Robert Crossley: AI Agents Are Coming for Your Clients' Cash Flow

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Creative destruction is alive and well in financial services, and this time it's coming for retirement. Hi everyone, I'm business coach Steve Sandusky for Barron's Advisor, The Way Forward podcast. My guest today is Robert Crossley of Franklin Templeton. Robert recently led a major research effort examining how demographics, technology, and investor behavior are colliding to reshape the retirement ecosystem. His conclusion is pretty clear. The current retirement system was designed for a stable employer-based world, and that world is disappearing fast. In our conversation, Robert explains why younger generations prioritize income over accumulation, why trust is shifting from product expertise to digital ecosystems, and why neo-brokers and fintech platforms aren't just competitors, they're redefining who owns the client relationship. We also discuss wallets, AI agents, and what happens when technology starts directing cash flow before an advisor ever sees it. This isn't about products, it's about how the entire system is being redesigned. With that, here's my conversation with Robert Crossley. Your team at Franklin Templeton, you guys have come out with some new, really interesting research about retirement. So I want to start with, give me the, the high-level overview of what's in this research and what some of your main conclusions are.

We interviewed probably just over $18 trillion of assets in the US, and we did over 50 interviews with all the whole spectrum of participants across the retirement ecosystem. And essentially, in a nutshell, needs are changing and growing much faster than the industry can adapt and it can change and it can evolve. When you think about it, there are, I don't know, there are 10,000 people who are turning 60 every day. If you have children, your 20-year-old is going to live to 103. So decumulation is going to be a luxury for our children. And since 2000, since that child was born, your purchasing power has gone from $1,000 to $600. Healthcare spending has tripled. That's a pretty heady cocktail for the industry to try to solve within the constraints of the existing system.

So what needs to change in the existing system? If everyone can see this, what's the stumbling block here?

When you look at the traditional system, it's really— the industry's geared up for standardization. What's happening is it's being forced— the wider industry, whether it's wealth management or the retirement part of it, is being forced to solve for personalization, and the equation of competition is being rewritten by technology, by demographics, and by economics. One of the things that came through very clearly in our interviews was that everybody recognizes the problems, as you say, but that ability to act on that recognition doesn't exist because we're essentially, as a retirement industry, we're trapped by our history, by our technology, and by our architecture, or by our incentives is maybe a better way to put it. So one of the messages that we kept hearing was that the problems of the current system are very, very difficult to solve within the current system, within the current setup. And so essentially you have this situation where new technology is out of reach because of the integration cost of it, avoiding litigation risk, has entrenched the role of the target date fund. And a lot of the criticisms of target date funds aren't legitimate, but they can't solve the problem by themselves. And at the same time, you have the structure of the industry means that there's this fragmentation of roles and responsibility and data, which makes it almost impossible to change the way that we do things. Now, the big so what and the big why now what's new and why is this, why has this suddenly become urgent? It's because the structure of the economy and employment are changing, is changing. New technology is rewriting the rules in ways I'm sure we'll talk about. And there are new forms of competition which suddenly the competition is no longer just internal to the industry, it's coming from outside. So when you put all of those three things together, the economy, the technology and the competition, overlaid with demographics, you have this situation where change is no longer an option. It's absolutely imperative.

Well, and what I find really interesting about this conversation is this affects everybody. So it affects you at the big incumbent players like Franklin Templeton, and it affects every financial advisor that's listening to this. Because I think there's— and we're going to get to this— but there's really, I think, some dramatic changes taking place as a result of what you guys are showing and talking about here in the research. And one of the things is that, you know, this idea of creative destruction, right? You guys are incumbent, you've got all these legacy systems, and that gives rise to Coinbase, that gives rise to the neobanks, that gives rise to Robinhood, all these other companies that are starting from the newest of the new technology. Whereas you guys are— I don't mean you guys, I'm just sort of, you know, talking generically here. Your systems are built on COBOL, right?

Absolutely.

Some of this stuff goes back decades, and so it's difficult. But to Franklin Templeton's credit, you guys, I think, are at the forefront of the legacy firms that are really moving swiftly to take advantage of everything that new is happening. So talk to me about, from a demographic standpoint, the technology economics, what's all happening there that's really making this urgent?

That's a great question, Steve. And the reason why it's a great question is the people think of the problems of baby boomers and the problems of younger generations as being different, and it's actually the same problem that we need to solve. Let me go through those three, actually. So let me start with the changing economy. If you think about the traditional retirement savings model, that's really based on the traditional employment model where you have stable long-term employment. That means a stable ability to spend and save. You can spend and save regularly. And it also means that the workplace is the focal point for the decision and the provision of retirement savings and benefits. Now, you talked about baby boomers and talked about younger generations. The average number of years that a baby boomer spends in a job is over 8 years. The average number of years that a Gen X spends in a job is just over 2. So you have this situation where careers are shortening. And if you look at your, your personal life, we live in a much more flexible, on-demand economy. And that means much more variable employment. And that has been accelerated by COVID, the pandemic, and by AI. So you have this situation where today the gig economy is forecast to grow by over 3x by 2023 to almost $2 trillion. 25% of millennials have more than one job. 50% of gig workers have college degrees, but they also have no access to benefits whatsoever. And at the other end of the spectrum, a third of rideshare drivers are over 60. So you have this situation where the employment, the, the economy is becoming much, much more flexible, and the model really has to expand and evolve to accommodate that changing reality. Now, you mentioned demographics, Steve, so that's the other big pillar of this, and that's what I think really gets misunderstood or maybe misinterpreted. When you think about a portfolio for a baby boomer, the number one purpose of that portfolio is wealth accumulation and wealth preservation. And that almost sounds so obvious to even say it. For younger generations, accumulation is number four. The number one priority is income because they can't afford to live in the same way. And the very different formative experiences that baby boomers have had from younger generations politically, economically, socially, technologically, that's translated into very, very different attitudes to wealth and to saving. There's a really nice study that Bank of America do every year, and one of the things in it, they slice attitudes by age group. So over 55% of people over the age of 43 allocate to stocks. Under the age of 43, only 25% are buying equities. So the question is, what are they buying? What do they believe will give them the long-term returns they think they need for their retirement? The reality is that older people love equities. It's a strapline. So 41% domestic equities. Number 2 is real estate, and number 3 is offshore equities. If you look at that priority, if you look at that order for younger generations, then Their number one asset that they believe in is real estate. Number two, a very, very close second is crypto and digital assets. And number three is private equity. So it's much, much more skewed away from public equities and towards, let's say, the next generation of alternatives and the current generation of alternatives. The second really important point there is that they're also twice as likely to care about the long-term impact of their investing. And that's tied to some— the other point that doesn't get enough attention. It's not just what they trust, it's how they trust and who they trust. So we've just talked about the assets that they trust in. So 90% of Gen Z, 72% of millennials, they get their financial information from social media. The top 10 US influencers reach about 113 million people. So 17 million on Instagram, 9 million on YouTube, and 11 million on TikTok. Now, to an older generation, that might sound completely crazy. When you look at the reality, if you look at hashtag fintech, 4.7 billion views, that was up 373% last year. A third of Gen Z watch fintechs. 80% of them take action based on those fintechs. Now, what's really going on here is that there's a change in the trust and decision-making model of generations. There's a disconnect between how decisions get made, whether it's in public or it's in private, whether it's peer-driven or the traditional model of it being product-driven and expert-driven. And validation comes from a community rather than from an individual. So the point that gets missed here is that at a similar stage of life, our children will have similar needs to us, but who they trust to meet those needs and what they trust to meet those needs will become and is completely different. So what we're really talking about here, Steve, is a move away from product-based relationships, which are based on very narrow product-based expertise, to this much broader and much more federated way of thinking and of validating. And you mentioned Robinhood and Neo Brokers there. What Neo Brokers really do and what they really represent is the displacement and the disintermediation of those product-based relationships. And they're using technology in a very, very different way. And the real risk that the traditional industry runs It's not so much losing A, but losing relevance.

Well, Robert, you have created a big problem for me here. You've given me like 5 big ideas here that all could be 5 separate podcast episodes. So I got to pick and choose here which lane I want to go down.

They'll come together, Steve. We're all going to answer them.

We're all going to stick the landing here at the end. We are going to land it. Well, yeah. So one of the things that you mentioned there was this idea of the baby boom generation. Okay. They're focused on like accumulation, and now it's decumulation. Now it's income because they're retiring or retired. But then you said the younger generation, like their number one thing was income. So talk to me a little bit more about if I'm a financial advisor and I'm hearing that and my clients have been the baby boomers and now I've got to move to the next generation who may be more focused on, on income. What does that portend for the role of the financial advisor? How might they need to adjust what they do or how they communicate to the next generation if that generation— and you also mentioned that they're not as focused on equities, which all of us have grown up on equities. It's done great, but they're into crypto, right? So talk to me a little bit about that.

It's really hard for us as human beings not to impose our view of right and wrong, and especially of advisors to impose their view of what's good and bad and right and wrong, whether you believe in equities or younger people believe in crypto and digital assets. One of the real lessons that we've got to take on board as advisors is not to only advise on things that we sell because our kids are going to go and do that stuff anyway, or it's going to happen anyway. I can tell you lots of stories about how people you wouldn't expect getting burned in unexpected ways. They didn't involve their advisor because they were worried about being judged. And what all this really boils down to is, I suppose it's the next generation of KYC. It's really knowing your clients, because the problem that both the baby boomers and younger generations face, and the advisors who cover both ends of that spectrum, is really how to personalize their service, how to personalize for the whole individual, not just the slice of that individual they see and cover. So one of the— I'm sure one of the topics we'll get to talk about is wallets and the consolidation of assets in wallets. But one of the implications of that is that we have to have a holistic understanding and dynamic understanding of the individual irrespective of their age. And we've got to be able to service their changing needs as a whole rather than looking at the world through a straw. And this is why the neo-brokers are so dangerous, or why there's so many lessons the traditional industry can learn from neo-brokers, and why they're on a collision course with retirement providers in particular in the planning space. Because it's very easy for them to offer IRAs with 401(k)-like matching. You get your instant matching, kind of up to 3%. It's a Robinhood. They're creating an ecosystem which enables them to draw you in to service, service you horizontally rather than vertically. That generates data to enable that personalization of service. They're essentially a learning machine. And to your point earlier, they don't have that legacy technology to service. And so they can use technology to broaden and deepen engagement. And that is what allows them to service both ends of the spectrum. Rather than just the younger generation, they're moving into that older generation. And when you start to see how, and you and your listeners know very well, just how appealing it is, the package of Neo Brokers, when you can be offered SpaceX and OpenAI exposure, you have gamified education, you have stock back rewards, you have a whole ecosystem. What's really going on there is that they're using technology to essentially involve you and embrace you and bring you in. And that enables them to offer services and personalize in a way that's just not possible if you're only servicing a tiny little slice of somebody.

Now, haven't we seen this movie before in the sense that the way innovation and capitalism works is you've got a big company like Franklin Templeton, been around for many, many decades, hugely successful. And then you get the new upstart. They see a little place in the market, they start a business and become successful. And this is, let's say, the neo-brokers. And then the big incumbents come and they buy the upstarts and they incorporate it and they swallow it. We saw it like with Meta when they purchased Instagram. We've seen it happen in the technology space and every industry does that thing. Is that what's happening here, or do you think that these neo-brokers and some of these other upstart fintech firms, are they really truly going to disrupt the big incumbent financial firms?

I think it depends how the incumbent financial firms respond and how much they learn from them, because I think what the neo-brokers are doing, or the successful ones are doing very successfully and intelligently, is they're solving for relevance and breadth of relationship. They're solving for trust. So it goes back to what we talked about, product-based relationships versus trust-based and relevance-based relationships. And I think part of the answer to your question, Steve, goes to, I suppose, the third leg of the stool or the third big driver of change of technology. And essentially what I'm going to say is why this time is different. When you said we've seen this movie before, what it reminded me of was some Netflix and Blockbuster. Everybody knows about that. Two things they don't really talk about is, first of all, Blockbuster was making $200 million a year from late fees. So they were invested in the status quo so heavily in a way that was detrimental to their customers. And secondly, when Netflix came along, people didn't stop watching films. It's just the route to consumption of those films changed. And this goes to your question about how advisors need to change the way that they think. Now, the reason I said that this, the answer goes to, sort of pertains to technology and new technology, is that what all technology does, from steam power to AI to blockchain, what it all does is it makes new things possible. It redraws that line between alpha and beta, between what's valuable and what's commoditized. And most importantly for our conversation here, it changes the fixed and variable cost structure of the industry. It changes how you can do things. It changes the cost at which you can do things. Now, if we just focus on the retirement industry for a moment, and actually let's just talk about old technology. As you said at the outset, the age of the existing technology stack in retirement puts even current technology out of reach. So cloud computing, big data, machine learning, all these things which are standard in the outside world are really, really difficult for the retirement industry to benefit from. Because the cost of change is so high. So the fintechs you talk about, they are providing isolated point solutions to those problems. They're bringing new technology in. But even if you could wave a magic wand and seamlessly integrate all of that across the entire retirement industry, you'd probably still be where the wealth management industry was 10 years ago. Think about the disparity in innovation in the 3 main accounts in your life. So You have a bank account, you have a brokerage account, and you have a retirement account. The UX and the usability and the customisability and the ease of access of your bank and brokerage account have changed out of all recognition over the last 20 years. Retirement has been stuck in this sort of stasis. It hasn't been able to change. Now, the reason why, and the reason I'm going to argue that this time is different and why incumbents aren't necessarily going to be able to just buy the fintechs or buy the people with the new technology is that the world that— so when Sandy Kaur came on your show from Franklin a little while ago, the world she described was one that was much more interconnected, blockchain-based, and much more the boundaries between traditional roles and traditional services were all broken down. And I think the key point here is that we are on the verge of an explosion in the supply of wallets, whether it's from the DTCC, whether it's Robinhood, whether it's the use of stablecoins. We're on this verge of an explosion in the supply of wallets. What happens then is that that unlocks all of the benefits for users on the demand side. So think about your portfolio today. Your portfolio is a fiction. The only thing which unites everything in your portfolio, Steve, is that you own it. It's across all these different systems. It's siloed, it's non-interoperable, it's opaque, everything. In the world that we're moving towards very quickly towards a wallet and account-based world, there everything will be in your wallet. You'll have a single point of control for all of your assets addressable in the same place. And advisors and incumbents will compete with fintechs and near-brokers to service that wallet. Instead of servicing an account, we'll service the wallet. So the argument for this time is different, is that what you're going to see is a convergence of your whole life in your wallet. Your whole personal balance sheet will be integrated in and managed in that wallet. And what we have to do is help our clients and help individuals navigate that world where accounts and wallets exist side by side. And that has huge implications of what you can do and how you can add value.

Okay, so let's talk about this wallet thing a little bit. And Sandy and I touched on that as well, but I think this is a really important piece because I think it affects how I think the advisor role is going to be evolving in light of what you're, you're talking about here, what your research is finding. So we've got all these disparate things that a financial advisor has to think about from a client. You mentioned we've got a bank We've got a brokerage account, we've got a retirement system, we've got a crypto account at Coinbase, we've got our own wallet where we're self-custodying. We got all these different things. And how do you see the role of the financial advisor? You said something here earlier, you said advisors can't advise only on the things that they're selling. And I think that's a really critical point there. So, tell me a little bit more about with all the different ways that people can invest today. We've got, I'd argue, new asset classes today, crypto being one of them. So, we got a lot of different ways to put our money to work. Each generation has different preferences in terms of the asset classes that are important to them. So, talk to me about how you see the advisor fitting within this environment where they may have to advise on things that they don't sell. What does that mean for the advisor going forward?

When you look at the role of the advisor through time, it's been on this constant ongoing journey of evolution. So once upon a time it was about stock picking, then portfolio construction, then it's almost turning into almost a life coach in some areas. Where that's going essentially is the advisor will end up being almost like a concierge, and they will have to have a service model which enables them to provide the same service but deliver it in very, very different ways. To match the preferences and needs of their clients. And this opens up a really, really interesting and fundamental topic, Steve, in that when we think of advice today, we have this almost crazy model of where the money goes to the advisor. You have money, so you go and find an advisor and that advisor will do everything for you. Think of open banking. What open banking has done When you go and buy a pizza, you get offered buy now, pay later credit at the point of sale. What open banking has done is enable the provision of bite-sized services offered at the point of need when it comes into existence, when you're just about to pay and is not tied to anything else. So when we talked about near brokers earlier, one of the things that we touched on very quickly was them offering credit cards and debit cards and bringing you into their ecosystem. Now, the link to retirement of all of this and the future of the advisor is that how you spend your money matters. In other words, when you use credit, which credit card you use, whether it's how many points you get, whether it's cash, etc. So the way that you choose to pay has a bearing on your purchasing power. So In the future, an adviser is probably going to want to advise on maximising the purchasing power of a transaction. So in other words, advising the flow of savings, not just a stock of savings. And you can see how moving upstream in the capital flow, instead of just waiting to manage the pool of money that's allocated to investment, if you can advise on the flow of savings or the flow of income upstream of that, that puts you or a neo-broker or a fintech in a very, very powerful position indeed. So the advisor in the future is going to have to think much more holistically about the individual, think about— broaden their focus from just investment and just traditional investment to a much wider, broader range of assets, but also advising on the flow of savings. And also, if they're not going to be disintermediated by technology, they're going to have to use technology and have to use AI to really actively manage the client journey and the investment journey and not leave that and not cede the ground to the fintechs who are going to do that for them.

Well, Robert, what you just said there, I find extremely interesting because I don't think I've really heard anyone talk about this idea of advising on the flow of savings, not just the stock of savings. And I think that is super insightful here because so often advisors that are working with really wealthy people, they talk about balance sheet financial planning. Like, we're going to manage the balance sheet, you know, assets and liabilities and that sort of thing. Not so much about the cash flow statement. And with this new technology, one of the things that Sandy and I talked about was stablecoins. And there's a lot of talk right now in Congress about Well, we've passed the Genius Act, but now we're talking about, okay, well, with stablecoins, are we going to allow stablecoins to generate interest? Because if we do, well, then that might disintermediate the banks because that's their bread and butter is taking in savings and loaning it out, getting a spread between what they can loan the money out at and what they pay on interest on the savings there. So, I think that's pretty interesting. And I think what I hear you saying is that could be an evolving role of the advisor is to look at things like, your credit card points, like which stablecoin is giving you the highest interest rate or the highest returns in various other forms of income that you might have, which I think goes back to your earlier point about how one of these younger generations, I think you said their number 1 interest or number 2 interest was on income and number 4 was like accumulation. And so, it seems like those are all tying together and we're starting to stick the landing here as we talked about at the beginning of the conversation.

So, so what we're talking about here, Steve, is that one of the fundamental changes that's happening is your competitor is not who your competitor was yesterday. So whether it's a bank, whether it's a fintech, whether it's a neo-broker, whether it's another advisor, whether it's another wealth manager, everybody is going to be everybody's competitor because the machinery of the system is changing as we move from accounts to wallets, as technology pervades through the system, ripples through the system. That fundamentally changes the levers that we can pull to add value and deliver value to our end clients. Now, you mentioned banks, Steve. So over time, I think banks have seen, I think it's $2.7 trillion of deposits flow out of bank accounts into fintech, outside the traditional banking system. And at the same time, stablecoins, again, that represents a leakage of deposits from banks. So banks are trying to recreate and recapture that deposit base because once you lose the custody of the cash, you lose almost custody of the relationship, which is exactly the same that we're talking about in terms of neo-brokers and traditional advisors. So you are going to have no choice ultimately as an advisor, but to be as relevant as possible across a wider range of products and services as possible. To your clients. Now, the twist in this, and where it gets both either really interesting or really scary, is that you're already seeing AI agents being embedded in wallets. And what agents and what smart contracts really represent is the automation of decisions. So you can see a world that isn't very far away whereby instead of just being recommended things, you're offered choices that are already personalized So think Amazon and AIs are enabled and you have given them a prescribed limit of autonomy to automatically execute your strategy and your wishes. So you've given them bounded autonomy. So we're not very far away from a world where as a traditional advisor, you may not even see that cash flow that's being directed by somebody else anyway, because you're waiting for it to drop out the bottom of the pipe. Nothing's there. It's already been eaten. And secondly, it's no longer just human-to-human interaction, and it's no longer all of the assets you're going to manage that entire account. It's the agents are going to do some of that for you, or you're going to be offered— imagine if you were offered a choice. Do you want investment option A, B, or C, given your spending, given your values, given what you've just watched, etc.? If that's just happened and you can have the 5-star option, you can have the risky option, or you can have the ones that your friends are doing, you can follow their portfolio like eToro. In that world, you don't even get the chance to advise the individual. It's already being done. And so I think advisors really have to understand how the competitive landscape is being changed by the unification of assets and management and control in the wallet and how technology is changing the way that advice is delivered, the way that it's thought about, and what you're actually advising on. It's not just the portfolio and it's not just the best asset to choose.

Well, if I heard you correctly here and what you're just talking about here, are you suggesting that possibly because of technology, because of AI agents, because of smart contracts, that a lot of the decision-making in terms of how a consumer deals with their cash flow and how their assets get managed and allocated, that a lot of that is going to be happening digitally through technology and that the advisor might not even be in the loop there. Is that what I heard you saying or no?

I'm saying an advisor who— a traditional advisor who doesn't change anything whatsoever and for a certain segment of clients, absolutely. That's a one way. It's not going to happen for everybody. It's not all going to happen all at once, but that absolutely is the direction of travel. And the danger, going back to what we were talking about earlier with older generations, essentially what's happening is everybody's needs are individual. So if I take a step back, the traditional industry has had the luxury of being able to focus on accumulation. In decumulation, everybody's needs are individual. So do you have siblings? When a health event's going to occur? How are your parents doing? Etc., etc. So that individuality that you have of servicing of needs in decumulation is exactly the same as individuality of needs in accumulation that we talked about. So the adviser is going to have to find a way to personalise for both ends of the spectrum. And then bringing this back to retirement, it's really easy to talk about the future and unicorns and rainbow and glitter and we're all in flying cars and everything is automated. What we really need to talk about is how we get from A to B, what we can do today, and how that relates to the constraints I started with of the retirement system itself.

I want to bring in a guy here named Michael Shrage. Interviewed him about a decade ago, and he's a researcher, had worked at MIT for a long time. And about 30 years ago, he wrote a paper. It was published by Merrill Lynch then, 1997, I think is when it came out. And his paper was called The Relationship Revolution. And in that paper, he was talking about the World Wide Web, the internet. Of course, back in the late '90s, it was still a huge, very interesting thing. And his argument was that technology doesn't primarily change information, it changes relationships. And he said that as information gets cheaper, relationships become more valuable. And one of the things that he was arguing in the paper is that he basically laid this out as a challenge to people in the— in not just the financial industry, which this, again, article is published by Merrill, but across all industries. And he said In your company, are you using digital technology and technology— are using it to try and organize your information better and become more efficient, or are you trying to use it to enhance critical relationships? So, like, what are you optimizing for? Information efficiency, or use this to enhance relationships? So, in line of what you're talking about here today, with all the technology that we have going on and what we can foresee is going to be happening Where does the role of the relationship between the financial advisor and the client come into play versus the role that the advisor should be using technology to play in that relationship? So maybe playing on what Shragi was talking about, how do you see that happening today in light of AI and smart contracts and crypto and everything?

There are two halves to the answer to that, Steve. I think the first is that traditionally we confuse having the client with owning the client. I said, so what things that technology does, one of the other things that technology does is reduce friction. And so it becomes easier for people to choose, they get more choice, it's easier for them to, to take those choices. Now, the one word was completely missing from our previous conversation about the advisor that I left out was trust. What we have is trust. And when I talked about Amazon and when I talked about younger generations, what I was really describing was a different route, maybe a digital route to trust. A different route to trust beyond just the analog relationship we have with somebody. Now, in the world that we've just been talking about, Steve, trust becomes even more important. One of the ironies of a trustless system, of a blockchain-based system, is that trust becomes more important because the only thing that you can really guarantee about any form of technology is at some point it will go wrong in some unexpected way, or there'll be a second or third order implication. In that situation, then the old-fashioned notions of recourse and responsibility suddenly become critical again. So technology can't displace, despite all of its increasing and exponentially increasing powers, ultimately it's going to be an individual human being that is trusting either a machine or a person. Now, that advisor, if they can be more useful, if they can use technology to foster trust, to increase trust, to be able to show how they're using technology in a trustworthy way and/or be able to offer the benefits of new technology and new investment products to their existing clients who already trust them, then that puts them in an even more important and more powerful position. But if they stay stuck in the mindset of selling individual products because they're the product expert, what's happening there is they're solving the wrong problem. And this applies whether it's at the individual advisor level or at the institutional level. So one of the things that Franklin Templeton believes very strongly in is being able to provide responsible investment choices and responsible access to the benefits of new technology to existing investors because we are a responsible, regulated, storied institution. That same narrative applies to an individual advisor, but the advisor's really got to understand how there are different routes to trust and how that's really what they're solving for.

Well, I'm glad that you brought up trust because at the end of the day, everything that a financial advisor does gets back to trust. And technology is interesting. In terms of what I think it's doing to trust. And I want to go back to something Yuval Harari said here in the last 2 or 3 years, and he wrote Sapiens among other books. And one of the things that he said was, he said, we are moving from an attention economy to an intimacy economy. And one of the challenges that he was pointing out with that is that technology can give us a fake sense of intimacy, meaning We can use technology to so completely personalize our communication with someone, whether you talk about the neobanks and how they have so much data, so much information. We're scraping everything off the internet, from your Instagram accounts to your Snapchat accounts, everywhere. Everything is so public about all of us. These technologies take all that and then they send you personalized messages. And we're seeing this on the marketing space in martech here in financial services where where a lot of these companies, you give this company your name and it's going to go and get 500 pieces of information about you that they've got from both public and private data out there. And now they can fine-tune messages that make it sound like, wow, they know me better than I know myself. They're like holding up a mirror. And what I find interesting is, okay, we've got technology that can do all this for us, that can create this fake intimate relationship with with me to think that they really know me, but it is fake at the end of the day. And so how do we think about, from an advisor standpoint, what role technology should play versus where the advisor should really double down, triple down, quadruple down on leveraging what remains of us being human that technology cannot do? Because I think a concern is technology is taking more and more of what an advisor it does from like the technical piece. It's optimizing it, it's making it efficient and all that good stuff. So what's going to be left for the advisor to be able to deliver that a client is going to be willing to pay $20,000, $30,000, $40,000, $50,000 a year to get from an advisor? Like, what's the core of what the advisor does that technology is not going to take away?

Technology is, as we talked about earlier, redraws that line between sort of alpha and beta commoditization and what's valuable. And you've seen this in every industry and you've seen it in our industry that when a light gets shone on value, then it's better for consumers, but it accelerates the evolution, accelerates competition. Now, when we talked about trust earlier, there are different levels of trust. So the way in which you trust Amazon is they have enough data about you that they can make intelligent predictions about what you might like and what is useful to you. Now, that is very different from trusting your surgeon or trusting your doctor. There are different levels of trust. Advisers have to make sure that they aren't at the product selection level of trust, and goes back to what we talked about relevance earlier, that they can be relevant to a broader range of important interconnected parts of an individual's life. So going back to the beginning when we started with retirement, what's happened in retirement is that globally there's been the ongoing shift of responsibility from the state to the individual. And technology has given us all many, many more choices and empowered us in extremely powerful ways. What hasn't kept up is the ability of the individual to navigate that complexity to make wise choices and to use that technology wisely. So I would argue that part of the role of the advisor is both to harness technology and to help their clients use technology to make better choices for themselves and show them how they're actually doing it. Now, when we talked about personalization earlier, we're in this crazy situation where Netflix and definitely Google and Apple knows more, way more about you and I and everybody than our advisor. Because what they do is they ingest and they analyze that data, they learn from, they iterate, they improve. Now, that level of personalization is very different from the emotional level of personalization an advisor can potentially provide. Now, some of that advisor's role, as you said earlier, Steve, some of that advisor's role absolutely will be taken over by technology. But the key point is whether the advisor will be controlling that outsourcing, if you like, or whether that's being done to them. The advisor absolutely has to free themselves up using technology to move up the value chain and at the same time The other fundamental change that's going on here is that it's not increasingly— success in this area is going to be a team sport, not an individual. However good your relationships are, it's not going to be enough. Your partners, both at the institutional level and at the individual level, are going to become so much more important because your job as an advisor, instead of just delivering a network of investment products is going to be delivering a network of investment capabilities and anything which touches your financial life and ultimately anything which touches your emotional life, not just the individual product. But you can see how that's a world away from where we are today and the vulnerability of advisors who don't change or who don't understand what's happening around them.

I want to ask a strategy question here. I see a lot of the multi-billion-dollar RIA firms are focused on trying to create their one safe source of data, meaning they're trying to get the data feeds from all these disparate sources out there, and then they have their own data lake, they have their own database where they are controlling or they have all the information. And then any new technology that comes along, that's fine, they'll just train that on their own data that they have versus smaller firms who can't afford to do that. They just use the existing third-party service providers out there and try and overlay things on top of that, for example. So do you see that continuing to happen? Like, from a strategic standpoint, do you think it's a good idea for these larger firms to, quote, control the data themselves, or is that just a losing game because they'll never be able to compete against the Googles and the Amazons and the Netflixes that have so much more information about us. How do you think about that from a strategic standpoint?

I think one of the really interesting words you used in there, Steve, was train, because in the not too distant future, so much of this conversation is going to be about having the private datasets and longitudinal datasets to enable you to train agents to make your advisors better or to make better recommendations or to personalize and personalize better. One of the things which really hampers the retirement industry today, and actually the whole financial industry or wealth management industry, is the fragmentation of data. Because we have fragmented service relationships and fragmented responsibilities and product-based relationships for the most part, we have this situation where the data is fragmented across all sorts of different providers. And that data is very, very narrow. It's all on a very specific slice of your life. So what's happening, whether it's the sort of big RIAs or whether it's a fintech, what has to happen to enable that personalization we talked about is some way to defragment data, enrich that data as you talked about, to actively generate data through interaction. That's another role of AI and the other role of platforms and ecosystems. And then combine that data, and this is the key point, combine that data with existing data or with existing partners who already have the technology to be able to extract the value from it. So what I mean by this, Steve, is that if I'm a retirement provider and I somehow create the partnerships across the retirement industry to amass that fragmented data, that still is going to be a partial view of that individual. Now, the wealth managers already have a big head start here. So I shouldn't, as a retirement provider, I shouldn't reinvent the wheel. If I can combine my data or as a benefits provider, etc., I have really valuable data which can be put together with that wealth management data to create, and this is the key point, to create much richer and more dynamic cohorts, that is what's going to enable me to extend, let's say, my target date inputs from, from your date of birth to having, so having multiple trade options with the same year glide path. That's what's going to enable me to create products. And again, this is what Franklin Templeton are doing, to create products which are personalized by using that AI-driven customization, data-driven technology to create those outcomes that those individuals need. So to answer your question, yes, it's completely understandable why the big houses are doing that. They will continue to do it. However, that does not preclude the smaller players from doing it. However, they can't compete head-on with the sort of £300 gorillas. They have to find their own niche and they have to use data in a much more creative a different way to enable them to provide their brand of value to their client. So what's really happening, what I should have said, a much simpler way of saying it is that this is going to accelerate client segmentation and the value that is provided to different clients is going to be very different. And it's not necessarily going to be economic for the big boys to service the small clients and the small to service the big. And to us ever thus.

Well, Robert, I could keep going for hours here, but I think we're going to need to stick the landing here. I think we have actually done that pretty well. Yeah, so what's your final thought? What's your final comment, observation here to try and pull all this together here that we've been talking about?

I think from the many thousands of conversations we have, the one thing I would say is that technology is changing the world faster than you think. The vulnerability comes from us having outdated beliefs because the world is changing. What's possible is changing much faster than we're updating our beliefs about it. And it's almost as if that's outdating our operating, our mental and strategic operating systems. So what I would encourage everybody to do on a personal basis and a professional basis is to find those partners who can help you understand that pace of change. As you said at the beginning, knit everything together to show you the bigger picture. So you're not looking at the world through a straw. You're not looking at the sky from the bottom of a well. And when you understand the big picture and how the different elements fit together, then you're equipped to select your partners and also change your strategy to adapt and evolve. Otherwise, you're going to be very, very vulnerable. You're going to be on the wrong end of the change.

Yeah, and I love that point there. And if you personally are not growing faster than the world is changing, then you're going to be falling behind at an accelerating rate. And that's a terrible position to be in. Robert, this has been fantastic. If folks want to learn more about you or what Franklin Templeton's doing, or even get a copy of the report that you and I have been talking about here, what's the best way for folks to do that?

The easiest way is on my LinkedIn, Robert Crossley, or to find us at Franklin Templeton. And we have an absolute wealth of thought leadership and frameworks around all of this, and we'd be delighted to speak to everybody.

All right, that's all for today. Make sure you like and share this podcast through your favorite social platforms. And for more great podcasts, visit us at barons.com/podcast. Take care and be safe.

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