04.18.18
Candid Conversations: Marc Vosen Part Three
by: David Macchia
This is the final installment of our Candid Conversations interview series with Marc Vosen of Key Investment Services. To read part one, click here. To read part two, click here.
On the Impact of Technology
David Macchia: The way I see it, we have a huge disease in the United States that needs curing. Millions of people have it. I call it “income disease” because too often customers have no plan, and depending on what happens with the performance of equity markets, they may well have no chance of having incomes that last. Where banks can play the key role is in helping their customers with this issue because with all of their sophistication and experience in the financial services industry, they really didn't know what they needed to know. They know their “number,” but not their “income.” No customer knows, right?
Marc Vosen: Well, I'm sure there are some that do know, but I would say that the clear majority do not know. As we move towards better technology, as well as a fiduciary standard, the financial consultants or advisors today will have to adopt the fact that they are going to be operating under a fiduciary standard and they have great technology at their fingertips. They can sit down with a customer, do something much more comprehensive for them and give them much, much better advice. In most cases, they're going to wind up feeling better than they did before they walked in the door. Because the customer wants to know the answer, they’re going to fully disclose their information. They don't want you to come back with a lie. They want you to come back with the truth.
Macchia: To me, there’s one more component to this that's going to be, to a great extent, the arbiter of success, and that is that once the advisors are systematized with this capability; once they're able to execute on it, there's an even greater challenge, which is the communications challenge. Because the customer has to come to understand that there is an alternative to their current state — that there is a solution to meet their needs — that can give them confidence. This communications challenge can only be met with digital communications technology, because we're in a digital-based society. It’s going to have to involve creativity, interesting content and a great customer experience because people are going to have to be enticed into the process. They're not going to just necessarily walk in. They're going to have to be invited in.
I look at what's happening with great the technology companies in our economy, and how they're transforming themselves, and I think, "Here's the example we have to follow." If you look at, say, Netflix — Netflix was a technology company that commoditized a whole industry. Blockbuster had 7,000 stores, and 60,000 employees, and one day Netflix showed up, and Blockbuster was no longer there. It was usurped by superior technology. Apple came with iTunes, and iTunes, all of a sudden, took out Tower Records, and probably thousands and thousands of other record stores, because technology became better and more effective for the customer.
Now, you look at what's happening globally, and these incumbents, as great as they are, they're worried about being commoditized by Chinese companies, like Meizu and Alibaba. It's interesting what they're doing. They all have a strategy to protect themselves from being commoditized, to protect their franchises. It’s the same strategy: content. Apple doesn't want to sell somebody else's movies anymore. It wants to produce and sell its own. Netflix has budgeted $7 billion this year for the creation of proprietary digital multimedia content. Amazon won five Academy Awards for content, and it’s just beginning. David Letterman is coming back. Not to CBS but to Netflix.
This joining together of technology and content, I think, is the model that the bank channel must look to generate its future growth and to protect itself. It has to let more customers know that it can serve them in the sense of their most important financial concerns. Anyway, I talked for a long time there, but does that resonate with you?
Vosen: Yeah, absolutely. Like I said, you're going to be a railroad if you don't change.
On Adding Life Insurance to the Mix
Macchia: You talked about the bank wanting to sell more managed accounts. I started my career building sales systems for life insurance companies. I've always been interested in life insurance. Do you see this as an increasing priority, for bank broker/dealers and their insurance agency affiliations? Do you see life insurance becoming a significant component of overall revenue in the years ahead?
Vosen: I really do. It's an area that we've neglected. Remember, financial consultants, or financial advisors, they shy away from insurance. It's a product that they truly don't really understand as well as they should, and the bank channel does a very poor job of distributing life insurance. The reason that brokers have life insurance licenses is because it enabled them to sell annuities, and that's the way it's been. However, as we move into this fiduciary world and this world of planning, you cannot do planning without an insurance component. It's in there every single time, and either the financial consultant must satisfy that need, or they have to refer it somewhere where the need will be taken care of. But, under the fiduciary standard, they must address that need, so it is going to become a much, much greater part of our business, just like planning is going to become a much, much greater part of our business.
Macchia: What will help get it off the ground? Do you see the life insurance providers doing more in their wholesaling activities to help the brokers? How do you see it happening?
Vosen: It's tough. I mean simple-term insurance, if you look at all the insurance sold in the bank channel, it's a very, very small percentage of the business. But, once you take out the instant-issue insurance, or the instant-issue term policies, and you take away the single-premium whole life policies, when it gets down to the fully, truly underwritten life insurance, I mean it's minute. I don't know what the model for that is. Banks have been talking about it for 25 years, and the needle hasn't moved at all, but they've got to figure out a way to do it. Life insurance is not investing. These are investment brokers. They know how to do this job very well, but you need somebody else to do the insurance. Get a partner?
(laughs). I don't know. I don't know what the right model is, but the banks have been struggling with this for literally decades, and I don't have an answer for it.
Macchia: When one is developed, it will mean a lot financially.
Vosen: Yeah.
On What He Would Change About the Industry
Macchia: Let me turn to a few more personal questions. If I could put a magic wand in your hand, and you could wave this wand and effect any change in the industry that you wanted to — instantly, you had the power — what change would you make?
Vosen: Oh boy. If I could change anything, what would I change? If I were to change anything I would want every action with a customer, no matter what you did in our industry, whether you're in an independent channel, a bank channel, a wire-house channel or a regional channel, there needs to be one standard of care for everybody.
Macchia: That, you foresee, would be driven by the SEC.
Vosen: I would think so, yeah. Just one standard of care. There are so many different levels of care out there. Now, of course, people with a lot of wealth need other services, but when I say one standard of care, one standard of care for the needs that you have. But given the proper care, I think basically what I'm saying is moving the business to a fiduciary standard is good. It's good for the entire business.
Macchia: Agree.
Vosen: It takes away all the conflict. You don't even use the Golden Rule, you use the Platinum Rule, you know? If I could do anything with a wand, I would do that.
Macchia: Another personal question. If you, Marc Vosen, had not taken the path you chose for your career but instead could have done any other job in any other industry — politician, musician, playwright, actor, whatever it may be — what would you have done?
Vosen: Okay. If I could have any job, I would want to be a United States senator.
Macchia: Senator Vosen! Why?
Vosen: Well, first, I think it would be a lot of fun. There are only 100 members, so it's an exclusive club. I just would have loved to have been a U.S. Senator. The other thing that I would have loved to have been is an astronaut and go into outer space.
Macchia: Wow.
Vosen: If I could do anything, I would also love to play the piano.
Macchia: For me, it would have been to be a great trumpet player, which, unfortunately I’ll never attain.
Did you miss parts one and two of the Candid Conversations interview series with Marc Vosen?
Read part one.
Read part two.