Disruptive technologies that make existing businesses obsolete are hardly new, but the pace of change could be frightening. “It is predicted that two-thirds of the S&P 500 may no longer be in business in 10 years,” Edelman said.
Aware that many advisors might find his comments outlandish and unbelievable, Edelman qualified them by noting that if he is wrong, the question isn’t if but when. Developments that might not occur in 10 years are bound to become reality by 2030 or 2040.
It means advisors will have to change the way they deliver advice and services and they’ll need new products as well. It all starts with retirement planning. Many advisors use a life expectancy of 90 to 95 years and some even go as far as 100.
“Today’s 60-year-olds will live to 120” while the newborn will live to 500, Edelman said. That is not a typo; indeed 200 will be the new 45. “Today when you get old, you die, tomorrow when you get old you will break,” he told attendees.
To me at least, the 120 figure sounds a lot more realistic than 500, but the implications for long-term care, estate planning and marriage are daunting. Birth rates will have to adjust and decline or the planet will run out of space.
Life used to be linear, as people went from school to work to retirement. Going forward, Edelman thinks people will go from work to retirement, then return to school and start a new career.
To some extent, people are already doing that, though not on the scale Edelman envisions. “People will do it as much out of boredom as need,” he said.
That last comment recalls an essay John Maynard Keynes wrote in 1928 about the economic possibilities the grandchildren and great-grandchildren of his contemporaries would face in 2028. Keynes thought that people would not need to worry about money and could work three hours a day. After the stock market crashed in 1929, Keynes was unrepentant.
For his part, Edelman hardly views the high-tech future as a hippy-dippy utopia. One study he cited has projected that 47 percent of workers could be put out of work by robotics. “If you have self-driving automobiles, will you need cab drivers, truck drivers, auto insurers and chiropractors?” he asked. Car accidents provide chiropractors with the lion’s share of their customers.
New jobs that never existed are rapidly emerging, cushioning some of the blow. Six million Americans now work full-time designing iPhone applications.
For those who have been around the advisor space for a few decades, one can recall planners who couldn’t survive when mutual fund commissions were cut from 8.5 percent to 4 percent and subsequently 1 percent on C shares. “Many advisors will be out of the business or they will alter their business,” said Edelman, whose firm is looking to add 55 advisors this year.
Many others will quit, merge or join bigger firms. “But many also have a value proposition that goes beyond price and performance” and they’ll surivive.
If this kind of disruptive change isn’t managed with a high degree of sensitivity, there could easily be political upheaval along the lines of the French Revolution in the late 1700s. “Kiss your 1% goodbye,” said Edelman, who has built a huge $12 billion RIA targeting middle-class Americans, not the so-called affluent many advisors fight over.
Edelman’s remarks were nothing if nor provocative. At one point, he alluded to the U.S. economy in 1900, when almost 80 percent of American workers toiled on farms. Other estimates are lower, but by 1929 that figure was close to 21 percent. Whatever figure one wants to cite, everyone can agree that the labor force managed to adjust, albeit with great turbulence. Also, while the period of the early 1900 saw the rise of progressive reformers like the Roosevelts and the advent of the income tax, it also experienced the creation of many great fortunes among the elites.
Some remnants of that fast-changing era are still with us. And a century later, our nation’s school year still gives students the summer off, a custom created centuries ago when virtually all Americans worked in agriculture.