The $124 Trillion Wealth Transfer Banks Aren't Ready For

The $124 Trillion Opportunity Banks Are Sleeping On

$124 trillion is transferring from Baby Boomers to the next generation by 2048. And most banks and credit unions have no seat at that table. I sat down with Tobias Salinger, Chief Correspondent at Financial Planning magazine — sister publication to American Banker — to unpack the disintermediation risk, the wealth transfer opportunity, and the crawl, walk, run playbook for standing up a financial advising program.

Timestamps

0:00 — Welcome & Tobias's background at Financial Planning and American Banker

0:24 — How fintechs are chipping away at traditional banking relationships

1:03 — How serious is the disintermediation risk for banks and credit unions not offering financial planning?

2:21 — Why smaller institutions have fallen behind on wealth management

3:05 — The long-term commitment wealth management actually requires

4:15 — The advisor retention problem — and why golden handcuffs matter

5:07 — Why institutional financial advising relationships appeal to privacy-conscious customers

6:35 — How LPL, Cetera, Osaic, and Ameriprise are winning the third-party race

8:00 — The natural connection between deposits and wealth management

8:54 — The $124 trillion Baby Boomer wealth transfer — and whether banks are positioned to capture it

10:52 — The emotional and behavioral complexity of intergenerational wealth transfers

11:23 — Can a robust financial advising offering intercept the wealth transfer moment?

12:55 — Unpacking customer acquisition costs in wealth management

15:39 — The crawl, walk, run playbook for standing up a wealth management program

17:04 — What should you expect to pay for a financial advisor? Real numbers from Diamond Consultants

18:27 — Mr. Beast, financial influencers, and what banks and credit unions can learn

20:26 — The compliance challenge of partnering with financial influencers

21:55 — Why hiring young advisors might be your best first move

23:28 — Using influencers as a front door to traditional institutions

24:39 — The paradigm shift in talent management banks aren't ready for

26:17 — What Tobias is watching over the next 12 to 18 months

27:31 — Last question: a bank CEO walks up to you at a bar. What do you tell her?

29:11 — Where to follow Tobias and Financial Planning magazine

Want to work with Propagate Fintech? Fill out a contact form at www.propagatefintech.com

Transcript

SPEAKER_00 0:04

Over the next two decades, somewhere in the neighborhood of $84 trillion is going to change hands. So this is called the great wealth transfer, and it's where baby boomers are passing their assets down to Gen X, Monials, and their heirs. And so the question that I think every bank and credit union in the country needs to be asking right now is well, where's the money going to land? And the overwhelming majority of heirs switch financial institutions after an inheritance. So that means if you don't have a relationship with the next generation already, that money walks right out the door. This is exactly why I believe that a well-built wealth advisor vertical inside of Bank or Credit Union is one of the most underutilized retention and growth tools in the industry. So I've got someone on the phone with me today who's been covering this space as closely as anyone in financial media. Toby Salinger, he writes for financial planning, which, if you don't know, is a sister publication to American Banker. And he has some serious insight into where wealth advisory is heading and what financial institutions need to be paying attention to right now. Check it out. Toby, so glad to have you on the podcast today. Just by way of a little bit of background and your journalistic pedigree here. So you're coming from financial planning, which is a sister company, to a little startup publication that not many people have heard of, American Banker. So glad to have you. Well, great to have you on the show. Let's go ahead and jump right into it. So let's start with the big picture here. So, you know, fintech and digital first platforms have been chipping away at the traditional banking relationship for a long time now. You know, look at uh, you know, Venmo and you know, P2P payments, that was probably the first big takeaway, I think, from the traditional banking ecosystem. You know, when you look at what's happening in, let's say, the wealth and planning space specifically, uh, how serious is the disintermediation risk there for banks and credit unions who aren't really leaning into financial planning?

SPEAKER_01 2:24

I think it must be quite serious when you have some of the largest banks with big wealth management businesses investing in fintech firms, buying them up to bring those capabilities to their advisors. I was just working on a piece yesterday about tax planning technology. All the large uh wirehouses, as they're referring to in wealth management, have invested in fintech firms that are uh focused on tax planning. And that's just one area. There are any number of other tech vendors that they've purchased over the years, and that is why there is a high barrier to entry for a lot of smaller institutions when you have such big players, you know, investing, say, tens of millions of dollars or even hundreds of millions of dollars in technology. That's going to be tough for a smaller institution to compete with when they're trying to work with uh clients of the 21st century.

SPEAKER_00 3:26

Yeah, absolutely. These firms that are making big moves in the MA space, they don't do so lightly. There's a real business case for doing this and for going after this opportunity. You know, one that banks and credit unions really should be in the catbird seat and pursuing.

SPEAKER_01 3:43

Well, and that's the the funny thing. But I know that for many decades there has been talk about why aren't banks branching into wealth management further. Um, and there are some myths there. It's a little bit strange to suggest that banks haven't uh gone far enough into wealth management when you have the Merrill, the Merrills, the Morgan Stanley's, the JP Morgan's, the Wells Fargo, UBS, they're huge wealth management businesses. RBC, another one, our neighbors to the north. Um, and but you know, you do have a lot of smaller institutions that really haven't developed their wealth management uh business at all, or just haven't really invested in it. And that's that's what I'm told by many experts is the issue is that it takes a long-term commitment in this business. Financial advisors, they're very valuable right now, they have a lot of recurring revenue. That's why they're getting a lot of investment in wealth management because they're very successful businesses once they build it. But it takes time to build a client base as a financial advisor. You can't just stop someone on the street and ask them to, you know, give you $100,000 to manage or trust me to manage. It takes time to build that that base of clients. So they have a very meaningful relationship, a very valuable relationship. They can look to a very interested marketplace for that talent, they can start their own firm. And so any credit union or bank that wants to get into this business needs to think in terms of five, 10, 15, 20 years down the line because that's how far down the line wealth management is. It's a generational thing. It is, it is, and you know, eventually they're gonna have to transfer it to a different advisor. But a lot of these banks or credit unions may struggle when advisors build a business. So they've invested, they've created this investment program, this wealth management business at the bank or credit union. Then the advisor gets these relationships and one day decides, you know, I would rather run this business myself and not have it under the umbrella of the parent company. And sure, you know, even the biggest mega banks out there lose advisors for that very reason. Advisors go and create their own firms. So the firms that are going to be successful need to find a retention and succession strategy that's going to keep advisors in place.

SPEAKER_00 6:26

They need to let them they need they need some golden handcuffs of some kind. Like you gotta keep them locked in. I was just thinking through uh like a personal scenario for myself here. So I have several people in our network who are financial advisors, and for me, I don't like marrying the two, my personal financial world and somebody who's in our friend group because there's privacy concerns in the mix. You know, this is anecdotal, would be more likely to lean into a financial advisor relationship where it's more of like a corporate relationship, or it's almost more of a an institutional relationship with like the local community bank or maybe like the you know, the local credit union, where it's more objective than it is like, oh, I know Roland and his wife, and you know, blah, blah, blah, blah, blah. I feel like there must be other people who think the way I'm thinking where they want to keep it private in in an institutional kind of setup would be maybe more attractive to those people.

SPEAKER_01 7:29

Well, it it it does come down to consumer preferences, which can range wildly on either side. Uh, a lot of advisors stay at uh at the the bank-owned wealth management firms for decades because advice uh their their clients have that name identification, uh prestigious name managing their money. Others would be more likely to go to that local credit unions have amazing relationships with with their clients, um, trusted relationships. That's a great foundation for considering uh a wealth management relationship that takes time and it takes sustained investment, it takes technology. That's why LPL has been so successful in its uh recruiting efforts. In this, uh, you see a lot of their rivals like Ozaic and Satara growing their footprints as well. AmeriPrize, uh, they only started in working with with uh bank and credit union-based uh wealth management firms a few years ago, or maybe they had done it at another time over their like 100 plus year history, but they got back into it in earnest about seven years ago or so with an MA deal, and now they're recruiting financial institutions too. So these wealth management firms want to come in as a third party and take off of the plate of these smaller institutions. And the selling point is you don't need to hire a compliance expert, a technology company. We'll we'll give you this package of of resources, and you know, you'll pay us a fee, of course, but you'll save money, time, and headaches in the process. You keep the liquidity around. Yes, you create a new a new business line. And banks, under the way that this system operates, banks have a real opportunity because a lot of the wealth management business is based around bank-related services. We've all heard of something called cash, and cash sweeps and lending are a big area of the whole wealth management business, just as they are for banks, that those cash management needs their liquidity. You're talking about for investors, the cash portion of their portfolios. That's where some of the largest wealth management companies are getting a lot of their business through the cash-based solutions. So banks have customers with deposits, uh, credit unions have customers with deposits. It could only be a natural flow, but it's difficult.

SPEAKER_00 10:16

Sure. Okay, because they got to set up a partnership, they got to develop the strategy. So, you know, we recently had the founder of Will and Trust on when they're all about future planning, thinking long term, you know, obviously we're talking about wills, we're talking about trusts. And one of the things that Cody Barbo mentioned was that there is a really unique moment happening right now. There's a huge transfer that's about to happen, you know, with baby boomers. There's a lot of wealth being generated right now with the AI space. And do you think that banks and credit unions are really positioned to, you know, capture that? Or do you think that this kind of absence in the financial planning space is going to let a lot of it out the back door?

SPEAKER_01 10:58

That depends on how they move in the next few years because it is tens of trillions. That number I've seen as high as $124 trillion in wealth inherited from boomers or other generations by 2048. I believe that was a Cerule Associates figure. But there are lots of calculations. The point is it's a lot of money and it's starting right away. We've got thousands of boomers retiring every single day. And they need retirement services, they need those estate planning services. That can be another challenging area of the business because money is so tied up in everything. And when you have wealth transferring between generations, there are the technical side of things with the trusts and the estate planning methods, but more importantly, there's a whole emotional and behavioral side within a family about possible tension between generations, people's involvement in the business, who's who's managing the business, who's owning the business. Any number of things can come up. It's been in a lot of popular media. Everyone liked that show, succession a few. Succession. Uh, and so so you can see everything that's there and all the the challenges that are involved. That's why it takes that sustained investment for banks and credit unions uh who want to get involved in that $124 trillion transfer of wealth that is underway.

SPEAKER_00 12:33

Would love to get your honest take here. Do you see offering robust financial advising service as a way to capture and insert yourself into that wealth transfer moment? Absolutely.

SPEAKER_01 12:46

Clients who are loyal customers of a community bank or credit union uh have built those relationships over a long time. And so if a financial planner comes into the picture who can display the value that they they bring to clients, and there's their quantifiable values that uh that financial planners bring, they can do uh a lot of great, important business out of that that base of clients that they already have. Unfortunately, it is a pretty big barrier to entry uh with a level of compliance and technology spending that is required, the level of expertise that is required to go into wealth management in addition to banking. So there's a lot there. If they get a successful advisor, they need to learn how to provide the services that advisors are looking for that benefit advisors' clients, and they need to figure out how to keep those advisors there for the long term. Otherwise, advisors are understandably just going to pick up and create their their own businesses. So advisors need to be compensated well, their clients need to be served well, first and foremost. Um, but they do have that opportunity if they can continue that sustained investment into the business.

SPEAKER_00 14:16

Yeah, let's unpack the costs there. So customer acquisition costs is something that's really interesting to me in the fintech and banking space. You know, I would say on the fintech side, the costs that these organizations are paying to sign banks and credit unions are huge. I mean, they're they've got to be at least $20,000 to sign one customer. When you look at what an independent advisor is paying to secure one customer, I've seen numbers anywhere from a thousand to ten thousand dollars to acquire a single client. Now, you know, with banks, they already have thousands, potentially millions of customers walking through the proverbial door. Uh, you know, what what does that acquisition cost story look like when a bank activates this planning relationship with somebody that they already serve?

SPEAKER_01 15:02

Well, first, in order to even get a meaningful client acquisition cost figure, they need to have a sustained business for several years. They need to see what has been successful in the past and compare that to uh other incoming clients. They need to examine it carefully how they draw a new client. Um, and that all starts with identifying their ideal client and how to how to reach them. Um, you know, in this day and age, the cost could be as low as, you know, the time it took to film a social media video and post it online and reach a client who happened to be wondering about a specific question that a financial planner is answering in a video, or it could run into tens of thousands of dollars when it comes to bringing clients and prospective customers to say the Kentucky Derby or some luxury box to watch the play in the playoffs or something. And you know, so it's a it's a big spectrum, and then there are all all kinds of other digital marketing methods these days, but it it takes a track record and it takes a full calculation. You know, I was going to say it's free to post a social media video, but of course we know that time is money, so time has a quantifiable cost too. And it starts with having that plan for an ideal client that you're trying to reach, and then developing a track record over time. Eventually, you have a marketing infrastructure where you're able to get a reliable calculation on the cost of uh of client acquisition. It pays off and droves once you get those clients because it's recurring revenue, the lifetime value of every client ends up being a great return on investment.

SPEAKER_00 17:00

That feels like a natural transition into the scenario where a bank or credit union, let's say, wants to stand this up. They want to go all in, they want to get family offices working through the institution, they want to support the financial planning uh endeavor. What what do you think that the crawl walk run playbook looks like here?

SPEAKER_01 17:21

Well, if I were a bank or credit union trying to break into wealth management, I would hire a promising young financial planner, a career changer, a young person who just graduated from an academic planning program and empower them with the tools they need to build a successful client base over time. It takes time, but when you have credentialed CFPs often, they could be CPAs with a personal financial planning specialty. It all revolves around getting a planner who draws clients and retains clients over time. It's going to be unfortunately a little bit too expensive to just bring in a rainmaker because they're going out in the wealth management talent marketplace and getting two or three times their annual revenue, uh, their annual business offered to them as a retention bonus at competitive wealth management firms out there. It will be a lot more cost effective to empower.

SPEAKER_00 18:27

Okay, let me pause you there. Let's talk about those numbers really quick. Can you just like give me some swag estimates on like what somebody should expect to pay for an advisor like this?

SPEAKER_01 18:38

Well, yeah, let me pull up uh one of the best uh resources on this from Diamond Consultants. They're a successful recruiting firm in the wealth management industry, and they're basically the big takeaway from their financial advisor transition report this year is that it's a great time to be a financial advisor. Um there are some really, really big offers going out there. You're looking at two, three times annual revenue that a lot of these firms are offering to advisors in a forgivable loan, where if these advisors stay at the firm for usually five or often now seven years, they get this retention bonus that is a lot of money. The alternative to that for a lot of advisors is hey, I don't want to do this recruiting offer thing, I'll just start my own business. And that can be a very valuable business too. So they would look at paying several millions of dollars if they want to bring in a successful advisor who's doing this for 15 years.

SPEAKER_00 19:50

So it's a lot of money. Well, you know, money I I think tends to follow friction. And so this it must be it's a hard gig. You're in hustle mode all the time, and you know, you're out there working it big time, you're joining social networks, you're golfing, you're tick tocking, you're doing all the things. Let me draw you out a little bit on something from a growth perspective. So I had one of your colleagues on the show, Melinda Huspin. We talked a couple of times about the, you know, Mr. Beast's foray into banking with his acquisition of STEP, which I think kind of opens the doors to other influencers, which, you know, I see a lot of financial gurus, if you will. How does a bank or a credit union do that? A lot of times their brands are very safe, they protect them, they're very old. And, you know, somebody who has got an iPhone and an Instagram account is able to go out there and get, you know, huge traction and viewership. Where do you see credit unions and banks developing a strategy here?

SPEAKER_01 20:56

Well, I think you're touching on something that is on the minds of a lot of people across the financial services. There's a level of frustration among professionals who see the financial influencers and say everything that I put out on social media could be regulated, and yet the financial influencers are out there saying any number of things. Look, there are some very, very um good ones who are X giving people great advice and in good plain language that someone like me can understand. Or there are people who are just out there saying everyone should buy a vending machine and or an ATM business and build income. You know, we'd all love to console property. Well, maybe we would we wouldn't from what I hear from landlords, but we all we don't all have the capital available to us to, you know, buy one of these things. The point is that there are there are some endorsement possibilities that these influencers could. To maybe point their followers to your institution if it's the right person. But there is a lot of compliance difficulty when it comes to partnering with people who may or may not be credential. And then your company's brand is is you know behind this person. Really, I am not a business owner, but if I were, if I were a bank or credit union trying to build one of these businesses, it's as simple as going to your local college or university that has a personal financial planning academic program. All of the big wealth management firms are already there. You know it, but they're already on those campuses recruiting talented people who are looking to go into this field. Me personally, when I was in college, I didn't have a plan for a career. Maybe that's how I ended up as a journalist. These people who are in personal financial planning programs have thought it out and they're going into a rewarding career helping people. They're going to a rewarding career that is uh that's going to build them a viable financial future. They've really thought it out. So they are they are young talent that is there for the right credit union, small bank that is mission driven.

SPEAKER_00 23:19

That's what I guess, you know, you know, if you're if you're going after uh, you know, I mean you mentioned going after people that are early in their career, you know, maybe as part of your your kind of crawl, walk, run sequence and kicking off this business. And, you know, there's there's value, I think, in working with younger folks when you're trying to fire up this business because, you know, they have a, in my experience, working in marketing, younger people have a greater propensity to put them a camera in front of their face and have fun doing it. And and they don't feel like they need to be a certain way when they're in front of the camera, you know, they understand like the medium and the context and the and they can do it very easily. Whereas for other people who, you know, spent their whole careers not being in front of an iPhone, you know, doing TikTok, it's it's a little harder for them to to lean into that. But you know, there's trade-off that you work with a different level of professional, somebody who's been in the game for 25, 30 years, you know, you gain other benefits and they have deeper relationships, you know, so on and so forth.

SPEAKER_01 24:26

So yeah, no, it's almost like take time. It takes time.

SPEAKER_00 24:29

Yeah, no, absolutely. It's it's such a what's the word? It's the long game. Going back to the financial influencer, I wonder if these people can be used as a front door to a traditional institution that can partner with these people to at least get the conversation started and maybe redirect them back to it's possible.

SPEAKER_01 24:51

It has to be the right influencer. A lot of community banks and credit unions are pillars of their community. Uh they they serve clients uh from a particular field, from a particular geographic region. Uh, they they are well known around their community, they may not be as well known in in the social media world. That influencer relationship could be helpful to them. But if they start getting leads that are not their ideal clients, that could be difficult. If the influencer doesn't give out reliable financial information, that is even more problematic. So they would have to be very thoughtful about the type of person that they would be partnering with. It's totally possible. I mean, think about, say, a veteran who's a financial influencer working with a bank or credit union that serves uh people who have served in the military. That that could be something. Or if it's a credit union that works with a union member who's who's an influencer or a union member's family member.

SPEAKER_00 26:00

I mean, you're getting in you're getting into uh something that I think is is really interesting and represents a paradigm shift in the banking world, which is managing a totally different type of talent. A lot of times the talent that banks and credit unions manage are the bankers internally, the tellers, the project managers, operation managers, so on and so forth. Now, you know, you're getting into a whole component where you're needing to manage third-party influencers to be on brand in some capacity. Yeah. And and there's production management. You know, you're getting really deep into an aspect of marketing, which is very niche and I think really foreign to a lot of the talent that banks and credit unions employ.

SPEAKER_01 26:46

Well, and that's why you have companies like LPL, Sotera, Ozaic, Ameriprize being successful in their recruiting efforts, because they can say, here are the marketing resources that I have. Here are leads. Um, here are here's content you can you can post that we've already run by compliance. And that's a the value proposition that they're out there pitching, and that's why they're they're winning, because they're providing these services that smaller banks and credit unions don't have uh familiarity with. And yeah, that could include influencers these days, certainly. Uh everyone's in a competition for eyeballs, and there are people who are winning those competitions, and that's who that's who any big company or any any company of any type is is reaching out to.

SPEAKER_00 27:38

Uh so uh just wrapping up your last two questions for you. Uh Toby, what are you watching most closely over the next 12 to 18 months where you know we have the intersection of banking and financial planning?

SPEAKER_01 27:50

Well, I'll be watching uh which wealth management firms are the most successful in working with these businesses. There is a continuing consolidation in many industries. Uh, banking and wealth management is only one of them. So the firms in either world that make a sustained investment are the ones who are going to get the biggest results. I'll be watching to see who that is. And I'll also be watching private equity because when they come into the mix and invest at the intersection of, say, banking and wealth management, there could be even more deals combining firms together, trying to deliver a comprehensive solution where someone like me says, Hey, I met with my financial person and they handle my banking, taxes, and wealth management. And that's kind of the magic formula the firms have been trying to crack for for decades, but we'll be seeing who does the best job of that in coming years.

SPEAKER_00 28:52

Okay. Last question for you. You go out tonight with your softball team after the game, you guys are at a bar and you've got a bank CEO sitting right next to you. And she says to you, okay, you know what? I heard that episode. I don't know why we haven't gone into this space. We're going into it now. What do you recommend she does?

SPEAKER_01 29:12

I recommend she goes to her alma mater and develops a relationship with either the advisor who's an adjunct professor to this academic program or the professor of the program. Oftentimes it's an advisor who does night night work uh as an adjunct professor or just the director of the program and go to the recruiting fit and find a talented young person or a career changer. There are many career changers these days who can build that that business, but give them the tools that they need to be successful, give them time and give them resources, and they will build that new business line for you. Just don't expect it to uh be up and running by the next softball game or the fair enough, fair enough.

SPEAKER_00 30:04

I thought you were gonna say step one is buy a subscription to financial planning, and then all that was next. Well, you're right.

SPEAKER_01 30:12

That is what I should have said is we'll tell you how to do that. Uh make sure and and go over to financial dash planning.com and subscribe or just find us on socials. We try to be there as much as possible because it is an exciting time when there's opportunity. There are some challenges, but there's a lot of opportunity. Absolutely. Well, Toby, thanks so much for coming on the show. Where can people follow your work? Find me on LinkedIn at TobiasSallinger, or just head over to financiald.com. Look for my byline or that of other talented colleagues, and we're covering any number of news, items, um practice management, professional development, everything that's important to financial advisors and other wealth management professionals. Awesome. Thanks for coming on the show, man. Thank you.