• The eventual upheaval of the insurance industry. Because of blockchain’s unparalleled record-keeping integrity, everyone can become their own insurance company or participate in one. People will be able to tokenize risk and get others to invest in it—a sort of global mutual insurance consortium. Sure, state insurance commissions will get involved and attorneys will battle over claims issues. But as this is business as usual, today with large insurance companies, why not with blockchain-enabled self-insurance? The difference will be the disintermediation of the behemoth institutions that act as intermediaries. Commissions on all insurance related products are already on the path to extinction, and blockchain may hasten the loss of this staple of many advisors’ revenue streams.
• Disruption of the banking industry. As the ultimate intermediary, banks profit from the trust that customers place in them. Yet blockchain’s transparency brings such verifiability and accountability to DIY transactions that this challenges this longstanding benefit of using banks. Significantly, these same benefits are the very raison d’etre of blockchain.
• A revolution in fact-finding and identity verification, the bread and butter of the financial services industry. To handle their finances on their own, people must get information, be certain of the financial facts and determine the right actions based on an array of complex information. The advancement of cognitive computing will eventually empower individuals to get a customized financial plan merely by asking aloud for it, tapping a virtual concierge service for asset management that charges no fees.
An essential part of the transactions involved is identity verification. Currently, we rely on institutions—such as the government and large credit-rating agencies like Equifax-- to be the vehicles for this verification. Blockchain will eventually change this dramatically, as more and more people register identifying information on blockchain, secured with private keys. This is known as sovereign identify or self-sovereign identity, and it’s already happening. Charitable organizations are seeking to ease the plight of refugees who flee their homes in third-world regions, such as Africa, without their personal identifying paperwork, by helping them register their identities on blockchain; all they need to do is remember the passwords for their private keys or, more likely, be prepared to submit to biometric authentication, to access their secure data. In “Blockchain Revolution,” authors Don and Alex Tapscott refer to this data as the “virtual you,” contained in individuals’ private “black boxes,” to be released in discrete amounts where holders choose.
• The growing acceptance of Bitcoin and other cryptocurrencies, whose vehicle is blockchain. This acceptance will grow, in part from the ease of consummating online transactions with digital currency. Advisors who learn about cryptocurrency will improve their understanding of the new transactional environment. Also, cryptocurrency will affect advisory practices directly.
Advisors who aren’t aware of these trends will be caught off guard, much to the detriment of their practices and their careers. By learning about how their clients will use blockchain, they can prepare to become part of this process (rather than their clients’ exes). This will mean, ironically, facilitating their clients’ new-found independence while adding something that machines can’t: the human touch.
Though humans won’t need human advisors for transactions—or even “advice,” as it will be attainable through cognitive computing—they’ll still need them for life planning and ongoing financial-life coaching. Naturally, advisors who already do this are well-positioned. Those who don’t, or can’t, may not be able to replace the revenue that blockchain will drain. The more advisors try to act like machines, the more they’ll pay the human price for it—lost revenues.
Indirectly, machines will teach us what’s good and irreplaceable about being human, and that we shouldn’t try to be anything else.
Eric C. Jansen, ChFC, is the founder, president, and chief investment officer of Westborough, Mass.-based Finivi Inc.,an SEC Registered Investment Advisor and is the founder of BlockSocial.com, a blockchain technology media site.