Editor’s note: This is the third in a series of interviews with thought leaders on the future of the wealth management industry.

Michael Durbin, Technologist for Wealth Managers - Over the last 25 years, Mike Durbin has served in a variety of senior executive positions supporting wealth managers while at Morgan Stanley and Fidelity. During his five-and-a-half-year tenure as the head of Fidelity Institutional Wealth Services, he oversaw a business that more than doubled its assets under administration. However, earlier this year he was handpicked to run Fidelity Wealth Technologies and charged with reinventing the firm’s value proposition for its RIA and custody clearing businesses. He is also currently serving as interim CEO of eMoney Advisor, which Fidelity acquired earlier this year. He generously agreed to share his thoughts on how he believes technology will change the wealth management industry over the next decade.

Hurley: What will the technology platform used by wealth managers look like in 10 years?

Durbin: It will finally deliver on several things. The first is easy access to aggregated, reconciled data. Consumers of the future are going to require that their advisors truly advise on everything the household has or does.

Second, technology will enable clients to be involved in what the advisor is studying, sourcing, debating and doing. Fast-dying are the days when an advisor sits across the coffee table at home, asks a thousand questions and says, “I’ll come back in six weeks with your plan.” 

This is one of the principal reasons we were attracted to eMoney. Its architecture is centered on the idea of the advisor and consumer working together. They are able to jointly study multiple plans. 

Third, technology will deliver on integrated solutions for wealth managers. A threaded stack—CRM, performance reporting, all of the other capabilities that are required—will be integrated and delivered efficiently to advisors, through one relationship.

Hurley: What services will advisors provide in the future? 

Durbin: Good firms will become counselors instead of just financial advisors. Technology will allow advisors to wring out any excess spread or cost that their clients are paying. It will also allow advisors to offset pricing pressure on their fees. Although the mechanism of price will change, they will be able to get the same dollar amounts. 

Today, most traditional wealth managers are investment managers. Most have overestimated the portion of their clients’ wealth that they actually serve. Frequently, when a client’s information is fully aggregated, advisors are stunned to see how little they manage. 

Ten years from now, to be viable, advisors will have to provide holistic wealth management advice across an entire household’s set of needs and holdings, including homes, investments, liabilities, cash, 401(k), etc. For example, there is a marriage between health and wealth that’s absolutely coming. Clients need help understanding what kind of health care they can afford. They are going to ask their advisors, “What can you do to help me get the health care that I need?” 

If you’re going to really be that holistic advisor-cum-financial counselor in 10 years, you better have a view of absolutely everything going on in that household. They also will have to do more for clients, and technology will allow them to do that cost-efficiently.

Hurley: Let’s get to dollars. The cost involved in creating these kinds of technologies is mind-numbing.

Durbin: For the advisor or for custodians?

Hurley: That raises an interesting question. Who will pay for all of this? 

Advisors currently get a technology platform that is free because their clients, effectively, pay for it. But because advisors have systematically lowered what their clients pay for custodial services, the math, at some point, will not work for the custodians, especially if they are going to pay for all these new technologies over the next decade. 

Durbin:You point to several interesting issues. The first one is integration. Custodians traditionally have provided a platform, and advisors have added technology. Today, both custodians and the independent tech vendor base are augmenting these platforms with various bells and whistles and capabilities. 

If I am a principal at a wealth manager, at first, I may think, “This is phenomenal. There is so much capability out there.” But then I think quickly, “How am I supposed to stitch all of this together?” And the resulting technology stack turns out to be quite expensive and its various components do not talk to each other. 

Second, because of several secular trends, the clearing and custody businesses are growing very nicely from the top and bottom line. But the marginal rate of revenue produced on the marginal dollar of asset coming in continues to fall. There is a potential future in which custodians look like utilities. 

This is why we created Fidelity Wealth Technologies. You can only fix that revenue issue by positioning your own solutions or serving something up that is new and on which you can get a revenue stream. 

The core capabilities that we provide, access to brokerage or some new account access servicing, that’ll continue to be free. But we also now provide wealth managers with a technology solution for an out-of-pocket, per advisor annual licensing fee.

This is a new piston in our revenue engine. Through Fidelity Wealth Technologies, we can license technology to advisors, who are very willing to pay for it because the value they perceive is being delivered.