Advisors have to pivot quickly to keep up with changes in technology and science, according to RIA entrepreneur Ric Edelman—and in doing so they may find reason to avoid using life insurance and annuities as retirement income and estate planning solutions for their clients.

Edelman, chairman and founder of the Digital Assets Council of Financial Professionals, a provider of blockchain and digital assets education, said in "Preparing Your Practice For Success in the Coming Decade: Why You Need A New Approach To Client Advice, Service, And Practice Management," a recent Financial Advisor magazine webcast, that advances in human longevity and changing living patterns is rapidly making the advice and the product offered by financial advisors obsolete.

“The bottom line is, the advice and the services that you have been delivering to your clients—to great success, I might add...—will lead to failure for your practice and your clients over the coming 10 years,” said Edelman. “The reason I say that bold statement is because of demographics.” 

Edelman said there are two opposing demographic forces straining the wealth management industry right now—the shrinking pool of qualified financial advisors, and the growing pool of people who need some form of financial advice.

The Great Crunch
A decade ago there were approximately 400,000 advisors in the U.S., said Edelman, and unless something changes a decade in the future there will only 200,000 active financial advisors in the country.

At the same time, the number of older Americans in particular is on the rise, said Edelman. In 2010, there were 40 million Americans over age 65, formerly the full federal retirement age and still the age most Americans set their retirement expectations around.

“Ten years from now it will be 80 million,” said Edelman. “So while the number of people over 65 is doubling, the number of advisors available to serve them is being cut in half.”

Advisors are aging out, said Edelman, who added that currently the average age of advisors is approximately 60. A quarter of active financial advisors are over age 65, but only 11% are under age 40. The industry is not replacing advisors who are aging out of their practices.

Edelman expects human longevity to increase radically in coming years due to the onset of new technologies fueled by recent decades’ scientific breakthroughs. With nanotechnology, scientists will build molecular machines to help cure and restore the human body. Genomics and gene editing are identifying the primary causes of diseases like cancers and viruses and offering new pathways to treatments and cures. Focused ultrasound—wielding soundwaves like a scalpel—offers potential treatments for “hundreds” of diseases with little pain or side effect. Personalization within medicine means treatments and interventions custom-designed to the patient and their precise condition.

“What we will be able to do is revolutionize medical treatment,” said Edelman. “What scientists are telling us is that 2040, we could cure heat disease, respiratory illness, obesity, addictions of all sorts, cancer itself.”

What That Means For Advisors
“Financial planning assumptions need to be revamped,” said Edelman. “We’re shifting away from the linear lifeline and moving towards a cyclical lifeline.”

In a linear lifeline, the arc of human existence is pretty much the same for everyone: We’re born, we enjoy a period of infancy and early childhood, enter our education and remain there while we mature, usually 12-21 years. Then we work, retire—often around age 65—and then die. That lifeline is going away, according to Edelman.

In a cyclical lifeline, people may go back to school and then enter a new career after retiring first in their 30s or 40s. They may take years off during what once would have been considered important mid-career or peak-earning years to spend more time with family or to pursue non-money-making personal interests. People may start to work well beyond 65.

“I think we will work through our entire lives, not because we need to economically, but because we want too emotionally, we want to stay engaged and stay active and contribute to society,” said Edelman. “That means we need to rethink the lifeline we’re dealing with and recognize that living an extra 20 or 30 years doesn’t mean we’ll want to just tack it on at the end of our life.”

People may stop sending children to college at age 18, said Edelman. The age of majority may be increased from 18. Children may begin staying in primary and secondary schools until age 20, and then attend college in their mid-20s after a period of work or travel. College may become an eight-year experience.

Changing Clients
The pace of technological development is killing and birthing industries at an increasing rate, said Edelman. The average length of employment in a single job is now eight years. By necessity, younger generations will have more people experiencing multiple careers throughout their lives. Gig work will become more popular, and the w-2 employee will become increasingly rare.

Clients will also be less likely to live in traditional marriages, said Edelman, as “the nature of gender, sex and relationships are all evolving at a very rapid pace.” For example, 20% of U.S. adults right now have never married, and 5% of adults claim they are living in a polyamorous relationship—three or more people living together in a romantic relationship.

The family is changing, too, said Edelman, as 42% of the population now has a step-relation, 10% of grandparents live with a grandchild and 150,000 children are adopted annually. 

“There are multiple spouses, children, half-siblings, step-children, there will be five or six generations alive at the same time, so it’s not just your parents and children and you, it’s your grandparents and your grandchildren, too. There will be a new dynamic regarding family support” and estate planning.

While longevity means there are more years of life to account for, the revolution in healthcare may very well mean that fewer clients will want or need long-term care insurance, Edelman said, as medical advances will cure many of the conditions that cause people to require nursing care.

New Retirement, New Strategies
Retirement income and investment strategies will have to change, too, said Edelman—glidepaths that dictate the balance of investments in portfolios will have to be extended to account for clients that live to 150 years old or beyond.

“We need to recognize the massive wealth creation opportunity that exists as a result of exponential technologies and make sure we’re providing clients with portfolios of the future rather than investing in the companies of the past,” said Edelman.

At the same time, the shift to older demographics will strain the social safety net, said Edelman. Social Security and Medicare may collapse under the pressure, or, more likely, will survive in reduced or greatly altered form. 

The same thing is likely to happen to life insurance and annuity companies, said Edelman, as most of the assumptions they’ve used to design and sell policies and annuities are based on people dying in their 80s. Thus, advisors, investors and clients should not count on annuities or insurance policies as guaranteed sources of income.

As a result, advisors must be willing to revise their financial planning assumptions, he said.

“Technology has killed companies forever,” Edelman said. “Ask yourself—what category of companies are at risk to tech obsolescence? Some examples are in the life insurance industry. If you live to 100, do you need to buy life insurance? By the time you die, your children are in their 80s. Ditto for annuities, which can’t make payouts for as long as people are going to live—do people really want to buy these kinds of products?”