Reaching Middle-Income Investors

A Conversation with Estee Faranda, CEO of PFS Investments

In this episode of our Wealth Management Leadership podcast series, SIFMA president & CEO Kenneth E. Bentsen, Jr. sits down with Primerica’s PFS Investments CEO Estee Faranda for a discussion on reaching middle-income investors. Only 25 percent of middle-income Americans feel prepared for a comfortable retirement. We explore Primerica’s “kitchen table” approach to helping middle-income families budget, save and invest for the future, as well as discuss the importance of financial education. We also look at how Primerica’s family-oriented culture and commitment to diversity helps advisors better serve the communities in which they work and live.

About SIFMA’s Wealth Management Leadership Podcast Series

The financial advisor-retail client relationship is critical to helping retail investors accomplish their unique financial goals, including saving for retirement, funding a child’s education, buying a home or creating a legacy.

In this podcast series, SIFMA President & CEO Kenneth E. Bentsen, Jr. speaks with wealth management industry leaders for an insider’s look into the advisor-client relationship. The financial services industry deeply believes we must boost retirement savings, enable Americans to save more, promote financial literacy and support a strong retail investor culture. This exciting new podcast series looks at how SIFMA member firms have enhanced the client experience by exploring innovative approaches to drive client engagement including teaming, exploring demographic trends and the role technology plays in wealth management.

Transcript

Edited for clarity

Ken Bentsen: I’m Ken Bentsen, president and CEO of SIFMA, and I want to welcome you to the SIFMA podcast. Today we’re joined by Estee Faranda, CEO of PFS Investments at Primerica, for a discussion on Primerica’s efforts to serve middle-income savers. Estee Faranda has served since March 2020 as chief executive officer of PFS Investments, Primerica’s broker-dealer and investment advisor. Primerica is the leading provider of financial services to middle-income households in the United States and Canada. As CEO, Estee oversees 18,000 securities-licensed financial representatives who educate Primerica clients about how to prepare for a more secure financial future by assessing their needs and providing appropriate products like mutual funds, annuities, and managed accounts. She attended Kean University and spent six years in the United States Naval Reserve.

For the last 44 years, Primerica has been committed to helping middle-income families and savers prepare financially for the future. A key component to successful financial planning is the advisor-client relationship. Today we’re going to hear more about Primerica’s unique approach to working with middle-income clients, trends, challenges, and successes.

On that note, Estee, thank you for joining us. Can you start maybe by telling us about Primerica’s brokerage business and what makes it unique?

Estee Faranda: Well, in a nutshell, it’s the community we serve. If you look at us, we look like just about any other independent broker-dealer owned by an insurance company, but what makes us truly unique is our dedication to middle-income Americans. These are folks making 30 to $100,000 a year, mostly dual-income families, who really, really need the financial support and education that a rep, that an advisor can provide to them. While, like I said, on the surface, we resemble any other insurance broker-dealer, certainly from a regulatory perspective, certainly from a structural perspective, no other wealth management or broker-dealer firm is dedicated to the middle market, to middle-income Americans, as Primerica is.

Ken: Primerica conducts regular surveys of middle-income Americans, the client base you were talking about, which looks at their financial preparedness, habits, and concerns. What has your most recent survey revealed about this demographic?

Estee: Yeah. I guess the good news is that overall sentiment among middle-income Americans has improved from last year. That’s the good news. The bad news is that middle-income Americans still have real challenges. Only 25 percent of middle-income Americans think they’ll be able to provide a comfortable retirement for themselves. That’s a problem. They have debt that’s stacking up. Yes, they’re saving more, and multiple studies have shown that people are saving more, but there are real issues with debt and saving for retirement.

Also, what we’ve seen is that people feel better when they work with a financial professional. A financial professional can provide a path for folks to feel a little bit better and to do something about their future, so that’s encouraging.

Ken: Following up on that, and thinking about the last year, really the last year and a half, with COVID-19 and everything that the industry has gone through in going remote, but more importantly, what kind of feedback have you gotten from your colleagues, your advisors, in their engagement with their clients, who have been through all sorts of different circumstances and difficulties because of COVID?

Estee: Well, it’s a bit of a mixed bag, really. One of the bright spots that came out of COVID is the ability to work remote. Now, depending on what you like to do and your level of extroversion versus introversion, that might be good or bad, but our ability and our representatives’ ability to leverage technologies, specifically Zoom, which we’re doing right now, has meant that they have been able to be a lot more flexible with their time and respect their clients’ time a lot more. Between our clients and our representatives, Zoom has enabled, really, more frequent, more meaningful, and more important and timely conversations, which is a good thing to see.

Ken: Yeah.

Estee: And I don’t necessarily ever see that changing.

Ken: Mm-hmm. I would think you’re right. Yeah. Once you’ve started down that path and everybody’s figured out the ease of doing that —

Estee: Yeah.

Ken: — I think really interesting and a good thing. Maybe shifting gears, your survey also documented some of the financial challenges facing women between the ages of 18 and 49. Why did you choose to specifically look at women, and what did you learn?

Estee: Well, we didn’t specifically look at women, but women were included in the survey. What we’ve seen is really no different from what the rest of the industry and really what the rest of the world has seen, and the sad fact is that women have disproportionately felt the impact of COVID. They have. COVID has disproportionately decimated industries that women have really dominated in, service industries, hospitality, restaurants. With the rise of kids being educated at home and having to attend classes at home, women have left their jobs in order to coordinate that. It’s going to take some time for women to recoup the gains that they have gotten over the years that have been lost during COVID, and that’s unfortunate. The good news as it relates to Primerica is that women make up 50 percent of our field force, so I feel good about the opportunities that we’re giving women, not just our independent folks in the field, but our clients as well.

Ken: That’s really interesting, particularly in talking about the workforce in the field, as I know the industry — and this is a SIFMA priority as well from our board on down, of increasing diversity and inclusion. That also includes increasing the number of women who are in the financial advisory role, and clearly, at Primerica, you all have made great strides there. We both know that, if you start saving earlier, the better off you will be, but I wonder if many of your clients have the common misconception that you need to have thousands of dollars saved up just to start investing. How do you and your professionals change this narrative, and how do you approach middle-income clients to get them to start saving early?

Estee: Well, it’s not just our clients. It’s everyone. Most people have this misconception that investing is for the wealthy and only wealthy people invest. It’s so ironic and unfortunate, because it’s middle-income Americans that need to invest, even more so than wealthy Americans. When our representatives meet with their clients, they are literally meeting at the kitchen table. We call them kitchen table conversations. Most of what they do when they’re having these kitchen table conversations is educating, educating their community, who are their clients, on the importance of investing. One of the really great things I had mentioned earlier that we are uniquely positioned and dedicated to middle-income Americans — one of the things that will show you that in a very transparent way is that we allow clients to start investing with us for $25 a month. $25 in an IRA just to start that investing mindset. We do a lot of education, as I mentioned, around compounding. It’s that $25 a month that you’re saving now that compounds down the road to help you retire a lot easier. Like I said, it’s not just teaching the importance of investing, but teaching the little steps that you can do that enable you to have a nest egg.

Ken: You’ve gone through this, the kitchen table conversations, the engagement, your workforce out in the field. How does Primerica’s culture lend itself to this type of hands-on approach?

Estee: We have an extremely family-oriented culture. We have very much a family culture in the home office, and that is reflected in our field force as well. What you’ll see is families in business together, in our field. Again, as I mentioned earlier, our field force lives in the communities they serve. They look like the communities they serve. So it is a very special culture that I am really pleased to say is reflective not just in the home office, but also in our field and amongst our clients as well.

Ken: Sort of taking that a step further as well — we talked before, when you had mentioned that half of your advisor field force are women, and I noted the industry’s commitment to building a diverse and inclusive workforce. You were talking about how your workforce resembles the community, lives in the community. What other steps have you all taken at Primerica? It sounds like you were just doing quite a bit here and really creating a model for building a diverse and inclusive workforce with a very much diverse and inclusive client base.

Estee: Our diversity and our commitment to diversity is one of the things that I am most proud of at Primerica, beyond a shadow of a doubt. I wish we could take credit for how diverse our field is and our home office employees. While we take steps to encourage that and support that and foster that, it really was something that just happened organically, and it happened organically because our reps come from the communities they serve.

Ken, as you said, when you look at the wealth management industry and you look at where the United States demographically is going, we’re becoming younger and more diverse a population. I think, as you know, the wealth management industry definitely has to catch up to that. We need to look more like the communities we serve, and that gulf is widening. I am really proud to say, at Primerica, there is no gulf. We do look exactly like the communities we serve, because we come from the communities that we serve. Amongst our reps, we have various councils. We have our African-American leadership council. We have our Hispanic leadership council. We have our Women of Primerica. Those are dedicated to serving those constituencies, but those constituencies happened organically, and we’re really proud to be able to serve those folks in the field.

Ken: Yeah. That’s just really, really interesting and an amazing story as well of the company. Before we wrap up, I wanted to ask, given your vantage point and your experience in the industry and what you’re seeing from your field force and your surveys, what does the future hold for middle-income investors, and what more can we do as an industry to encourage savings and investments as early as possible?

Estee: Well, I’ll tell you where we as a country have let down our kids, and as a result, we’re paying for it and will continue to pay for it until we get this right. We need to do more to educate our kids about personal finance. It’s so ironic. I remember spending so much brainpower in school memorizing the quadratic equation, and I have never used that in my life. I’m sorry for all the math majors and physics majors out there, but we teach fairly obscure scientific theories, but we’re not teaching kids how to balance a household budget, what a mortgage is, what an interest rate is, why we have to be saving for our own retirement and can’t rely on pensions anymore. I think we’ve left it up to folks like Primerica field force and wealth management firms out there to do a lot of the educating that, quite frankly, we should be doing in schools. I’m looking forward to a day when we have, as part of every school’s curriculum, personal finance for kids.

Ken: Yeah, that’s great. We at SIFMA with our colleagues at the SIFMA Foundation have the same view, that more needs to be done, as much as the industry does and various industry-driven foundations do, in working with the schools. Really sort of making this a mainstay of the curriculum is terribly important, and so that’s something we look forward to working with you all at Primerica and others across the industry on.

Estee, I can’t thank you enough for spending a little bit of time with us today and giving us your views from your vantage point at Primerica. For our listeners, for more information on SIFMA and the wealth management business, please go to www.sifma.org. Again, Estee, thank you very much for being with us today.

Estee: Thanks, Ken.

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Estee Faranda has served as Chief Executive Officer of PFS Investments since March 2020. Before joining Primerica, Ms. Faranda was at Envestnet from March 2015 to March 2020 where she held several leadership positions, built the asset management network and was responsible for all asset management products on the Envestnet platform.

Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. Mr. Bentsen is also the CEO of the Global Financial Markets Association (GFMA), SIFMA’s global affiliate.