John M. Dowd is CEO of Fiduciary Trust International (FTI), a global wealth manager and wholly owned subsidiary of Franklin Templeton, specializing in strategic wealth planning, investment management, trust and estate services, and tax and custody services. A 30-year veteran of the wealth management industry, Dowd oversaw the Northeast region for Wells Fargo Wealth Management prior to joining FTI in 2016. He also spent almost 20 years with Bank of New York in various roles, including chief trust officer and head of wealth management. He joined us to discuss how the wealth management industry and the high-net-worth (HNW) clients served by his firm and others are changing—and why.
Russ Alan Prince: How do you view the state of the wealth industry in 2023?
John Dowd: The wealth industry today continues to be in very good shape given the continued positive demographics, such as HNW individuals growing faster than the general population and, even with volatile markets like 2022, a very loyal and sticky client base. Top-line growth has been more challenging given uncertainties in the market—chances of a recession, geopolitical concerns, high inflation, etc.—and so many clients and prospects have paused putting new money to work. However, we are seeing some signs that the investing environment is improving—the markets never give you an all-clear sign—but it looks more risk-on than risk-off. Mergers and acquisitions certainly slowed down, and some of the multiples look like they may be coming down from their heights, but I think the quest of smaller players to achieve scale and a broader platform for their clients is still a strong driver behind M&A.
Prince: What trends are you paying attention to, especially as it pertains to HNW individuals and their families?
Dowd: We are continuing to see families that look to their wealth manager for full balance-sheet advice. When I joined the industry, it was investment performance that the client or prospect valued, and the advisory portion of the service—financial planning, trust services, etc.—was not as valued.
Over the last decade or so, that has somewhat reversed, and the ability to deliver value fully across their whole balance sheet is critical. Examples include insurance review, helping clients with business succession and transition, and financial education for their kids. There are also major changes in terms of who is making decisions for wealth. By 2030, a majority of the decisions will be made by women. This is good news because women tend to be more comprehensive and disciplined in their approach compared to men.
Another major trend is the digital natives amongst us, from the next generation, taking a more active role in the decision-making process for their families’ wealth. Some consequences of this trend will be that wealth managers will need to stay relevant as their clients’ wealth providers.
Firms will need to demonstrate the following core strengths—a very modern, easy-to-use digital interface for their clients; a business model that gives the client a do-it-yourself experience instead of forcing them to completely rely on their advisor. These offerings embody the trust but verify approach that next-gen clients want to see. Finally, next-gen clients increasingly want to benefit from being part of a community of clients.
When I started in the industry, there was a common white line between clients and you as an advisor. They pretend that you were their only advisor, and you pretended that they were your only client. The next generation wants to benefit from being part of a community of clients—to network, start businesses and co-invest.
Prince: What is next on the horizon for FTI?
Dowd: We are doing a ton of work around alternatives. Franklin Templeton, our parent, has acquired some top-notch firms like Lexington Capital, Benefit Street Partners, Clarion, and of course, K2 Advisors. I get to work very closely with these partners to build products for our clients—who are very sophisticated, tax-sensitive, and sometimes leery of the illiquidity traditionally associated with alts. The investment thesis for a greater alternative allocation in a portfolio is stronger than ever, given the growth of private markets versus public markets. But accessing those products and giving your client a seamless experience on reporting, taxes, plus all the capital calls and sub-doc needs, is still a challenge.
Also, one of the other great things about having a parent company which is a $1.4 trillion global asset manager, is that FTI can benefit from some of the key emerging trends that will soon affect the asset management business. In particular, I see a tremendous opportunity in how the blockchain can disrupt the traditional clearing and settlement of securities. Ultimately, we will be going from T+1 to T+0 and the ability to trade 24/7 on a global basis. That will unleash a tidal wave of liquidity.
In addition, I think blockchain will make inroads into tokenization of securities, which has significant implications for private assets and hopefully leads to wealth-creation opportunities for a broader group of investors.
Prince: What do you believe are the biggest opportunities in the wealth management space for companies like FTI?
Dowd: I feel like the firm is superbly well-positioned in this very competitive industry. Over the last five years, we have built an exceptional, homegrown digital platform for our clients and our advisors. We have greatly broadened our investment offering beyond the 60/40 portfolio to private equity, private debt, real estate and hedge funds.
Along the way, our firm has doubled in size, and we have had record profit growth and client retention. Our team-based and client-focused culture has been the secret to that success. Getting out the story of our value proposition so prospects know what it truly is like to be a client of FTI will drive opportunity for us over the next five years.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.
