To quote a cigarette commercial from back in the day, the financial advisory profession has come a long way, baby. Great, but now what?

During the past 40 years or so, independent registered investment advisors have won a growing share of the hearts and dollars from an investing public increasingly yearning for holistic financial advice and not just stock picks. And as RIAs have taken a bigger slice of the business, traditional brokerages have responded to some extent by upping their game in the comprehensive financial advice department.

But as the 21st century enters the midway point of its second decade, the profession seems to be at a transitional tipping point.

The advisor workforce is aging and not enough new faces are entering the business. Baby boomer clients who grew up financially with their baby boomer advisors, and whose assets provided the foundation for many advisor firms, will eventually give way to younger clients who have different ideas about what the client-advisor relationship should look like. And rapidly changing technology is enabling brokers to cut ties with their mother ship and go independent, while letting advisors of all stripes unshackle themselves from their wood-paneled office and work remotely from wherever the heck they want, leading to the rise of the “lifestyle practice.”

A brave new world is shaping up for the profession, which in 20 years could look significantly different than today’s advisory model.

“The near future is more of an evolution, while the far future is more of a revolution,” says Mark Tibergien, CEO of Pershing Advisor Solutions. “The far future is 20 years out, because by then we should have had a wholesale turnover of the current generation of financial advisors to the next generation. In the short term, I don’t think that development will be perceptible. But by the time this wholesale change occurs, I think the way we do business, what clients will look like and how advisor firms will look will be quite different.”

Some advisors are itching for tomorrow to start today. “I hope we lose the 200,000 financial advisors over the next 10 years that everyone keeps talking about [as the older generation leaves the business] because it could let us push the reset button to get new energy into the industry,” says Alan Moore, 26, founder of Serenity Financial Consulting. “In my opinion, innovation on the financial planning side will come out of new firms because they don’t have a pre-existing structure and they’re free to do things in a new way.”

In many ways, Moore embodies the new wave of Gen Y advisors—tech-savvy, imbued with a sense of purpose and confident they’re at the vanguard of a changing industry.

In Moore’s case, he was fired from his prior job at a successful RIA firm in Wisconsin because he felt it wasn’t moving fast enough into the future. “I was a pain-in-the-ass employee because I wanted to do things how I wanted to do them, which was tough to do within an established firm,” he says.

After the sting of his firing wore off, Moore talked to people, did some soul searching and concluded he could go it alone. He and his wife fell in love with Bozeman, Mont., but there’s not a big market for financial planning there. But there is in Wisconsin, so Moore set up shop in Milwaukee (with a satellite office in Bozeman) with the intent of attracting clients, getting them used to working with him in a virtual relationship, and then moving full time to Montana and keeping Milwaukee as the satellite location.

“I structured the technology and marketing of the firm with the intention of moving it,” Moore says, noting that creating a virtual office is key to his plans. “I’m amazed by how many advisors refuse to meet with clients other than face-to-face,” Moore says. “It’s an incredibly inefficient way to do business. The use of free video technology has a dramatic effect on clients because they don’t have to drive into the office. Once I have a client do a virtual meeting, I can’t get them back into the office.”

Moore uses Google Hangouts and Skype for video conferencing and a screen-sharing service called join.me for online meetings. Among the online software tools he uses to help run his business are EchoSign and DocuSign, which let advisors e-mail documents to clients that they can sign electronically.

He says most of his clients found him on the Internet, and that only about half of the 40 clients he’s worked with—a mix of hourly planning and retainer fees—live in either Wisconsin or Montana.

“I truly believe the game changers won’t be advisors, it’ll be the tech folks,” Moore says. “I believe we’re in a time of reshaping the industry in a way that’s never been done before thanks to technology.”

No Bullying
Much has been said about the rise of the advice-centric RIA model at the expense of the product-centric wirehouse model. Look for that trend to continue, but don’t expect the wirehouses to become ancient relics in 20 years.

“I think the philosophical question is whether the business is changing,” Tibergien says. “There clearly will be a shift toward a more fiduciary advisory model versus the professional sales model.”

But, he adds, “Anyone who predicts the demise of the wirehouse model is engaging in wishful thinking. These are large, sophisticated retail financial organizations, and while they might change hands, their existence will be real.”

Within the RIA space, Tibergien expects the rise of the large independent, multi-shareholder, multi-employee advisory firms to continue. And, as it does, the RIA channel will likely become more like the accounting and legal professions where there’s a delineation among large national or global enterprises, regional firms and local businesses.

Chip Roame, managing partner at Tiburon Strategic Advisors, says technology advances, coupled with platforms from the likes of Morningstar and Envestnet, will “help guarantee that small firms will continue to thrive and not be bullied out of business.”

“RIAs will continue to take share, both in growing their businesses and adding breakaway brokers to their market,” he says. “The wirehouses won’t die but will focus on fewer, larger producers who will increasingly look like independent contractors with their own brands, offices, etc. The independent broker-dealers will find themselves caught in the middle, will consolidate further and will evolve to look more like custodians and/or producer groups.”

Gazing further into his crystal ball, Roame posits that discount brokers will outgrow the wirehouses and maybe even outgrow the RIAs, at least in their number of accounts.

“Discount brokers and their advice offers are the right model for the next generation,” he says, pointing to Schwab’s Independent Branch Operator strategy and Fidelity Strategic Advisor as examples.

Online Advice
Among the findings of an RIA survey released in November by Charles Schwab Advisor Services, 45% of respondents said they expect online investment advisory services will become bigger competitors to their business five years from now. And if these services take hold with younger investors accustomed to doing most things online, that threat could be even bigger in 20 years.

A recent report from the research and consulting firm Corporate Insight examined the fast-growing online advisory industry and handicapped likely winners and losers among more than 100 start-ups. The report, Next-Generation Investing, Online Startups and the Future of Financial Advice, divided these start-ups into 10 business model categories. These models range from algorithm-based investment advice and low-cost online managed accounts to online-only financial advisors and online financial planning and budget/cash management tools.

“While many of these start-ups will inevitably fail, those that succeed could change the very nature of investing, particularly as Generations X and Y begin to accumulate wealth,” the report said.

Among its findings, the report noted that Generations X and Y have higher expectations for online and mobile services and don’t see as much value in regular face-to-face meetings. Many of them are also skeptical about large financial institutions and tend to shy away from active investment management in favor of passive, index-based ETFs.

“These trends pose a clear challenge to existing financial institutions and create an opportunity for innovators that can offer cheaper and more technologically sophisticated alternatives than traditional investment firms,” the report said.

Grant Easterbrook, Corporate Insight’s senior research associate and the report’s author, tells FA that he doesn’t believe online financial advice will ever replace humans. “Putting someone in a portfolio based on time lines and goals can be automated to an extent and be offered at a much lower cost by these newcomers, and that’s where the real competitive pressure will come from,” he says. “But at the highest level, it’s hard to automate some high-net-worth services that advisors provide, such as setting up trust accounts.”

Easterbrook believes that fundamental change in the industry will occur when Gen Xers enter their peak earnings years because this cohort will have different preferences than their boomer parents.

“Generation X will still need advice with complicated financial decisions, but it’ll be with a different business model,” he says. “These trends will reinforce the shift to low-cost RIAs who have the legal obligation to do what’s in the clients’ best interest.”

RIP To AUM?
In the aforementioned Schwab survey, 44% of surveyed RIAs said they believe investors 10 to 20 years in the future will want a different service model than today, but that technology is changing so fast and the needs are so different that they’re unsure what this new service model will be.

Some advisors believe the traditional business model of fee-based assets under management doesn’t cut it for a large segment of investors. “The traditional fee-only business model doesn’t work for younger clients who don’t have a lot of assets,” says Alan Moore at Serenity Financial Consulting. “The hourly planning model works, but you need a lot of clients to make that pay.”

Moore’s clients range in age from their 20s to 42, and tend to be high-income folks with limited net worth due to paying off student loans, mortgages and the like. Most have opted for the hourly model, but he says one-quarter of his clients have chosen a retainer model that charges 0.5% of net worth and an ongoing 1% fee of income for investment management and comprehensive financial planning. “So if they have high income and no net worth, that’s fine with me,” he says.

Michael Kitces, research director at Pinnacle Advisory Group, has blogged that monthly retainers could be the model of the future in financial planning because the potential for a full fiduciary standard undercuts the current product-based transactional model that serves much of the middle market.

Some firms, such as Gen Y Planning in Minneapolis, have opted for a monthly subscription model. Sophia Bera, 29, started Gen Y Planning last year specifically to serve that particular demographic. “Gen Y is comfortable with the notion of monthly subscriptions because that’s how they pay for gym memberships, cell phones and their Netflix accounts,” she says.

Bera serves roughly a dozen clients around the country that she meets with via e-mail and Skype. She charges them an initial planning fee that varies based on the complexity of a client’s situation, plus a monthly subscription fee. She declined to give specific numbers because she says she’s in the process of changing the fee amounts.

“The monthly dues give them unlimited e-mail support from me, and we do check-ins every six months over Skype,” Bera says. She notes the monthly fee makes it easier for clients to get needed financial advice, and they can pay for it with PayPal or through an automatic bill-pay from their bank account.

“It’s about helping people incorporate financial planning into their lives,” she says.

These new models are desirable, if not needed, but the AUM model will be a tough habit to break, particularly for advisors with well-heeled clients.

The AUM model for pricing is a way for advisor firms to gain economic leverage when the markets go up, which historically they do, says Mark Tibergien. “Plus,” he adds, “if you go to a negotiated fee approach, you’ll have to negotiate with clients all of the time, and that’s a hard conversation to have.”

Filling The Ranks
Speculating about the future can be fun, but an industry without enough employees won’t have much of a future. The advisor profession’s existential conundrum is that it’s a graying industry that’s having a hard time attracting new blood. Increasing numbers of colleges and universities offer financial planning programs, but some observers say it’s not enough.

Caleb Brown, a partner at New Planner Recruiting LLC, believes the process for students majoring in financial planning at some universities is flawed. “I get the sense from colleges and universities that financial planning programs are seen as the red-headed stepchild in academia circles,” he says. “We need to increase the visibility of financial planning on college campuses.”

Brown’s company specializes in placing students and career-changers enrolled in CFP Board-registered programs, as well as CFP-certified practitioners with less than five years’ experience, with financial planning firms. “There should be people lining up at the door to get into this industry and position themselves to take over these firms, but I’m not seeing this at the level I’d like to,” he continues. “On the current path, I don’t think there will be enough advisors to serve future clients unless someone figures out how to provide financial planning for the masses. But people who need advice typically want it tailored to their situation. That means people will still want tailored financial advice, but there might not be an advisor to work with them.”

Tibergien, for one, is more hopeful about the future labor pool. “I don’t fear it as an industry because people will see there’s an oversupply of clients and an undersupply of people providing advice,” he says. “Sounds like a good place to build a career. I think the greater risk is to individual firms that don’t prepare for the evolution of their business and who’ll lose out on making an impact on what their industry will look like.”

The advisory profession has indeed come a long way, baby, and a generational shift over the next 20 years will move it along even further.