In Wealth Management, ‘Technology Is Important, but Relationships Trump Technology’

Even as digital technologies seem poised to bring sweeping changes to the finance industry, there are some areas where the human element is likely to remain deeply important. In this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Jack Markwalter, CEO of CIBC private wealth management in the U.S., discusses the role that rapidly evolving technologies are playing within personal finance.

Back in the 1980s, Markwalter remembers customer relationships conducted via infrequent meetings (often with poorly-informed clients) to discuss portfolios containing little more than cash and U.S. stocks. Today, portfolios include international and emerging market assets, venture capital, private equity, etc., and clients can pull up detailed information about their portfolios with the swipe of a finger. The growth of fintech promises to add even more complexity in the years ahead. Despite these changes, Markwalter asserts that one priority remains the same: the importance of cultivating close customer relationships and deeply understanding the clients’ values. He discusses the strategic value of these relationships in his industry, the emergence of competition from fintech startups, and the latest trend in finance, cryptocurrencies.

An excerpt of the interview is transcribed below. Listen to more episodes here.


Jack Markwalter (CEO, CIBC US)

Siggelkow: Fintech is a hot topic now. Everyone has seen new startups coming up, and quite often, it’s some Silicon Valley entrepreneur saying, “By using technology, we can do this better and we can do this more cheaply.” What new startups have you seen in your industry? Wealthfront and Betterment come to mind, but I’m not quite sure if they are exactly in the industry as you might think of it. What increased competition have you seen?

Markwalter: A lot of the competition for the last number of years used to focus more on cost cutting: How can you lower the cost for a financial institution and how can you manage your profitability? In the last two or three years, especially with the rush of technology and how plentiful information is, we’ve seen much more of a client interface in the front end, so different startups have done particularly well.

I think one company (which is not a startup by any means; it’s been around for about 50 years) that we like the way they interact and the way they integrate things is SEI. They are outside of Philadelphia. They are very innovative in their approach and they have different buildings all set up for different aspects of the client relationship. What we’ve seen that they’ve done differently than a number of startups is they integrate from the very beginning, from the very first time they meet with the client, so it’s sort of prospecting in the meeting books, all the way through account opening, all the way through managing the account and cash disbursements. Then the back end is client reporting and performance and things like that. So that’s been a very innovative company that, at least in our business, has pulled together many of the other aspects that before were very disparate.

“In the end, it’s human interaction, it’s personality, it’s the ability to ask deep, penetrating questions to bring out what’s beneath the surface.” – Jack Markwalter

Siggelkow: Let’s push along with this kind of thinking about technology, how technology is changing and has changed and probably will change the business that you are in. My colleague Christian Terwiesch and I have been working quite a lot lately on the topic we call “connected strategies,” the way firms are trying to change the relationship they have with their customers. And we thought about four different elements which we call the four Rs: recognize the need, request, respond, and repeat. Maybe we can go through this in a little more detail. You started out by saying that there’s a whole set of potential needs that these customers have, right? It’s not just investing. So, how has technology allowed you in some sense to recognize the needs that a customer has? Sometimes, customers don’t even know that they have a particular need, right?

Markwalter: Right. For all those four Rs, technology has been a tool; technology has been helpful and useful. But really, in the end, it’s human interaction, it’s personality, it’s the ability to ask deep, penetrating questions to bring out what’s beneath the surface. And so, for the first R, recognize, you’ve got to spend time with discovery. You’ve got to go through and spend several hours with the patriarch and the matriarch and the children and the grandchildren to find out what’s important to them. What do they care about? Frankly, when they are very wealthy, a big question is, “What is this money for?” And once you’ve met all their basic needs, do they have a big philanthropic need? Do they want to give money to a university? Or do they want to hold it all and pass it to the next generation? What are the family values? Recognizing this is really, really important. Then you have to be able to request and to get information for that, and then to be able to respond to formulate the right solution.

What’s happening now is there’s so many different choices of different ETFs and ETNs and hundreds of managers, thousands of managers, thousands of mutual funds and hedge funds and private equity. How do you respond? Once you’ve listened to the client, how do you come back with the right asset allocation with the right blend between stocks and bonds and cash? And how do you tie it all together? Also, how do you tie together those other goals of educating the children and making sure that you don’t spoil or ruin the children with the money? Oftentimes, very wealthy people learn that it’s more important to pass on their values than to pass on their money. And so how you respond and repeat is really important.

As to the way I see technology interfacing: There is information gathering with a CRM, a client relationship management tool, at the point of contact. We’re able to communicate with clients of course, whether it’s email or text, whatever it may be, and then we’re able to come back to our clients and send them something instantly in terms of a portfolio or other response for them.

“The interesting thing is that technology is really, really important, but relationships trump technology.” – Jack Markwalter

When I look at repeat, it’s getting into the proper rhythm with a client and their family in terms of reporting and interaction. How do you interface with them? How often? How much detail do they want to see? Some clients are sort of engineers and they are very technical. They may want to see a report for a $20 million portfolio that’s 80 pages long. And they may want to see gory details about every manager. Another client may come in and say, “What’s my number?” Or they may come in and simply say, “How am I doing?” They mean, how is the portfolio, how is it doing? And some clients, when you say that they are doing fine and you’ve worked with them for 10 years, they know that their portfolio has grown and they are not as worried.

So, to your point, you’ve really, really got to recognize what is happening. You’ve really, really got to request their information and respond. And then once you get into that rhythm, it’s about repeating the way you interface well with the client.

What we really try to do is simplify our clients’ lives. We try to bring financial peace of mind, because people work hard to create their wealth and we want to preserve that wealth and grow it at a reasonable rate. But also, we want them to be able to do other things that they want to do. I talked to a client the other day and he was a big golfer. He said he played 280 rounds of golf last year and he said, “Your team here has done such a good job, I can go out and play golf and not worry about it. I played 280 times last year.” And I said, “Well, how are we doing?” He said, “Your technology is good, but you need to keep investing in it.” He said, “Your people are great. Your people love my extended family, and you care about my extended family more than I do.” So the interesting thing is that technology is really, really important, but relationships trump technology. The winning combination is where you can leverage technology, to your point with the four Rs, to do all those different steps, but then have a really intense, very focused and deep relationship.

About Our Guest

Jack Markwalter is chairman and chief executive officer of Atlantic Trust and has been in the role since January of 2004. He joined Atlantic Trust in 2002 as head of business development and has more than 29 years of experience in the private client and investment industry. From 2004 to 2013, Jack also served as senior managing director of Invesco and as a member of the Invesco Executive Management Committee. From 2008 to 2010, he was head of Invesco U.S. Institutional Sales, Client Service and Consultant Relations. Prior to joining Atlantic Trust, Jack served as managing director and national director of the client strategy group for Morgan Stanley Private Wealth Management. Jack has been profiled on CNBC and has also been featured in the Atlanta Business Chronicle. Jack has been featured in various publications including The Wall Street Journal, Barron’s, CNBC, Private Asset Management magazine and Family Wealth Report.

Jack earned a Bachelor of Science with highest honors from the Georgia Institute of Technology and a Master of Business Administration from the Harvard Graduate School of Business. Jack serves in various leadership roles for numerous community organizations. Among other positions, he is a member of the board of directors for the Children’s Healthcare of Atlanta Foundation, the board of directors for the Georgia Tech Foundation, the board of directors for the Marist School and the Atlanta History Center. Jack served as chairman for his Harvard Business School Reunion Fund Campaign and is a member of the Big Brothers Big Sisters board of directors and Capital Campaign Committee.

Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.