Lack Of Cooperation
There are a number of things that we could do as an industry to make our lives easier, but collectively we don’t have the will to do it. Let’s take, for example, the issue of account aggregation as it relates to reporting. Many advisors would have no need for a third-party account aggregation service if they could just get direct access to their clients’ 401(k) accounts and 529 plans. From my perspective, this is more of a legal issue than a technology issue. The way the laws are written, plan sponsors control who can access a client’s account information, not the client. As a result, advisors have to go through an intermediary and incur additional costs to obtain the data. If we all lobbied Congress for a change in the law, allowing our clients more control over their own information, access to this data would be less problematic.

Data standards are another area where we could cooperate and drive down costs, but there does not seem to be a collective will to seriously tackle this problem.

Robo Advisors
As the cover story in our April 2014 issue (“The Rise of the Robo Advisors”) made clear, some people view automated online advisors as a threat to financial advisors and others don’t. Regardless, most think these sites are here to stay. I approach the issue from a different perspective, dividing the robo-model into two dimensions: technology and service.

And complacent advisors have much to fear from the former—the technology powering most robo-platforms is better than that supporting your typical RIA or B-D firm. I have personally opened accounts on at least two of these platforms to gauge the client on-boarding experience, and it is excellent. Unlike the typical advisory firm, many robo sites allow you to open an account electronically, sign forms electronically and fund the account from a bank account in a matter of minutes. Once you’ve established an account, the online portal experience is far superior to what many advisors I know offer.

And it’s particularly well suited to the Gen X/Gen Y market, people who are much more comfortable with an online/mobile/self-directed model. And these are the people you need to attract to grow your business. If they choose a robo-advisor over your firm first, you might find it difficult to entice them away.

Our industry has been slow to respond, technologically, to the threat. A number of firms offer a robust client portal experience, and a number of B-Ds and custodians do, but many do not aggregate held-away assets like the online sites do. (One leading third-party vendor in this niche is eMoney.) The number of B-Ds and custodians that offer true, electronic straight-through processing is still small, as is the number of advisors that have it incorporated into their own Web sites.