00:00But LPL Financial says the technology could make advice more personalized, emphasizing the human relationship.
00:06Joining us now is LPL Financial CEO Rich Steinmeier.
00:09Rich, thanks for coming on. Great to see you.
00:11Great to be here.
00:11What a ride it's been for you.
00:12And look, I know your contention all along has been one, you have your own AI product you've been building.
00:17But trust in the human is still important.
00:19But you've seen your stock sell off 7% in one day as Muse announces this AI tool.
00:24What is sort of your pushback to this idea that we could see financial advice become commoditized because of AI?
00:31Yeah, I think when you get to big life events, the big challenges, the big questions.
00:35I was just with a family member this weekend who had her father went into a facility for memory care
00:40issues.
00:41You know, they're talking about how does my advisor help me?
00:45Can we live through this?
00:46Where are the right investments?
00:47You had three different family members with different perspectives about the markets trying to make investments.
00:53And you need to have someone that you trust at the middle of a relationship.
00:57And I think that we see a lot of opportunity for technology to enhance how the delivery of personalized advice
01:03is effectuated.
01:05But I think in the end, it's about relationships.
01:08It's about trust.
01:09It's about context.
01:10It's about, you know, empathy.
01:12And I think those are things that are done today between humans.
01:15And we feel bullish about the human advice.
01:17What about other things around the edges?
01:19Part of the whole Citrini thesis, you've seen other people, Goldman, have sort of latched on to this too.
01:25This idea that a lot of what we're seeing is just like friction and laziness.
01:29But all of a sudden, if you can compare advisors using AI, what once was a very sticky business, you
01:35trust your advisor, you stay with them, all of a sudden is a little less sticky.
01:38What about that risk?
01:39Yeah, I think what we see is that if you can compare, there's a lot of work that gets done
01:44by the advisors.
01:45There's a lot of work that gets done on behalf of consumers.
01:48And as some of the work gets done by bots and gets automated, I think you're going to see the
01:53depth of relationships and the depth of advice be able to progress.
01:56What we see is that as you bring more tools to bear, the best advisors treat different clients differently.
02:04But what you see is a rising tide of the delivery of advice because of the availability to fill in
02:11the blanks and to get the context and get the personalization.
02:14We love the ability to help advisors go deeper with their clients.
02:18And as you take that work, 60% of the work that advisors do is not client-facing.
02:22And so can we continue to diminish that so that they can give rich advice?
02:26I think that's the bold case here.
02:27What about the other side of this where an advisor enabled with AI itself is something that erodes trust?
02:34And just stick with me here because I feel like there's this growing movement where people look at, you know,
02:38an op-ed written by a very predominant financial person existing in this ecosystem saying, oh, that's written by AI.
02:45I'm not sure I trust it.
02:46Or you get an email that's obviously written by AI and you think, I don't trust it.
02:50There's this whole movement on dating apps of people using AI and saying, I don't trust the person I'm talking
02:54to.
02:54If you equip financial advisors with AI, how do you stop them from themselves giving something that feels less personal
03:01and more fueled by AI and, again, goes back to erode that trust?
03:05Yeah, I think I follow you, right?
03:06I think you're making a good point.
03:08That's where human in the loop is.
03:09I think that's why we think about human in the loop as being so incredibly valuable and important in the
03:15engagement.
03:16You can't just put slop out there and say, okay, now I'm getting deeper with you because I have slop.
03:20You actually have to go do work.
03:22You can have AI enable that work.
03:23You have to be able to then use your judgment as to whether it is applicable to that particular situation.
03:29And I think, again, being able to use tools to allow you to automate parts of the way that you
03:35prepare.
03:36The advice delivery is where the value, where the rubber hits the road.
03:39And I think the preparation, the post work, the account openings, the rebalancings, et cetera, all of those things occur
03:45in the background.
03:46It's what occurs in the foreground that I think is incredibly important and, to us, is enabled through technology and
03:52AI but is ultimately delivered by advisors.
03:55I think a lot of people are seeing this.
03:56And Anthropic bringing up new tools.
03:59Claude for financial advisors partnering with Schwab.
04:02You've been building a tool in-house.
04:03How are you thinking about what you take on yourself and build organically versus partnerships?
04:08Yeah, and we partner with Anthropic as well.
04:09So, look, we are powered by the pioneer models and so Anthropic and others.
04:15But, ultimately, our data sits inside a secure environment.
04:19And then, as we apply tools, and Anthropic and Claude are great tools and a great partner, as we apply
04:25those tools into our data set for the appropriate action that we need for an advisor, for the appropriate insight
04:31to an end investor, I think that's how we think about the tools.
04:34We're going to draw on the best tools, but we're going to put them in a safe, secure environment that
04:39is protected and protects the data.
04:41And a lot of that's where a lot of our focus is, to make sure that the client data is
04:46available to be utilized inside of the tools in a safe environment for which the advisors know that there isn't
04:52going to be any data leakage.
04:54It's such an interesting time for your industry, not only because of that, but it feels like we're in the
04:58throes of consolidation.
04:59You are on the heels of your biggest deal in history for Commonwealth Vanguard buying altruist, Carlisle & Bain reportedly
05:06bidding for Wealth Enhancement Group, $7 billion, I think, is the price tag on that one.
05:11Is more consolidation to come, or are we kind of, this is the final stage in the consolidation era of
05:16wealth management, and why is it happening?
05:19No, I don't think that, I don't think we're at the final stage.
05:21I think you may see lulls in the action of consolidation, but the truth is, what's required to deliver exceptional
05:28advice and support advisors continues to rise.
05:31So the minimum scale required to be a viable player in the marketplace continues to ascend, and that's at the
05:37core.
05:38Now, that may not be behind every single deal.
05:40There are obviously capability deals, but I think there is this ability to make sure that you have the capacity
05:45to make investments, and that's how we think about it.
05:47How do we make sure we can be the best firm in wealth management, and part of that is having
05:51leading technology and being able to put all of the power that we've been talking about here in support of
05:58a financial advisor so that they are more empowered to deliver advice versus disintermediating them.
06:03And that's how we see the fight, is how do we make sure that we take the best of the
06:07investments and tools to support an advisor versus try to diminish their role?
06:11Are there any other gaps you see? Any other deals you'd want to do?
06:13No, I mean, no, I wouldn't break news right here.
06:16You're allowed to, just letting you know.
06:17I don't know. I think we are really happy with our position.
06:20We are really happy with the Commonwealth acquisition.
06:22That wasn't just a scale acquisition for us.
06:24That was about changing the culture of our firm.
06:26That is a forward-leaning firm that delivers an experience to advisors that is differentiated in the marketplace, and for
06:32us is something where we're going to emulate that and keep Commonwealth itself, but also emulate the best of what
06:37they do.
06:38It's fantastic for us.
06:39Rich, I'm basically out of time, but I do just want to squeeze this in here.
06:42We have a huge wealth transfer happening right now.
06:45Wealth is also being created at an incredibly rapid pace because of the American entrepreneur, because of all these IPOs.
06:51How do you position LPL in the middle of this huge shakeup in just the way wealth is being created
06:57and handed down?
06:58Yeah, I think one of the most important things for us is to make sure that we have advisors across
07:02that entire spectrum, the wealth spectrum as well as the age spectrum, and so we need to make sure that
07:07we have tools there for intergenerational wealth transfer, as well as you look at small business owners that are going
07:12to have succession issues, being able to have our advisors empowered to talk to them, not just to the entrepreneurs
07:19who created those businesses, but to their next generation that is inheriting that wealth and making sure they're prepared to
07:24make sound financial decisions.
Comments