Wealth Management, Explained | Kristin Lemkau on Business Casual

Check out the Business Casual Podcast Page and Episode Notes

Key Takeaways

  • At its core, a wealth management business helps people grow their wealth through different investment vehicles
  • How does wealth management make money?
    • In automated investing, they charge a small percentage of the overall asset
    • In self-trading, money is made of the net interest income
    • In advised trading, the advisor gets paid for their advice through fees
  • JP Morgan Chase’s advantage over Robinhood, Wealthfront, and other wealth management companies is that their company currently has 5,000 physical branches and 40 million people on their app every day
  • The current race among fintech companies is to see if the incumbents can innovate faster than the new entrants can reach distribution 
    • Today customers want to have their debit and credit cards, investing, and savings accounts all in one place 
  • Apps like Robinhood that have democratized investing is a good thing because it got people investing money at an earlier age and learning about the value of investing
    • However, Kristin doesn’t like how some apps have gamified investing
      • “I think you have to take the dopamine out of it” – Kristin Lemkau
        • If investing people gamified, it gives people a casino-type mindset

Intro   

The Banking Industry

  • What does a bank do?
    • A bank takes in money through deposits and lends out a portion of those deposits to people who need credit (small businesses loans, personal loans, etc)
  • JP Morgan Chase currently has $600 billion in assets under management (AUM)
  • At its core, a wealth management business helps people grow their wealth through different investment vehicles
  • How does wealth management make money?
    • In automated investing, they charge a small percentage of the overall asset
    • In self-trading, money is made of the net interest income
    • In advised trading, the advisor gets paid for their advice through fees

Changes In The Industry

  • As CEO, you need to know about every department in your company because ultimately you’re responsible for the decisions made 
  • What has changed in the banking industry since Kristin started working?
    • There’s been a greater focus on maintaining a work/life balance
    • There are more women in leadership roles
  • How can banks get more female advisors?
    • Make the company a great place to work
    • You have to create new sources of talent since the average age of advisors is currently around 50 years old
  • Investing is about staying consistent throughout the up and down cycles and not trying to time the market
  • Wealth management is becoming a lot more customer-focused today because it’s easier than ever for a customer to move their wealth from one company to another
    • Returns are also being commoditized so the differentiating factor in wealth management will be mostly who provides the best customer experience
    • So why stick in the wealth management business? 
      • “It’s an awesome business because everyone wants to grow their wealth” – Kristin Lemkau

JP Morgan Wants You To Invest With Them

  • What’s Kristin’s current goal as CEO? 
    • To double the amount of wealth management clients
  • JP Morgan Chase’s advantage over Robinhood, Wealthfront, and other wealth management companies is that their company currently has 5,000 physical branches and 40 million people on their app every day
  • The current race among fintech companies is to see if the incumbents can innovate faster than the new entrants can reach distribution 
    • Today customers want to have their debit and credit cards, investing, and savings accounts all in one place 

Is The Gamification of Investing Net Good or Bad?

  • Apps like Robinhood that have democratized investing is a good thing because it got people investing money at an earlier age and learning about the value of investing
    • However, Kristin doesn’t like how some apps have gamified investing
      • “I think you have to take the dopamine out of it” – Kristin Lemkau
        • If investing becomes gamified, it will give people a casino-type mindset
  • Investing should go viral through good content, experience, or making long-term investing sexy, not through gamification or making risky trades

Investing Trends

  • Kristin believes that crypto will become more and more common in investment portfolios
    • “I think crypto is here to stay” – Kristin Lemkau
  • Another investment trend is in ESG (Environmental, Social, and Corporate Governance), a form of sustainable investing that considers an investment’s financial returns and its overall impact
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Notes By Alex Wiec

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