? You've seen that demand growing quite a bit, and I wonder when we talk about disruption, innovation, how does the industry deal with that? As we've talked about how all of these people are coming into trillions of dollars to the great wealth transfer, they want advice, there aren't maybe enough advisors out there. Tell me a little bit about the growth in that and where you see that heading.
Neesha Hathi (
Yeah, this is, I think such a meaningful trend and those of us who have been in the industry for a long time, I think sometimes when you look at the data, it's striking the level of acceleration we've seen. So the Cerulli data, that's the most recent shows that it's about 60% of US investors say that they are willing to pay for advice. And only a decade ago that was almost half, it was a little over 30%. If you think about in a decade, we have so many more investors saying not only that they want advice, but they're willing to pay for advice. That's a pretty significant change if you think about it in a decade of this industry. And when you go in a little bit deeper into that, what you see is it's actually not just one demographic. It does tend to be a little bit higher percentage.
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So around 64, 65% of affluent investors willing to pay it for advice. But actually I think there was probably a notion that we had, many of us had that the younger investors coming in the Gen Z and the millennials will be less likely to use advice. Well, that's not showing to be the case actually. We see a really strong uptick of advice with the younger generations. And so it is a very significant trend across all of the demographic groups that we see is this just increased interest in getting advice and then a willingness to pay for it because there's a perception of the value that it can provide to the investor.
Brian Wallheimer (
Sure. I wonder about fee structures and things like that with this though, right? Because when we're talking about younger investors looking for advice, they tend not to have the millions of dollars to put forward at that age, and then that makes it difficult for an advisor to take on a client like that. Do you think that fee structures are going to change any, do you think that there's going to be more flat fee or anything along those lines to try to bring those clients in? And I would assume the idea is bring them in even when they're at that pre affluent phase and keep them along. How is that going in your mind?
Neesha Hathi (
Yeah, I mean, first of all, you're right. It is about being able to serve an investor throughout their client journey throughout their investing life. And so I do think it's important that we as an industry embrace that and figure out how we're going to serve and provide advice to investors that maybe don't have a million dollars or don't have even $500,000, but are seeking. They have meaningful moments in their lives and they're seeking advice. They need help with retirement, they need help with the kids' education, whatever it is. So I think that that's something that is happening. And as that happens and more firms embrace that and we leverage technology and people and bring it together in interesting ways, I do think there's likely going to be continued evolution of the fee structure. I mean, I'm not a believer that the AUM based fee goes away, but I do think that we're going to continue to see introduction of new and just different kinds of fee structures.
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So I mean, we have one here, our Schwab Intelligent Portfolios premium offer, which is where you have our robo-advisor as well as access to a certified financial planner and capabilities around that. That one is a one-time fee for the first interaction and then a monthly fee, so a subscription type model. And I do think that those kinds of models, I do feel like we're going to continue to see. Sometimes I think we'll see more pay for service type models. I think we'll see retainer models. I just think that as we think about serving different kinds of clients in different ways, that's going to become important. The other thing I would call out here is just this demand for advice. If you kind of dig into that too, one of the big themes is this demand for holistic advice. And so what that means is not just, don't just tell me about how to do my asset allocation and invest my portfolio, but that means financial plan and my trust and tax planning and estate planning. And when you think about all of those services that wrap around the portfolio, you could imagine some advisory firms already charge differently for those services. And so I think that's going to be an area where we will continue to see evolution on the fee structure. So are all those bundled into the an AUM fee? Are those explicit and separated? Are there interesting new innovations and fee structures there around those other services? Because in many cases, that's providing this personalization and really making the advice meaningful and tailoring it to the individual.
Brian Wallheimer (
Sure. And we can loop that back to our earlier part of the conversation about ai. I mean, I imagine if you're a wealth management firm and you're trying to bring on tax planning experts or estate planning experts, that's expensive to bring people in. If you're able to do that through automation and ai, you probably have to bring in fewer people. You probably are able to expand your scope of business. Do you think that that plays into what financial planning will cost? I mean, if you don't have to bring on more people and you can offer more services, does that allow firms to charge a little bit less and bring more people to the table?
Neesha Hathi (
I think it's an interesting point. I mean, I think at the end of the day, the financial planning, I was alluding to this earlier. I mean, if you think about the way financial plans are created across, let's say most of the industry today, it's a very kind of manual process almost, right? Data is collected, sometimes it's aggregated using APIs and other things, but it's collected, it's kind of put into a structure of whatever financial planning software you're using, and then an advisor sits with the investor and kind of validates the information and goes through the process. And I just think it's kind of a little bit dated in the way that we all do this, conduct this process of financial planning. Now, if we had better technology and we really kind of innovated around that data aggregation and how that we could probably reduce that time that's spent and because of the automation that we could get, but at the end of the day, the advisor still needs to engage with the investor because part of doing a financial plan is actually a discovery process.
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It's an engagement process. It's where you ask, the advisor has the opportunity to ask the question behind the question and cover something that maybe they didn't know. And so I think financial planning, if we just think about it as an artifact and a plan and a document, then yeah, you can probably automate and make it really efficient. But I think if we think about it as the impact that it has on an individual, and we've done lots of research at Schwab about the increased confidence and ability for a client to stay on track and all of those things that happen once they go through a financial planning process, that I think is as much about the document itself as it is about this process. And so will cost come down for planning? I mean, we already offer very competitive, very inexpensive financial planning. Actually digital plan is for free on schwab.com. So I don't know if that's where, I don't know if price is where the competition necessarily is. I think it's really around how do we innovate the experience so financial planning can feel like a more modern, more relevant experience and integrate it into that, again, financial life of the individual.
Brian Wallheimer (
Absolutely. We do have some questions down below. Let me try to grab one of them here with someone asking, how do you see open banking with the CFPB regulation playing a role in 2024?
Neesha Hathi (
Oh, that's an interesting question. I mean, I think that, well, first of all, the demand for kind of integration of capabilities and data is just, I mean, profound. And actually ai, and we've talked a lot about AI today. I think if you think about gen AI or the power of some of these capabilities, you need data in order to do that. And I think having access to data and being able to figure out how to do that securely and safely and have the investor be able to say and have a perspective on how their data is being used, and I think it's going to be really important. So I think I feel like there's a lot of evolution coming in this area.
Brian Wallheimer (
Absolutely. A second one. And before I ask it, a reminder, anyone else out there that wants to throw a question into the chat? Please do. We've got about seven minutes left. We'll try to get to all of them. One here is how do you see real time payments fed now and RTP impacting your business?
Neesha Hathi (
I mean, the demand from investors to have more real time, more just everything in an instant continues to grow, so expectations continue to rise. I think for us at Schwab, we are engaged in all of the various ways that we can enable that and thinking through the use cases. I think that there are investors where that's a big deal, and I think there are lots of investors where that timeliness is not that big of a deal. So I think it definitely has an impact, especially if you think about just the regulatory trends and wanting to make sure that investors can do what they need to do as quickly as they want to do it. But I don't know if it meaningfully changes the way that we work with investors or what we offer necessarily. It's just kind of an enablement and acceleration of what we do.
Brian Wallheimer (
Sure. One more that just popped up here. A commenter who talked about taking a trauma of money course and wondering if trauma awareness and trauma-informed approaches are on Schwab's radar. Do you advisors trained in this area?
Neesha Hathi (
I'm not familiar with that particular term, trauma of money, but I think if it's around, if the question is really getting to advisors who are trained in dealing with situations where people have gone through very difficult situations with regards to their money, their personal situations or debt situations or fraud situations or whatever, we certainly are very, we have many advisors who are very skilled and equipped to do that. It's unfortunate that there's probably a lot more trauma out there than we'd all like to believe. And money is such a personal thing. I mean, I always say people think about money as an intellectual, something you think about with your head. Money is so much about the heart and there's so many emotional decisions that get made around money. So I'm not sure about that particular term, but we certainly are well equipped to be able to make sure that clients are well taken care of when they've had a situation.
Brian Wallheimer (
Sure. We've talked a lot about ai, we've talked about fees and the increase in number of people looking for advice. Anything else on your radar this year? Anything else disruptive, innovative, that you think is coming down the pike that we should be on the lookout for?
Neesha Hathi (
Well, I think the only other thing that I might call out is we talked about technology evolving and this trend towards advice. There is one other thing that I think, and two years ago, whatever, we were talking about it as crypto, and then now we have Bitcoin ETFs. And I do think that if we just kind of step back and think about that as a broader categorical trend, I think there is this continued demand for investors looking at different ways to invest, alternative ways to invest. And we've all seen the growth of alternative investments more broadly across the industry. I would anticipate that we're all going to continue to see that grow. And I think crypto is just kind of one little microcosm of that. But if you look at some of the research out there and just what we see, we serve a lot of investors across our retail and RIA channels and just based on what we see, we certainly see that there's increased demand for that kind of access to alternatives and just finding different ways for investors to access markets and get return as they're looking for maybe a different type of investment strategy than maybe what previous generations have looked at.
Brian Wallheimer (
Absolutely. Absolutely. That's all the questions we had in the form, and I think we're pretty close to wrapping up. Is there any last thoughts? Anything else on your mind? Neesha? There's the lights. I'll tell you. You got to get that timer a little bit.
Neesha Hathi (
I moved to a new office and this is what happened. So anyway, well, it's been great to be here, Brian. I'll just say I've been in this industry, around this industry for a very long time. I do think that the opportunities that we have as an industry to this demand for advice that we all see in front of us and being able to democratize advice using ai, I hope we're going to be able to leverage this technology to really drive down the cost of getting really good, tailored, personalized advice no matter what affluence level someone is at. So I'm really excited. I know all of us at Schwab are excited to be able to bring technology and people together and really deliver something meaningful for so many people out there who deserve it.
Brian Wallheimer (
Absolutely. Well, Neesha, thank you so much for taking the time to talk with us today. We do appreciate it. Again, I'm Brian Heimer, editor-in-chief of Financial Planning at Arizent, and I just want to thank you and thank all of our audience for being here today.
