I recently had the opportunity to attend a one-week leadership program for financial advisors offered at Harvard Business School. Not surprisingly, the program was excellent, in no small part because the professors and the “cases” they presented were also excellent. Unlike my professors, I went to law school, which is of course very different from business school. But both rely on the case method of teaching. They review real-life cases and stimulate Socratic learning by analyzing the facts and outcomes of those cases.

Two cases in particular really struck me. The first was the case of “The Rise and Fall of Nokia.” You remember Nokia, right? Given the fact that it once dominated the cell phone industry, you may have owned one of its products at some point. Remember the cool phones used in the film The Matrix? That’s right: They were Nokia phones, which were renowned not just for their utility but for their style.

Nokia was so successful, however, that it apparently failed to anticipate the stealthy competitors around it and the way they were tapping into changing customer preferences and market dynamics. It also appeared to fail in the critical areas of innovation and collaboration with others. When Apple’s iPhone and Google’s Android operating system hit the markets, Nokia was simply ill-prepared to keep pace, let alone outmatch these companies. Making matters worse, when Nokia, late in the game, did consider the possibility of collaborating with Google by adopting its successful operating system, it obstinately decided not to do so. Its CEO declared something along the lines of: “That’s not Nokia! We need to fight!” Ultimately, Nokia shriveled up and was acquired by Microsoft for a small fraction of its once gargantuan market value. It seemingly had become the victim of its own complacency, lack of vision, failure to consistently innovate amid changing client preferences and overly fierce independence.

I wonder if the other students had the same reaction to the Nokia case I had. To me, Nokia was no different from many of today’s financial advisors whose great accomplishments may have lulled them into their own false sense of security—or complacency. Many advisors have enjoyed wild successes—and deservedly so, as they have done good work for their clients and helped them achieve their goals. Yet my experience is that many also have overly strong convictions about their businesses and how they operate. Their successes have convinced them they’re doing everything right and that they’ll be fine if they just keep doing what they have done to get them where they are. They are slow to innovate, and when they do it’s often just by adopting other people’s innovations. And fierce independence? Well it’s probably not an overstatement to say that there’s a good deal of that in our industry. In fact, the very term “fiercely independent” has become a common industry cliché that often inspires pride not concern.

Are some advisors setting themselves up to follow the fate of Nokia? I believe many are doing exactly that. Effective innovation and collaboration are critical yet lacking in much of the advisory industry. Why innovate or collaborate when everything is going so well?

The answer is simple: because others will do so if you do not! Competition not only is intensifying but is coming from new places. Who will be the Apple or Google of our industry? Will it actually be Apple or Google? Will it be Amazon? What about the custodians or technology vendors on which advisors rely so heavily? Will it be a new company? A robo-advisor?

And that brings me to the second case that really struck me—the case of “The Wealthfront Generation.” Even if you don’t remember Nokia, you almost certainly know Wealthfront. It is one of the first and better known “robo-advisors”—a technology company that uses algorithms to manage, allocate and rebalance investment portfolios for a fraction of the cost of human advisors. Want tax-loss harvesting? It can do that—daily. How about programs diversifying concentrated stock positions? It does that too.

I was very interested in this case, particularly because I have followed Wealthfront and the other robo-advisors for some time. But what interested me most was the way the other students reacted to this case. The professor who presented it implied that Wealthfront, despite its many challenges to get off the ground and grow, may be a competitive threat to human advisors. Yet many of the students vociferously and passionately dismissed it and the very concept of robo-advisors.

“Robo-advisors can’t hold a client’s hand at the darkest moments of a bear market.” “Robo-advisors aren’t intuitive.” “Robo-advisors can’t do holistic planning.” “TurboTax didn’t wipe out the accounting industry, and LegalZoom didn’t wipe out the legal industry either.”

First « 1 2 » Next