Poor market returns over the past decade may sour younger clients on equities, said Bank of America Corp.’s John Thiel.
“We’re at risk of losing an entire generation as investors,” said Thiel, who heads U.S. wealth management and the private banking and investment group at Bank of America’s Merrill Lynch unit. “They’ve been through 10 years of not-so- sterling results.”
The Standard & Poor’s 500 Index declined about 5 percent from the beginning of 2001 through the end of 2010, according to data compiled by Bloomberg.
“No wonder they don’t have a lot of confidence that equities are the place to be,” Thiel said at a conference in Boston held by the Securities Industry and Financial Markets Association. Sifma is a Washington and New York-based lobbying group for banks and brokerages.
Wealth managers need to recognize that younger investors have a different perspective and investing experience when working with them, said Thiel. To better serve investors of all ages, firms should increase the use of technology such as video conferencing for meetings and offer online statements. Advisers also should talk to clients more about their goals than performance benchmarks.
Hammer and Nail
“Sometimes I think we act like a hammer, and to a hammer everything looks like a nail,” said Thiel. “The client is going to define to us -- especially around the use of technology -- how they want to interact with us.”
Thiel also addressed the issue of a fiduciary standard which would require brokers to put clients’ best interests ahead of their own. Broker-dealers currently are held to a suitability standard that calls for advice that meets their clients’ needs when a product is sold, rather than the fiduciary duty followed by registered investment advisers.
“There’s a new standard of care that’s coming that we have to prepare for,” said Thiel.
The U.S. Securities and Exchange Commission recommended in a staff report to Congress Jan. 21, 2011, called for by the Dodd-Frank financial overhaul law, that brokers and registered investment advisers who give personalized investment advice follow a uniform fiduciary standard.
The global wealth management division of Charlotte, North Carolina-based Bank of America had $2.1 trillion in total client balances at year-end.
About 21 percent of investors surveyed by Fidelity Investments are too conservative with limited exposure to stocks based on their current age and planned retirement date, according to a study released by the Boston-based firm today.
Investor trust in financial services firms is eroding, Kathleen Murphy, president of personal investing for Fidelity, said at the conference. “We need to invest in our clients so they will invest with us,” she said.
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