When it comes to financial advisors' value-add model in 2024, traditional approaches may not be ideal. That's the perspective of Anton Honikman, chief executive officer of MyVest.
"The industry's historical model of how we add value is under threat," Honikman argues in an interview with ThinkAdvisor. "The [advisory] world is moving away from stock picking as a source of extra return. [It's] anachronistic in a way."
Rather, the tech expert points to personalization through tax management and other sources of investment solutions as better alternatives.
MyVest, winner of 2023 ThinkAdvisor LUMINARIES awards for executive leadership and community impact, focuses on delivering personalized tax-aware portfolios at scale. The TIAA subsidiary works with broker-dealers, banks, big RIAs and other medium-to-large wealth management firms.
In the interview, Honikman discusses trends in the RIA space and the eventual end of "swivel-chairing" — advisors needing to switch among a series of point-solutions — to enjoying integration of the same data in all subsystems.
Here are excerpts from our conversation:
THINKADVISOR: What's the greatest challenge in the financial services space today?
ANTON HONIKMAN: The industry's historical model of how we add value is under threat. Two ways we need to evolve to address that is through personalization in tax management and the breadth of services.
Tax management by financial advisors is increasing. What's been the motivation?
Tax management is a huge trend. The world is moving away from stock picking as a source of extra return for clients: It's not generating positive alpha.
So the value proposition that an advisor brings to clients is shifting away from traditional investment management. Stock picking is anachronistic in a way.
Advisors are looking for other ways to add value. One is personalization through tax management and other sources of investment solutions rather than picking stocks.
The other way is offering a breadth of services well beyond investments.
For example, everyone is looking at estate planning, insurance, health care. That's a huge trend.
How does MyVest address tax management?
Our strength is in tax management with tax-aware portfolio management at scale. It's a big, important part of personalization. [In] the [foreground] of the strategy of personalization is tax management, a demonstrable benefit in the client's portfolio.
Your Strategic Portfolio System, or SPS, is MyVest's core technology. Please explain.
It's a unified wealth management platform for advisory firms to build and deliver personalized investment solutions at scale.
The kernel of it is tax-aware rebalancing where we rebalance portfolios, being cognizant of the tax consequences for the client and of their personalization preferences. And it controls for risk.
We can do this for hundreds of thousands of different portfolios simultaneously.
What does an advisor need to do to use SPS?
For a very large firm, a big bank or big broker-dealer, all the advisors are required to do is capture the input.
Then we automate the implementation of the portfolios over time.
How is it possible to deliver personalized investment solutions at scale?
That's the key. Personalization was generally done as a hand-crafted, highly manual construct and delivered only to the wealthiest clients because they had the assets to justify the extra manual work.
Our vision was, and is, applying technology to automate a lot of that and thereby expanding the universe of people who can benefit — not only the ultra-wealthy but those who are underserved.
Do you use artificial intelligence for any part of SPS?
