Author and financial planner Michael Kitces offered his insights to the incoming cohort of Columbia’s Master’s in Wealth Management program during the second day of Orientation this fall. In a wide ranging and engaging discussion, Kitces gave his advice for how financial advisors can stay ahead of automation, best manage their time, and navigate the thornier issues of wealth management with regard to family dynamics.
Kitces is the Head of Planning Strategy for Buckingham Wealth Partners, a private wealth management firm located in St. Louis, Missouri, that oversees approximately $50 billion of client assets. In addition, he is the co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, former practitioner editor of the Journal of Financial Planning, and the publisher of the e-newsletter The Kitces Report and the popular financial planning industry blog Nerd’s Eye View via Kitces.com, a website dedicated to advancing knowledge in financial planning.
What makes a successful financial advisor in today’s current climate of automation? “Form some sort of niche or specialization,” said Kitces. Advisors do have the ability to always stay one step ahead of AI. “Technology automates the lowest common denominator tasks. It’s expensive to build an AI tool to fix narrow, more complex problems. At the same time, having deep knowledge and access to information is necessary, but it’s not sufficient on its own.” Kitces makes an analogy to losing weight--while people know the answer is simply diet and exercise, most people aren't able to simply act on that common knowledge alone. Clients need accountability to act on information and trends, and advisors need to stay constantly learning to keep up with the latest strategies.
He advised students to keep an open mind, to spend time getting a handle on what it is they’d like to pursue in the industry. “Few advisors I know are still with the firm they started with, or even with the second firm they joined. Most advisors build their careers at their third job--with disturbing consistency. It’s your third job where it’s most important to pick the right company. Not your first.” The more experience, the more education you receive, he said, the more confidence you will have in your abilities.
In response to a question about his thoughts on online trading platforms replacing advisors, Kitces said that trends tend to move in cycles. “Day trading dot com tech stocks in the computer lab in college in the ’90s is not so different from day trading on Robinhood today, and advisors are still here."
Kitces discussed the importance of time management. He recounted a story he learned from Stephen Covey’s The Seven Habits of Highly Effective People. Everyone has a jar that represents their time. For most people, the jar is filled mostly with sand--the little things in life, such as Zoom meetings, Slack chats, email messages, and other random things that come up in your work day. The pebbles are the items on your to do list that you absolutely need to get done in the day. Then there is a big rock, which is some very important thing that, for most people, is just not fitting in the jar, because of all the sand and pebbles that have already been added. “Getting your master’s degree--for some, that is one big rock that is constantly put off and never happens. Just like you all in actually getting your master’s degree, my advice is to keep adding your big rocks first, and let the smaller pebbles and sand fall around them.”
He told students about an exercise he runs with his Kitces.com team. There is a bot on Slack that pops up in their team channel each day, asking everyone to list the most important things they need to get done each day. This helps keep people accountable to their “big rocks.”
Multi-generational family dynamics will always require a skilled advisor to manage. “Anyone who has accumulated a great deal of wealth is grappling with the question, how do I give my kids millions of dollars, and have them not mess it up? Many of the thorniest problems in wealth management are on the family-dynamic level." It has nothing to do with taxes. It’s how these wealth conversations occur, how advisors can help teach the next generation to be good stewards of wealth. Know how to do that, and you will always be able to add value to your clients. He recommended two books that have had an impact on him in working with more affluent clients in particular: Wealth in Families by Charles Collier, and Stranger in Paradise by James Grubman.