Nine Converging Forces in Financial Advice

Welcome to Barron's Advisor, The Way Forward. I'm Ray Scalfani, CEO of ClientWise, the exclusive coaching partner to Barron's Advisor, and today I'll be your host. You know, every so often you sit across from someone and you just think, wow, this person really sees what's coming before the rest of us do. And today's guest is bringing us that kind of insight. Rob Nelson is the CEO and founder of NorthRock Partners, a firm he has built over the past 3 decades into one of the most innovative wealth management enterprises in the country. Over $12 billion in assets under management, a personal office model that other firms are just beginning to dream about. In today's conversation, Rob's gonna walk us through 9 forces he believes are converging on our industry right now, simultaneously, from AI to the convenience revolution to a generational shift unlike anything we've seen before. The advisors who don't see them coming, well, they'll be left behind. And the question isn't whether those forces are coming, they're already here. The question is, are you ready? But here's what I also wanna say before we start. Rob has challenged my own thinking about the future of advice and made me better every time we've talked. He's a thought leader in the truest sense, not just someone with good ideas, but someone who genuinely moves the conversation forward and executes. So I'm putting that on the record now before he has a chance to return the compliment. Rob, welcome to The Way Forward.

Thanks, Ray. Uh, very excited to be here. How lucky are we? I will return the compliment, uh, a little bit. I just— Ray, I think you and I were talking about, we've known each other for at least 20 years, and every time I feel like you and I have gotten together, we always pick it right back up, and you've made me better every single time. Thank you.

You're welcome. I love it. Let's get right into it. Uh, most advisors who've built the business like you for over 30 years have kind of a traditional practice. You built something fundamentally different. Take us back to the beginning. What did you see when you founded NorthRock that other people weren't seeing just yet?

You know, Ray, I think as I look back, as you know, I started in the early '90s, came into the business in '92, officially started my business in '93 in practice. And at that time, a lot of the components of deep financial advice were just starting to take shape. And so, As I think about the business and how it's shaped for me, there's a little bit of luck of timing. And part of it is also maybe how I see the world. I go back to the beginning in the quick version. I started with a company called IDS Financial Services.

The old IDS.

The old IDS, which became American Express Financial Advisors, which became Ameriprise. And the luck component is probably twofold. One, their business model at that point in time was you started as an independent contractor. Now, I don't know if I would have necessarily signed up for that if I would have known what that actually meant. But I, again, now as you think about being a business owner from the beginning, from age 22, 23, how lucky. And the second component was at that time the company had made a decision strategically that if the, for new advisors that were affiliating with them, the only way that you could work with a client is deep comprehensive financial planning for a fee. And that's the early '90s. So that wasn't really prevalent at that point in time. And so coming into that, so as I'm building a business, I didn't have a network. I didn't know anybody. You've heard this story thousands of times. I built it one client at a time, old school, going down the phone book, generating my own leads, buying leads, doing events, whatever I could do to get in front of other people. But as I started working with new clients and started to bring people in to have that conversation about financial planning, As you might expect, anybody that became a client, it's like, what can I do for you? How can I have an impact on your life? Do you want me to take out the garbage? Do you want me to shovel the driveway? I'm here. I'll do it all. I'll do it all. And I was all about it and they could see it probably in my eyes. But as that first year and that second year and third year continued to roll out, I started working with a large number of corporate employees. Some of them were up-and-coming corporate leaders. And as I started to work with those up-and-coming leaders, there was common signals. There was common asks that came through in those conversations. I would provide advice to that we need to get an estate plan in order and they wouldn't do it. We would talk about the need for updating their life insurance. They wouldn't follow through. We talked about making a change in their 401(k) and 3 meetings later, it still wasn't being done. And you could tell that time was an issue. Execution was an issue. And I just naturally, I just leaned into that. So as we started working with, clients back then, it just seemed natural to, if we could start doing their taxes, let's do it. So we've been doing tax for over 25 years. We've been playing a role in paying the bills and hands-on with their employer benefits and taking the estate plan from A to Z and really being their execution partner. And that was really the impetus that, that's actually what brought the business model to life of just leaning in, earning the right to be at the center, forming these lifelong relationships. I'm relationship-oriented and minded. In working with clients. And that's ultimately what started the business model.

Fast forward, holy smokes, tax returns back 30 years ago, doing financial planning for a fee. Today, I understand you call it, is it the personal office model?

Yeah.

So walk us through it because when you describe how deeply NorthRock integrates into a client's financial life, it sounds almost like a different profession than what most advisors are even practicing today.

Yeah, we trademarked the personal office a number of years back because that's really what it was becoming. You know, obviously family office experience is what we about, but we really wanted to build a personal office around our clients. And so, you know, the quick version on that too is if you're working with us as a client and you are an up-and-coming, it could be in any walk of life, but if you were an up-and-coming corporate leader or you're a director or you just got the promotion to become a vice president and we're working together, what it would look like is you'd be directly depositing your paychecks with us. We'd provide you a regular stream of income on a monthly basis, which is, There's 100 reasons why that provides benefits. Clients save more, it's more disciplined, you have a better sense of cash flow, it's easier to plan, and so on. We turned that into full-scale bill payment over time for those clients that needed that kind of care. All lines of insurance, life insurance, disability, long-term care, property, casualty. We do all of that in-house. Wow, all of that. All of it, everything. Taxes, like I said, we've been doing taxes, and it's not just doing your taxes. We're going to do, we're going to handle your tax payments. We're going to tax planning through the course of the year. My investment team, if they were going to place a trade that was going to generate capital gains, they would never do that trade without talking to the tax team of understanding where we're at from a tax return through the middle, middle, mid part of the year. We have in-house estate planning. We'll run the estate plan from A to Z, total balance sheet management forever. I mean, we've been doing that. So when a client logs into our website, they see all assets as of last night's close or last valuation date, no matter where they're held. We trade in the 401(k). So if they have direct private investments, all of that reporting flows through our office. We have a charitable platform called Foundation X. If a client is charitable inclined, we're running all of their charitable giving. And that's just, we don't even think different. That's just the way our business model is. When a client hires us, they're hiring us to be their total advisor. Our goal is to earn the right to be at the center, even to the point where when they're gonna make a big change or a big life moment, we wanna earn the right to be at the table with the family.

Okay, so that personal office model is clearly unique, and I think many advisors today are calling themselves family offices or they're moving that direction. I know you serve ultra-high-net-worth clients as well, Fortune 500 executives, professional athletes, you mentioned entrepreneurs, even multi-generational families. What do those clients expect today that simply they didn't expect 15 years ago?

Time. 10, 15 years ago, a client would come to us, pay a fee, and look for rate of return. Now a client comes to us, pays a fee, and they're looking for time. They'll say that consciously or unconsciously, where they just want more time back and peace of mind. They're just— they, they've got a lot going on, and they will be seeking a peace of mind in a relationship. Decision support beyond finance is becoming a very big part, where they're thinking about making a career change, or they're thinking about making a move with the family or they have a problem at home and they want to bounce it off somebody. And probably one of the biggest things that comes to mind is they don't want to be alone at the center anymore. I mean, you think about what our industry from a financial services perspective does as we work with clients. Even if you're in your late 30s and you have, you've got a young family, think about all the relationships you have related to managing your finances. You might have a banking relationship. You might have an organization helping you with your taxes. Somebody has helped you implement life insurance. You have a different company help you with your property casualty. You bought a home and you worked with a realtor. Then you actually worked with a different company to do your mortgage.

I'm getting anxious just talking about it.

Exactly. You're fragmented. And they work with somebody for their estate planning. They work with somebody else to help them on their 401(k) and their employer benefits. And you're just, you're up and coming. I mean, you're just building wealth. That's overwhelming. And when you call that out loud, if we're sitting down with a prospective client for the first time and we talk about, those relationships around them, a lot of times they say, "That's me, and I don't want to be that, just be me." And a lot of times we talk about earning the right to be at the center with them, helping to manage it. And 9 out of 10 times, it's that, that's what we're looking for. They don't want to be alone at the center, and that's really what continues to foster our business model.

Okay, brilliant. That's terrific. Thanks so much. Rob, I want to shift gears just a moment and talk a little bit, I know, about this change moment. I know you've been thinking deeply about the larger transformation happening in our industry right now, and I want to hear kind of your unfiltered take. What's really happening in financial services from your perspective as CEO of a large multibillion-dollar wealth advisory business? What are you thinking about?

You know, you and I talked about this a number of times, Ray, and I don't— we're at the Barron's Conference, which is amazing. I'm happy to be here, and you're talking to a lot of different professionals and We all have different points of view, different points of view on the world, but I still don't think we're having the right conversation around the depth of change that's coming our way. And I think about it in, in two big shifts that are happening. Let's talk about it at a really high level that's happening at the same time. The two shifts that I would say at a high level that are happening is we've got a technology shift and then you've got a consumer, a consumer shift, what the, what the client is looking for. And those are converging at the same time. You think about technology, but I don't think we often take the technology shift and you just add it all up. What are the technology shifts that are happening? Obviously, it's the advancement of AI, which is about to go agentic, which is actually mean that's actually going to help you do work. And that's a shift by itself. But in addition to that, we have related to AI, AI is about to have long-term memory, meaning that maybe by the end of this year, sometime next year, It never forgets. It's also, it's affordable, it's low cost. Anybody on the planet can have access to AI, which makes it incredibly accessible for everyone. Then in addition to that, voice technology is hitting the marketplace where you can't, it's not like there's no longer a computer sound. You actually have the ability to—

Sounds like a human being.

It sounds like, exactly like a human being. And then to double down on that, you have avatar technology where you have the ability to, I think we're right now at that spot where you can design an avatar that you can't decipher between it being computer-generated.

Just to make sure I am talking to the real Rob Lewis.

You are talking to the real version of me. I did think about sending my avatar, but we're not, we're not quite ready. Not there yet.

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And then you can start to see what's on deck. Robotics, wearables. People will tune out wearables. That doesn't mean anything to— it's going to mean something to us as financial advisors when a client is wearing glasses like I am and they're in your meeting and you don't know if they're recording you or not.

Or they're getting a feed of all kinds of information about you so they can interact with you and ask the right questions at the right time.

Absolutely. And then you can start to see what's happening is we have execution technology in our space and wealth management is starting to hit the market. Wealth.com, the ability to not only analyze a client's estate plan, they'll actually read, they'll generate the documents on behalf of it. Next is tax preparation, not just getting holistic plan and doing the tax analysis, Soon we're gonna have tax preparation. So all of the execution technology is about to go online. And so our sector is gonna be low-hanging. It's gonna be, our sector, financial services, you think about all these technologies that kick in, it's gonna be low-hanging. And then you have the consumer. Think about what's happening right now at this point in time in our lives. You have a consumer that's digitally fluent. They're digitally aware. They've grown up with it, especially Gen X and millennials. And they're seeking a different experience. They don't want the same experience as their, as their parents. You can see that in a lot of the platforms like a Robinhood. It doesn't look like the platforms that we grew up with. Time is becoming the ultimate client deliverable, even for the 20-somethings. They, they, you can work with clients that are starting in their 20s and they're talking about that this is not where I want to spend my time. They think intentionally about their time, hyper-personalization. Hyper-personalization is becoming baseline where for all of us as consumers, I want you to know me, I want you to customize it for me, and I want an experience related to it. And then the demand for advice is going beyond financial advice. And so all of those forces are coming together at this time. And so what does that mean? What it means is, what it means is, is 2, 3, 4, for sure within the next 5 years, but in the next 2 to 5 years is that the consumer has the ability to go online and design their financial advisor, what they look like, how they talk, how they interact, what they remember. Um, they have the ability to choose what that interaction looks like. They decide what information to share, but because it's technology, they'll give access to their entire everything that's in their phone. And in everybody's phone right now, it's everything.

All the information they need.

All of your emails, all of your texts, people carry their diary in there now. I mean, the ability to have access to information that neither you or I have when we talk about to the consumer, the power of never forgetting, never forget, the ability to work with you as well as it's the most knowledgeable financial advisor on the planet as of last night's close. It's also happened to read every book on human psychology. So when you're talking, it's literally listening to every word and it knows what you really mean, maybe even sometimes better than what you do. As you think about it, it follows through on every promise. And it's not just advice, it's doing, it's executing. So it's there, it's providing you, it's providing the advice and then it's doing your taxes. It's implementing the insurance, it's making the trades on your behalf. And it's gonna feel relational. It's gonna, there's a common thing that you hear on stage often right now is we'll never replace human empathy. And that could be true, but AI is going to be able to simulate human empathy at its best. And so there's so much more, but this change is going to be profound. And I don't think as advisors that we understand that this is what's coming our way.

[Speaker:MICHAEL_LEWIS] So as you're describing this, I'm thinking about 3 types of advisors. There's the futurists, that are right there with you and the tracking. I'm thinking about those that maybe have their head in the sand, like, hey man, it's not going to happen like that. And there are some that are trying to figuring it out, kind of in the middle, like, oh, I get it. I can't see the future, Rob, the way you painted it, but what you're saying makes a lot of sense. What I'm wondering is, how do you see this different in kind of a way that's different from previous inflection points? I'm thinking Y2K, I'm thinking the robos, they were supposed to take over the world, the internet or the 2008 crisis. What degree of difference is this going to be in your mind moving forward, both in terms of the consumer piece you talked about, but also the technology side of things?

I think the big inflection point is not only how fast the technology is working, but how the biggest change moment is going to be how relational and how human it feels. The ability When you put a— I mean, I think right now we're at a part, we're at a point in our business where more than half of advisor-client meetings are in Zoom. So the ability for a client to have an incredibly Zoom-like experience that feels relational, that knows you, that will actually know your values and respond and interact with you that's going to connect with people in a different way than any technology is. Actually, I was home last weekend, in my hometown last weekend, and I set my mom up with ChatGPT, and she's not good on technology. And, but why was it easy for her? I just gave her the voice button. She hasn't hit one button.

And she's talking to it.

She already named it. So she has Rosie, and she was talking with it, bantering with it. Told it to slow down, was asking it questions that she would normally ask for me. That was just day 1. So the ability to like, that's, that's, that's different. That's different. Yeah, it's different this time. And I think there's a lot more of that to come.

You framed a very specific timeline. I've heard you say 2026 is the recognition year, 2027 is the activation year, and 2028 as the transformation year. We're sitting in 2026 right now. How are we doing as an industry? How are we recognizing what's coming, or are we still hitting the snooze button?

Well, first, I think we need to recognize that all predictions that any of us are going to make are going to be wrong. It's too complicated. It's the formula that AI, it's the problem that AI can't solve. What does this look like 3, 4, 5 years from now? And we just need to recognize that. Why a year ago we started to look at kind of doing time-based of what this would look like was just trying to get our head around what's coming in waves. And in 2026, the reason that we thought about it being a recognition year was that it's a little bit what we're going on right now. The conversations were not as prevalent a year ago at these conferences. It was more of talking about it being an operations platform than anything else. And there was a, it was knowing that at this, there is gonna be, in my mind is middle of this year, end of this year, you start to get this clear recognition from individuals and companies that we have something that's of a major, that's gonna be profound and a major magnitude that's gonna have an impact on the planet. And as they recognize that, especially in the second half of this year, let's talk about it, our industry, is that is going to create a sense of urgency where you'll start to see activation in 2027. If you look at what's happening right now in most financial planning practices in our industry, there is some activation, a Jump AI or using a— Vanilla Copilot. Yeah, Vanilla Copilot, or there's some ChatGPT, but it's not dramatically. I think there's a lot right now within our industry where there's a feeling like this is gonna be mostly the same with some tools surrounding it, but the essence of the model is gonna be human-based. With making things a little bit better. But with that recognition professionally and personally that we're about to go through a moment, us as an industry, we start to activate with a sense of urgency and that recognition as we turn that into execution and the tools start to work. I mean, the tools are already working. I mean, ChatGPT is probably at a point in time where the answers I'm getting back are better. The hallucinations are insane. Exactly. I get a lot of hallucinations from my staff. So it's like, we're not perfect either, but it's pretty accurate. I mean, so, and what's that gonna look like a year from now? So as we start to turn that into activation and we're using it on a wide-scale basis, you get to 2028 and we all recognize that we are maybe in the most transformative time ever. And it's a little bit like you experienced in 2020, And then in our COVID moment where you realize you were going through something that was once in a lifetime, but as humans, we got our head around it.

And we were forever changed.

We were forever changed. But all of a sudden you're 6 months later and you're kind of used to doing meetings in Zoom and you're kind of used to wearing a mask or whatever that ended up being. And I think you end up where you're just in constant transformation and a constant change moment. And that's just our new reality. And so those are the stages that we think about.

You know, I've said for years, decades even, financial advisors are among the most resilient and adaptive. And I'm excited when I walk through the hallways here at the Barron's Top Independent Advisor Summit. The conversations are real and the best in the business are leaning into this, curious about what transformation looks like beyond just the operational impact and success in serving clients more effectively, but what is really happening transformatively in our industry. Speaking of that, you put together an interesting framework when we were preparing for this conversation. There were these 9 forces that you believe are converging on our industry simultaneously and right now. So I've looked at it carefully and I, I want to go through these with you, but if you could maybe give us a little bit of an overview of those 9, because I think this is one of the most useful maps, uh, blueprints, roadmaps, if you will, that any advisor could have going into the next 3 years And I'm just curious if you could just maybe take a couple of minutes and walk us through how you and your board, your leadership team are thinking about this 9-box framework, so to speak.

Yeah, believe me, when I put together this outline of the 9 Forces, it was for internal purposes only. I didn't think I was ever gonna have a conversation where I was on a podcast talking about it. But this stemmed from a little over a year ago where I'm going through meetings every day, all day, and it was, it was incredible the number of changes that I could see that are coming across our industry. And I wanted to have a better conversation with my leadership team. I wanted to have a better conversation with our employee base on what's starting to take shape in our industry. And, you know, Ray, you're one of the best thought leaders in our industry. Your version might have 14, but I, for me, it was like, what are the top things right now that we're feeling like we're tackling right now that are undeniable in our industry. The ones that I would probably, I'll just quickly comment on are industry consolidation. I think we all recognize that and know that. Industry consolidation, if you listen to the next 8 that I'm about to talk about, I think you'll recognize why I think industry consolidation is gonna be here to stay for the next 2, 3, 4, 5 years and who knows beyond that because of the scale that's gonna be necessary for excellence. To get to where you need to be able to deliver on what's happening from a change moment, You're going to need scale and industry consolidation. Second is what we just talked about at the beginning, which is AI taking center stage. AI a year ago, from my point of view, was not center stage. AI is now taking center stage and that's exciting. And we can talk more about that as well. The third is consumers going digital. Right now, it's undeniable that consumers are looking for a more digital presence. Some of them want more than, than others. But you're going to have to be able to have that accessible and available in a digital experience that feels like the client. Fourth is private markets acceleration. We, we know that it's changing how we think about asset allocation. And this isn't just us changing our asset allocation models. The number of private market opportunities that are coming in generated from our clients is unbelievable. And so there's going to need for us to change how we think about asset management, especially when you look at the volume of the number of private companies, the expansion of the client value proposition. I think that's undeniable now. And it's not gonna stop where it's at. The clients are looking to their financial advisors for more. And as we talked about, it's beyond financial advice, but they're demanding it on what they're looking for. Digital assets are gaining legitimacy. It's the sixth. And I just, I went to one of the sessions on the tokenization of securities. And I, 3, 4, 5 years from now, you're gonna almost every security is gonna be, there's a strong chance that you're gonna, it's gonna be tokenized. And I think as an industry, we're still kind of a little bit in limbo land. Is Bitcoin going to be here or not? We're going—

Regulations.

Totally. The regulatory framework isn't there. And so a lot of us are not knowing where this fits into our model.

But blockchain is real.

Totally.

Tokenization is real. Digital assets are real.

It's not going away.

Yeah, this is not a Bitcoin conversation. This is a digital assets conversation.

We're going to be settling to digital and beyond. And so just us getting a plan around that. The seventh is massive industry technology expansion. If you think about the KITSIS map, where it is different this time is yes, you have over 500—

Do you actually read the KITSIS map, by the way? No. When I look at that map, I mean, you gotta get like a magnifying glass now.

I always listen to his podcast and I read some of his articles to actually get a sense of it. And I do get lost a little bit. But the interesting thing about the technology is yeah, I do believe there are over 500 technology companies providing services to us. What's different this time is that a lot of it works. Like, that's the good news and the bad news.

And they integrate.

They totally, they totally. So you have technology that is coming to the marketplace that can make us better, and that's awesome. Eighth is the generational shift. It's that incredible generational shift that the next generation of consumers is looking for something different, and we're going to need to meet them at a younger age. And then the last and the ninth is the convenience revolution and what's happening, whether we like it or not, but we're all participating in it. The Amazons, the Ubers, the DoorDashes of the world are resetting consumer expectations, not just on how they consume products and services, but how they consume financial advice and the services that we provide. And so those are, and these are, I don't think any of these are deniable. And for us, it's like, what's our game plan on each of these structures is something that I think about and happy to jump in any of them.

Well, that's real leadership. When you're thinking as a CEO about guiding a multibillion-dollar firm and thinking about scale, having a roadmap or a framework is very powerful. And I'm sure those listening now are taking a look at their own strategy doc and asking, okay, do we have a piece of this and a strategy to maybe overcome or take advantage and capitalize on some what's coming at us? I want to just dig in a few of these forces, maybe just really narrow and deep for a moment. And I want to just jump back to the top on industry consolidation because you said something I thought that got my attention. That is this bit about scale and what it's going to take to create an excellent client experience. I think we've got to remind ourselves that the client is at the center of the whole conversation. And without the client, we don't have really any businesses whatsoever. So paying attention first and foremost to what is trending for the client is key. And we'll get into that maybe next. But I'm curious on this RIA consolidation specifically. The wave has been relentless. And it's interesting, you know, those that are in the business doing banking or, you know, some of the M&A, they'll tell you we're in the second or third inning. You hear some others that say, hey, this thing is way overblown. The multiples are way too high. But you've seen as both a consolidator and someone who's taken on a capital partner yourself, at what point does consolidation stop being a growth strategy and start becoming a threat to the very thing that made these firms worth acquiring in the first place?

Oof. Wow. I think about the consolidation is happening far faster, the pricing and multiples, it's hard to get your head around. As I mentioned, I can see it as a necessary path for scale. And that's where I get stuck on a little bit, Ray, is it's hard for me to see for those companies that are, I'll give you the example. The reason I, and I mentioned this to my employee base all the time, the reason I get excited, you know, we had an amazing growth year last year and every billion of assets that we add and how that adds, it adds onto the scale and it adds onto our path for excellence. The kind of the fun thing within our business is our whole leadership team is completely aligned on a path for excellence. But the only way I can get there, I can't think of another way to do it, is to gain the scale what my tax team looks like when my tax team goes from 20 people to 50 people. When our investment capabilities now, AI can have an impact on that and it can maybe have it where you can gain scale without having the people.

Yeah, digital workforce or something.

Exactly. And so that's the where, so I can look out 1, 2, 3, 4 years from now. What you're talking about is when you get to what's the impact on our industry long-term, where it starts to have potentially not the impact that we want, but also you can see all of these new advisors that are coming in. The number of new advisors our industry continues to add, you can see that consolidation will continue to kind of have the next run of advisors happening. And so you can see consolidation continuing to even happen 4, 5, and 6 years from now. I do think it's gonna change. I do think it's gonna morph, but I do think it's here to stay.

Just to pull a thread on that for a second about these new advisors coming into the profession, McKinsey talks about some 110,000 advisors shortfall coming in the future. Are we onboarding enough new advisors from your perspective? Managing this AI, you know, where— what part of the consolidation is going to drive scale and what do they need scale for in terms of delivering quality experience? If we've got AI coming into this thing and we're talking about maybe cutting a third of the workforce depending upon some estimates, I think you got to be nimble.

I think you got to— if the technology— if the technology didn't change much, which is going to— but if the technology didn't change much, you're still going to need to add advisors to be able to keep up with the volume of consumer demand. Consumer demand is going to continue to grow for advice. And even the younger generation is still looking for a relationship-based component. I think our industry is a very mixed bag of how we're bringing new people into this industry. And so there's no consistent way. I mean, if you think about that, that young professionals that are coming in, there's growing education, but it's not consistent. Every one of us has a different model of how we train the next generation of advisors. So I think it, I do hear large firms talking more and more about providing education to the next generation, which is incredibly encouraging. But does the math add up 2 and 3 and 4 years from now? Actually, I believe it does. I think you've got enough of bringing the next generation along and then AI and agentic technology where the consumer is looking and wants a combination of digital advice and human financial advice that helps part of the curve as we move forward.

Okay, got it. Let's combine a couple of forces here. I'm going to Take Force 3 that you describe, the consumer going digital and the expansion of the value proposition. There may be a little bit of an intersection on a couple of these. Um, the digital consumer doesn't want just convenience. They want to feel known. And most digital experiences in wealth management feel transactional and cold. So I'm wondering who solves the paradox of deep personalization at a digital scale first? What does that firm look like? And how does that connect to the value proposition that'll be delivered in the future?

I'll connect 2 or 3 components to this, which I think is— I don't know if it's a trend. I think we're all going through it, whether we recognize it or not, but we are all becoming digital hybrids.

What does that mean?

And what I mean by that is our industry is going to integrate digital experiences, and we are going to be over the next 2, 3, 4, 5 years, bringing forward to our clients the best of human and the best of digital. And you're going to need to combine it. You're going to have two neighbors that work at IBM, that live next to each other, and one wants 90% human, 10% digital, and the other wants 90% digital and 10% human. And you're going to need to meet them where they're at. And the opportunity with hyper-personalization, especially with the access to information and data we have about our clients, That's here. We can build that type of tailored type of systems and approach and ultimately create a digital experience. And then I'll tie it back to what I mentioned at the beginning. I know it's not a common thought or a common belief, but I do believe this technology is going to feel incredibly relational. And that is where this is going to be different, where you will feel a sense of empathy. You are going to feel seen. I think you're going to feel seen by the technology. and that'll have an impact on how the consumer takes this as well.

Well, we can look to other industries. I mean, you see how Gemini was built and Character AI, you see the secondlife.com. There are crazy interactive digital experiences where empathy and this human feel about it seems to be agentic and alive.

Unbelievable. It's like, I, you know, the, I think I gave you this example before and I'll just do it. I'll give you the quick example of, because this is what's coming next. I think a lot of things that we're doing right now, the healthcare industry has started to implement a little bit sooner than, than us. But I was at my executive physical a year ago, and yeah, this is February of 2025. I go to meet with my doctor. Um, they said it's an executive physical at the Mayo. We do 2 days. And, um, I go in, I get my labs right away, go meet with the doctor, and he's going to set up my schedule for the next 2 days. I get together with him, he says, hey, are you okay if I record this meeting, we were using AI. So no problem. Puts the device in the middle. We have a great conversation. He's asking me all kinds of questions about my health. And my labs are starting to come in. He's setting up my schedule. We get done with the meeting. And he says, all right, you want to see your transcript of our meeting? And I said, great. He turns the computer around. And it was logging— all of our conversation was there. But what was happening is my labs were coming in. And it was giving him advice.

Real time.

Real time of what he should be scheduling for me and what questions he should be asking of me during that time. That is our business in the future. You are going to be in a meeting and AI is going to be there right next to you.

As a co-pilot.

As a co-pilot, giving you suggestions, and the advice you're gonna be delivering will be better and the experience will be better. It's just gonna take an adjustment.

I was speaking with a group of professionals at the Barron's Women's Conference, and there was an executive who was a senior professional at Morgan Stanley who works heading up financial planning group for Morgan Stanley, and she indicated to the audience out loud, be prepared if your client walks into a meeting, a husband and a wife, a couple comes in, there's a third person in the room, and that's the ChatGPT.

Yeah.

Like if you approach that in a negative way and are defensive about that, well, look out, the client's probably not gonna be very empathetic to that. And understanding, but be prepared to actually accept that in the meeting too, just like you were with your doctor.

Absolutely.

So it was a different sort of way of thinking about it. Okay, so NorthRock, you guys have been doing this expanded value proposition. You talked about the personal office model for a while. We're talking about digital, but, you know, it's interesting as I look around, so many of these RIAs in the US are expanding services, tax, legal, insurance, bill pay, estate planning, philanthropic conversations, family governance, family education, all under one roof. So what I'm wondering is, now that the rest of the industry is trying to catch up and you've been ahead for a while, what do you know after 3 decades of building it that firms are just now starting to do this? What does their journey look like? What are they gonna get wrong that you've learned along the way that you've adjusted in building out this integrated, holistic, single source solution, so to speak?

Yeah, I think what firms, 'cause you do, I talked to even, we have an advisor that's joining us right now. He's a really good advisor, but he was saying, "Hey Rob, before I was joining you, I was about to start building a tax business." Well, that sounds great. And I understand where that fits in, but you, what's—

It's not for everybody.

No.

And what is the tax business?

Exactly. What would he, he was probably gonna go hire a tax professional. It's not scalable right away. You gotta gain scale. There's no specialization. It's not gonna be efficient. And you gotta have systems and process built in. And so those are gonna be some of the, that needs to be in play. And I think that's what a lot of our industry is not recognizing is that to have integrated, deep integrated advice, there is some complexity that goes with it. It's wonderful. When it's orchestrated well, it's beautiful, but it's like at the same time, there's, you do need to have a forward thinking of how you're gonna bring that all together to make all components of the business because the investment business does need to make the tax side of the business better and vice versa. Same thing is that by having those all, it should make your insurance advice better, should make your estate planning advice. Got it. So that all, when we brought it all together, it wasn't because we love to hire people. The integration of having it all, the advice does improve when done well, but it's not easy.

Got it, perfect. Hey, a quick shout out. We were talking about digital assets, which is that sixth force you mentioned. I want to shout out for Rick Edelman, uh, who's done just an amazing job leading the industry in education around digital assets. And for those listening right now, if you haven't checked out dacfp.com, Digital Assets CFP, that is a terrific platform for learning and education. And, uh, Rick is a big thank you to Rick for the work he's done there.

I just wrote that down for myself to sign up for that. I, I, I, Rick's been just such an amazing thought leader in this space. It's great.

Hey, before we move on from the shifts, so to speak, in these 9 forces you're talking about, I do wanna drill in just on this generational shift for a moment. The next generation of clients that are inheriting wealth grew up in Amazon, Uber, Robinhood. There's a bridge here. The Cerulli projects $124 trillion transferring by 2048. It's underway. Most advisors admit they're opening up larger accounts than they've ever opened up before. And this is up from $84 trillion, uh, as a figure cited just a few years ago. The share of millennials and Gen Z clients at high-net-worth-focused firms grew from just 8% in 2021 to 25% in 2024. This isn't coming, it's here. And what I'm wondering is, how does a relationship-first firm like NorthRock earn the trust with a generation that was never taught to trust institutions?

This is gonna be, this is gonna be a big change moment for our industry because I think what a lot of advisory firms are gonna recognize, like we did over the last 24 months, might've been a blind spot, is we are going to need to go meet these consumers in their 20s. Yeah, you're not gonna be able to wait until they're in their 40s or 50s 'cause they're not gonna be there anymore. I was at Tiburon and Chip made a comment. He said, "Robinhood, yeah, that's right. Robinhood isn't stealing any of your clients. They're stealing your future clients." And—

That's a powerful line.

It is. And it's true. It's true right now. I'm on the Schwab Advisory Board and the CEO, Rick, I believe he told me that a third of their new retail clients are Gen Z, under the age of 28. These consumers are saving at a younger age. They're thinking about this at a younger age. And if you take into a combination of the things that I've already mentioned of what's happening, this convergence, I test out a lot of platforms. Robinhood's one of them. A month ago, I logged into Robinhood. It asked me if I wanted to consider doing my taxes through their services.

No kidding.

Oh yeah, and also asked if I wanted—

That's a change.

And estate planning.

Wow.

And wanted to know if I wanted to meet with a financial advisor or if I wanted to use their digital AI advisor. And so we're in the early, early days. So you have Robinhood lean in with that and start to have that kind of that avatar experience of advice, start working with a consumer when they're 23 years old, not only is giving them advice on their account at Robinhood, but giving them now on tax, estate planning, helping them get prepared for an event that they're doing at work or helping them with their employer benefits. And then in their, in their 40s, and they're going to come into wealth, that they're going to give that up to go to a human advisor who may or may not call them back, uh, or who is definitely not going to be available on a weekend and not going to have that type of accessibility that they've grown up with. We're going to need to meet the consumer at a younger age. Otherwise, they're just not going to be accessible for us. And so we've always had the next generation of clients, but it's actually going on beyond that is, is going to be important for us. And And we embrace it. Right now, that consumer, yes, they're very comfortable digitally, but in the— they also, many of them are looking for a relationship-based component. I would say they're on the front end of wanting both right now. They want a relationship-based component when it's the big decisions, and they also want a digital experience. And I think that's going to be the shift for our industry is actually leaning into that. I think many people thought that we weren't going to, that we're just going to kind of let them figure it out at Robinhood or figure it out at Charles Schwab. And right now, I think that's the shift that happens over this next year.

OK, so what you're describing is a great deal of change management for an entire industry. CEOs leading change management inside their firms can find it a bit tricky at times. In fact, for some listening, this might be unbelievably scary. Not to confuse our listeners with the 9 forces you just outlined, I'd like you to describe this execution, this 9-step internal change management process that you're leading at NorthRock. It could be an interesting guide, I think, for those thinking about what it's gonna take to do this kind of level of transformation inside their firm?

Yeah, first, I mean, the 9 steps that we established was just, is a way to get our head around of how do you take action. 2 months from now, this could be 20 steps. I mean, we just, we have to be nimble.

You gotta start somewhere.

You gotta start somewhere. And where this came from was, what is it, about a year ago, a year and a half ago, I'm getting ready to go sit down with my entire leadership team and I wanna talk with them about what I think the world's gonna look like a year from now, which is a lot. I mean, we've talked about a lot here so far. So that's a lot. There's a lot of change coming, it's undeniable.

And it's happening as we speak.

Yeah, and it can be overwhelming. So what do you do? And what I wanted to do is like, what are the simple steps that we need to do that keep us safe, and that we know that we're heading in the right direction. And especially a year ago, the industry still didn't feel like you were on sure footing or on clear ground. And so for us, the steps that we started to follow was one, let's talk about it more around the AI revolution, which was center stage at that time, is one, we created awareness. A year ago, beginning of last year, I was in the hallways talking with employees about the impact of AI and how it was gonna look going for us in the future. And I was getting deer in headlights looks. It just, some of them looked at me like I was an alien. And I just, I could tell that we were all experiencing this different. And so what we wanted to do and what we started doing was like, okay, we gotta have a, we gotta start talking more about how this fits into our firm vision, what could be the experiences that AI can enhance and improve, talk about specific examples of impact. And so we started creating a higher level of awareness. The second step was, this is probably the most important, is I needed, I needed a leadership alignment because the rest of us doesn't work. If you don't have your leaders aligned, you're not gonna be able to implement. And so I need to get the leaders around the table and we needed to talk about it and we needed to agree upon what we were going to do. And from our standpoint, we, after a deep thorough conversation about the impacts and what this could look like, we decided that AI was gonna be center to our business model, that we are going to leverage AI to seek opportunities to improve upon almost everything that we're doing. And that's kind of the exciting thing is that it— look, you can see that the basics of what we do, advice, experience, this should be able to improve everything on behalf of the consumer. So we're going to be a top decile firm of leveraging AI. And we got full buy-in from, from the leadership group. From there, because without that, the rest becomes— it feels disruptive. So from there, it allowed us to start doing foundational training. So we've now, we've got the leadership on board, we've created awareness, we're bringing foundational training, 101, 102 type of training to all of our employees to get them in a bigger and better way, starting to actually come up with a higher level of fluency to start bringing ideas to life. And then step 4 was, and this happened because with just the training, we weren't getting the uptake that we wanted. And I bet, Ray, you'd give me some different advice on how I handle it, but I I need to create urgency. And I also felt for my employees who are my partners, I just felt like, 'cause I see all of us being on a long-term journey together, I don't want anybody to be left behind. I just feel like I didn't need to, I couldn't sugarcoat it. And it's like, if AI isn't the center of your professional life in December, you're in trouble. Like, you're going to have problems. And I just wanted to be that clear so everybody could see it coming and—

On the bus. Or off the bus.

I just, I felt like I owed it to him.

It's pretty direct.

I felt like I owed it to him. And I just, it was important. From there, and what we're in right now is on kind of step 5 and step 6, which is building a technology roadmap and deciding how we're gonna follow it. And so for technology roadmap, when I talk about that, which can sound overwhelming, especially when you look at all the technology that's coming our way.

It's hard to build a technology roadmap when things are changing so fast.

Oh my gosh. So kind of in the same spirit, when, if you were to build a technology roadmap right now at whatever size of practice you have, what is the basic that is actually right now undeniable given the world that we're in? Your data needs to be in order. So like, let's start foundationally. I, and good news is we have all the data. Uh, the challenge is it wasn't in the order to be able to utilize the technology that we could see that is coming. So we know that we are, so I'm actually still, I'm still going in the middle of it right now. Where over these next number of weeks, we're building the technology roadmap of what our December selves looks like. And so getting our data in organized, the one thing that's for us strategically that we're deciding, and it looks like we're going to decide to do, is that we're also gonna identify who our core partners are on this journey over the next 12 months. For us and for me, it's hard to think about getting a dance partner or a partner in the technology front, that's for the next 3 and 5 years, 'cause you don't know what it looks like 3 and 5 years from now. You don't know who are the main players 3 and 5 years from now, but you can look out over the next 12 months and think, okay, who are the companies that are heavily aggressively investing into AI? Who are those that are stable? Who are those that my employees are already familiar with? And that allowed us some place like, okay, I know that us leaning in with ChatGPT, a Claude, a Jump AI, a Copilot, a Salesforce, those were all safe bets. For us to be able to use existing platforms that my employees are comfortable with and start to implement it. So the technology roadmap and then being a fast follower is the step 6 connected to that. That was a big one for us because we did, and I do have the ability to, I mean, right now we're in a world where you can design your own software if you want, you can design your app, you can do those types of things. And I do have a handful of relationships with fintech founders and leaders that we could have done some development and it just didn't. We decided not to do that and just be, have a kind of do a fast follower model where as the technology becomes stable, we're going to jump in. And then quickly, just, you can know what's going to happen is you provide education, you've got the right platform in place. What happens next? It should happen is ideation. Now I have all of my employees engaged. You have this abundance of ideas that should be coming from our employees. You have a number of new technologies. How do you handle that intake? How do you handle that volume and not drive everybody crazy?

Well, if you're also giving everybody an opportunity and a sort of a low-cost access to, they should be developing new skills and coming up with new ideas and new ways to be thinking about the client and ways to impact the client.

It would. And then so you have an employee that comes up with an idea, the idea that could save everybody 5 or 10 minutes a day. What a waste if you don't bring it to life. If they don't even know what to do with it, right? So, or there's a really new technology, good, good new software solution that's out there that would work, and you don't have the ability to even go to do due diligence on it is something. So idea management was part of it. Then change management on step 8, which is you just, you're going to have to be able to pace this. You're going to have to sequence it. You just, you can't put all of this to all of your employees at the same time. And then that's really step 9 is being incredibly intentional about the client and the employee experience, but in this case, the employee experience of making sure that we're not overload, we're not burning anybody out because if you have 7 solutions happening in the same month and you don't know it, we just need to understand how are employees going through this? And those steps were kind of all foundational that, ah, yeah, that makes sense, and we're moving forward with.

Okay, so I have to ask about this fast follower piece. Because we've been spending so much time today talking about the future, and that caught me a little flat-footed when you said it. Rather than a first mover in technology, you're gonna be a fast follower. So partnering with Copilot and Salesforce and ChatGPT, I heard you say, for the near term, but deliberately avoiding the long-term lock-in. Why the posture? What traps do advisors fall into when they're building a tech stack right now? Like, what are you thinking about? 'Cause he sounded so futuristic, I thought we were building a spaceship to Mars for a second. I was talking to Elon Musk. What are you thinking on this fast follower bit?

I want to build a spaceship, but I— it's because when you look at and you play back everything that I just talked about, and let's go back to that last component I said, which was my employee experience. If I decided to now add software development in here, we're going to build out a new platform that they're not familiar with. I run the risk of execution and time. And I just, it was just a calculator. I couldn't take the risk. And so for us and for me, it's just, you look at the wave that's coming, it's a lot. And even though it's, I do want us to be on the front end of this and to keep the employees safe. I just, the fast follower model was the better approach for us.

You know, it's interesting. I learned something from another Barron's-ranked top advisor, Scott Underwood, who leads a firm called Sociam Advisors. And a shout out to Scott. He said something related to the connection, the deep connection to the employee experience is what's gonna drive the client experience. And so messing that up too fast, too quickly may be detrimental to the business at large. Would you agree with that statement?

I totally agree with it. And I just like, you know, I, we're, our partners, how they're experiencing everything is how our clients are experiencing. And it's also why we've always talked about being an advisor-led firm is you just know that the client's at the table —too. And so I'm completely aligned. A lot of wisdom right there.

Clients at the table too. You've said advisors need to be agents of change first. It's very hard for teams to go through transformation when the leadership hasn't gone through it themselves. What do you do differently today because of that belief?

More than ever, I'm very intentional about development. I'm trying to stay on top of trends, Even where my role is within the firm of making sure that I'm paying attention to my lane and how I bring the employees along. Putting yourself in a spot where you're getting a lot of different perspectives, especially from people outside of our industry. I think this is an important time for us to listen to voices of— there's a lot of signals coming from the technology world, especially service-based technology where you can— that tie into our— into what we do. And then surrounding myself with people that are comfortable challenging me, people like you, right? So it's like, that's incredibly important. And those are some of the things.

That's great. Okay. So I want to bring this home. You are one of the most optimistic people I know about where the profession is going. And I think listeners need to hear that. You've invoked this Jevons paradox, the idea that when something becomes more efficient and accessible, demand actually increases. Apply that to financial advice. When the upside case for this profession over the next decade, what is it? Not in spite of these forces, but because of them?

You know, the Jevons paradox, maybe I use it as a way to feel better, 'cause it's a way to be optimistic about the future because, you know, Jevons paradox is as things become more accessible, more affordable, demand increases. And then what happens when demand increases is innovation increases. And you think about, let's talk about what happened on the formation of the internet becoming live. And when the internet became prevalent, it wasn't where people weren't using the internet less, that didn't happen. But what also happened is, is that you ended up with jobs that we just could not imagine. Jobs, social media jobs, creators, influencers, all kinds of new industries that have come from this. I was at a family function a couple of weeks ago, and one of our family members is kind of a stay-at-home mom. And she is designing pens of all kinds of different types of pens that she's now making $50,000 a year selling pens globally with a strong presence on social media. If you would have said that 20 years ago, nobody would have got your head around that. And we all know stories of like that. And so you just, there's, I think there's going to be a number of jobs that come from this that we're going to need to be creative. And we think about what our role is. And I think about some of that is for our clients, 3 years from now, you have this abundance of solutions that can make your life better. Okay. What are you going to, how are you going to navigate that? Who's going to help you navigate that? Who's going to bring those, those solutions to life? It cannot be a role that we play. I think community is gonna be a premium in the future. We right now know our clients better than almost anybody. Can we actually form and help form communities in a more meaningful way as part of our business model?

Give us some examples. How would you go about doing that?

You know, if we start to use our data more effectively and you know all of the types of clients, their hopes, their dreams, and things that they love, their values and what they like to do, you know their hobbies, you know their interests, Why wouldn't we take that to bring like-minded people together and improve their life? Yeah. You know, like those are the examples and you're having an impact. Maybe it's, you can't tie it necessarily to financial advice, but you're also improving the quality of the client's life, which is ultimately what I think our job is. And, you know, one of the things I would also point to is, my opinion is, and we could, I think we have a near-term opportunity. We could squander this, but I think we have a near-term opportunity to think about our business model and the unique competitive advantage that we have like no other company, which is if data is going to be king, and I think that that's fair to say, data is going to be king. Is there any industry, or let's just talk about companies like us, which are deep advice firms where you know everything that we're doing. Is there any company that knows more about their consumer than us? I know the client's hopes and dreams. We know how they think about the future. We know how they think about their kids. We know how they're spending every dime. We know what their values are. We know their balance sheet. We know their tax situation. We know their health situation because we're running their insurances. We know what their legacy dreams are. We know what their charitable interests are. Does anybody, does any other company, does Amazon know that much about their consumer? They don't. Does there any other company, maybe, but I can't think of any other company. What are we gonna do with that? What, what are we gonna do with that competitive advantage? And I think that provides us an opportunity to rethink about our business model, taking advantage of the, of the position that we're in, which, which is rare.

You know, it's funny, uh, after more than 3 decades in the business, and I've heard for decades now, this is a relationship business, and it seems like the flow of technology and the wealth transfer that's coming, not only has this never been a better time to be an advisor, but the advisor becomes the center, the true center of the client's life with the data piece all coming together. So it's a really interesting perspective that you share. So thank you for that. That was really great. I want to just take a minute and thank you for your time. This has been exactly the conversation I hoped it would be and maybe even a little bit more. You've given every listener a way to think about what's coming that I don't think they could have gotten anywhere else. So the, the 9 Framework you described, which is a really great way for CEOs to think about the future of the business and start to begin building their own roadmap and plan. But I really appreciated the execution piece, the 9 steps taking your team through. And so to our listeners, if this conversation moved you, please share it. The advisors who need to hear this most may not be the ones who find it on their own. Hey, Rob, before we wrap up, any final thoughts you want to share with our audience? You know, I just—

my last comment is kind of as jumping on what you said, Ray, which is in our industry, how lucky are we? I think you can look at what's coming our way and you can lean into the innovation that's upon us. You know, I'm 55 and a lot of what's about to come to our clients and the way that the impact that we're gonna be able to have on our clients, I thought I, I didn't think that this was gonna happen in my 60s. And so there's an opportunity for us to go through this once in a lifetime, once in a generation time and play an important part on the development of it. And I just, I would want to have it where we all recognize that as we think about our futures. But thank you for allowing me to have this opportunity with you, Ray, and appreciate again everything you do.

It's a great reminder, the opportunity that we are all afforded to make a difference in the lives of others. So Rob, thanks again. And with everybody, that's a wrap. Thanks for listening to Barron's Advisor: The Way Forward. I'm Ray Scalfani, CEO of ClientWise. We are the exclusive coaching partner to Barron's Advisor. You may find me and ClientWise at clientwise.com, and you can find Rob Nelson Michael Lewis, CEO of NorthRock Partners at northrockpartners.com. Thanks again for listening.

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