Steward Partners CEO Jim Gold sits down with Yahoo Finance to discuss dealmaking activity in the greater wealth management landscape: "There's a real quiet revolution going on. If you look at the data of the industry, the big traditional firms are losing market share, and that market share is going to the independent space in one form or another. As I like to say, we're sort of passing each other on the elevator — one's going up, one's going down... Those firms always have a place, but this change is real and it's actually accelerating."
Gold also comments on rising trends in the industry.
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- This week, the Fed maintaining its outlook for three rate cuts this year. This could have some significant implications for companies looking to jump into the merger and acquisition space as the cuts might not come soon enough.
To break down what this means for the M&A market, we've got Jim Gold, Steward Partners CEO.
So first and foremost, just give us the correlation between dealmaking activity and the Fed's rate policy here.
- I think the dealmaking activity is very robust right now I think where you see the real impact is on the lower end of the spectrum where traditionally you might see a one advisor buying another advisor's practice.
And when they go to borrow that money now, that's like getting a Visa card, and, suddenly, it's like, wait, maybe we need to talk about the value here. How long I need to pay you over time? So I think you're seeing it more there, and I would compare it to-- we sometimes hear about national real estate and what is national real estate doing? But in your market, it may be completely different.
So I think on the low end of the spectrum, the high interest rates definitely having an impact.
- And how is it more specifically impacting just the wealth management space overall because we've been talking a lot about the fact that that space is changing pretty dramatically. We're expecting to see an uptick in consolidation. What, more specifically, do you expect that to look like in the coming years?
- I think there's a real quiet revolution going on. If you look at the data of the industry, the big traditional firms are losing market share, and that market share is going to the independent space in one form or another. As I like to say, we're sort of passing each other on the elevator. One's going up. One's going down.
So I think those firms will always have a place, but this change is real, and it's actually accelerating.
- You're also tracking some significant changes in the wealth management sector. What are those changes that you're identifying at this juncture?
- What you see is-- listen, the next generation of advisors overwhelmingly want to be in an independent structure. They want to have more autonomy. They want to have more flexibility. And I think the big traditional firms are sometimes very restrictive for them.
So what you're seeing is that the overall wealth management, who's managing the assets, there's a massive shift going on. It's a volcanic change. It's not a glacial change. And I think people are starting to notice that trend. You see the Cerulli data supports this continuously.
- And when we talk about the digital disruption end of it, what does that look like and how is that going to contribute here to what you're expecting to see just in terms of more changes coming within the industry?
- Yeah, the digital is amazing, and I think we've always been a believer in renting technology. You look at the technology of today, and in five years, the technology of today is going to be not useful anymore. So I think we have to adopt technology that helps us serve our clients better, whether that's portfolio analysis tools or ways to interact with them.
We were just chatting about the effect of Zoom and things like Teams Meetings where five years ago, that was unheard of. And now, anyone can sit here all day and talk to clients all over the country without leaving their desk.
- All over the world, yeah. And so all these things considered, and we think about the digital disruption, there is one major disruption that we're continuing to track right now-- highly anticipated-- to impact productivity, to impact potential bottom lines for businesses like NVIDIA, Micron, and it's artificial intelligence and generative AI specifically.
How does this newest iteration of AI stack up in terms of some of the deal making that's starting to come forward right now, even for companies that have yet to even think about making a public market debut?
- Yeah, I think the technology's always interesting to me. I think in wealth management, you've seen a trend that people fit in various silos, and you have to do-it-yourselfers who are probably much more open to new technologies and ways to manage their portfolios.
We find that people who have real assets want advice. They want to talk to someone. They want counseling. And sometimes, being a great advisor is more of like family therapist than it is about the numbers.
- What would you say is, from the clients that you're speaking with, their biggest concern at this point-- the biggest worry?
- It's always valuations in the short term. If the market's bad, they want to know when it's going to get good. And if it's good right now, they say, when's it going to get bad and what should we be doing?
So you have to take-- listen, the clichés are there for a reason. You have to take the long approach. I think you have to look at your own individual timeline. No answer is a bad answer. It's the answer you're most comfortable with, and if you can't sleep at night with the way your portfolio is set up today, you should probably change your portfolio.
- All right. Jim Gold, Steward Partners CEO. Thanks so much for joining us today.
