Your Business Model is Dying: MarketWatch Panel Edition

The issues are real. This isn’t a drill. The industry really is changing.

Last week MarketWatch and State Street sponsored a panel on “The Future of Financial Advice.” Here’s a sampling of what was said:

“If you are not a part of the tech revolution in finance, your days are numbered.”
Joel Bruckenstein, CFP - Technology Tools for Today (t3)

“Someday, $1 trillion will move to robo and we’ll just view it as an advisor.”
David Jegen - F-Prime Capital/FinTech Sandbox

“We’ve always overestimated technology in the short run, but underestimated it in the long run.”
Tim Welsh - Nexus Strategy

These sentiments are widely shared. If you’ve been to any panel on the future of wealth management in the last year or so, you’ve probably heard some variant of the following:

• Asset allocation, product selection, rebalancing and tax management are becoming a commodity. These are things robos (and, more generally, computers) can do just as well as advisors. If this is all you do, you’re doomed.
• Instead, advisors should focus on higher-value services: financial planning, coaching and acting as the coordinator of professional services like accounting, insurance and estate planning.
  

In short, “differentiate or die.”* This isn’t bad, and it's not the same as "advisors aren't needed anymore." There's the analogy of Turbotax. It hasn’t put accountants out of business — it’s just moved them away from mundane arithmetic towards more highly valued advice. Some accountants — those who weren’t capable of offering advice — lost out, but most are better off. Beyond some level of complexity, folks need advice, and our world keeps getting more complex. You occasionally hear the less happy example of travel agents. Online systems have, in fact, put most travel agents out of business. But even here, the lesson applies. There are still travel agents, and the ones that remain have much more rewarding jobs handling much more sophisticated problems. 

Statements about the future are never exact, but this is not arcane prognosticating. At heart, these claims are based on two simple foundational beliefs:

1. Investors won’t pay much for any service that a computer or robo service can provide as well or better.
   
2. Computers and robo services can and will provide basic asset management services like asset allocation, security selection and rebalancing.

These are not particularly controversial claims. And I think that’s why you hear such unanimity among panelists. The issues are real. This isn’t a drill. The industry really is changing.

*To read more about our thoughts on "Differentiate or Die" click here.

For more on industry events, check out In|Vest 2018: What we Heard in the Hallways.