Digital currencies. As more and more financial transactions are being handled anonymously with Bitcoin, credit card companies and banks could become obsolete. A financial blogger recently opined that “advisors who get smart on digital currencies should see a significant impact on their AUM in coming years. … Why should you care about Bitcoin?” she asked. “Do you want to be in the top 5% of performers? Do you want to be relevant in five years?” I don’t claim to know how Bitcoin and other virtual currencies will affect us, but I can tell you this: I own some. (There’s no better way to understand a technology than to use it. I own a drone for the same reason.)
Delivery of financial services. Robo-advisors are already proving that online advisory services can be provided at low cost. Can you keep charging 1% or more? The potential impact on your revenue model is obvious and, for some, chilling. This explains why, two years ago, we launched Edelman Online. Whatever the future, we’re positioning ourselves to remain relevant and successful. Are you?
These are just some of the issues all financial advisors must consider as these disruptive changes arrive. As I said in a previous column, you’ll likely have three options: change your business model drastically, join a billion-dollar firm or quit (perhaps retire).
Like it or not, we are all about to become acquainted with George Jetson, and sooner than you may have thought. You might want to prepare.
Ric Edelman is chairman and CEO of Edelman Financial Services LLC, a registered investment advisor. He is an investment advisor representative who offers advisory services through EFS and a registered principal of (offering securities through) Sanders Morris Harris Inc., an affiliated broker-dealer and member of Finra/SIPC. He can be reached at [email protected].
The Future Of The IA World
March 2, 2015
« Previous Article
| Next Article »
Login in order to post a comment
Comments
-
Predicting the future, albeit fascinating, is a low risk endeavor. Unless you are incredibly prophetic, no one remembers what you said 15 years ago so it doesn’t matter if you were right or wrong in your predictions. What is compelling is the realization that change is actually the only constant and the need to adapt is ongoing. The ability to pivot in the face of constant change is the hallmark of exceptional leadership. As to the robo-advisor invasion, many parallels can be made in a variety of industries- cosmetics for one. Customers for cosmetics decide to buy either from a mass-market retailer or from a high-touch service department store. People will pay a premium for a product that makes them feel good and is accompanied by excellent service. Financial advice is no different. So the challenge for financial advisors it to step up your game! Advisors need to offer something of more value to clients—additional client offerings and a higher quality service. The question this article should compel you to ask is “What am I offering NOW that separates me from the competition?†Complacency is the enemy.
-
Although a fairly good article about the way technology changes the world, the robo advisor argument is already getting old; almost as old as the word, "disruption". The point that seems to always be lacking in this silly argument is that we are never comparing apples to apples. What on earth does a robo advisor platform have to do with what we do and what we charge? Did the fee of the CPA drastically change when turbotax came out? How about attorney's? Did Bob Shapiro's legal zoom reduce attorney's fees from $200-$500 and hour?...of course not. Although there is some downward trajectory in advisor fees, it will remain around the 1% mark for the foreseeable future because we provide a completely different experience and one more critical to the more important behavioral element of money management and financial planning. The economies of scale prevent it from going much lower as most of us would leave the profession if we can't get paid reasonable compensation net of our ever growing expenses. More importantly, as with the turbo tax crowd and the legal zoom crowd, RoboForm clients were never going to be our clients to begin with nor did we want them. Ric is an outstanding businessman and I'm sure great at making money but when it comes to being an in the trenches advisor which he no longer is, all of us need to set our own course based on fair like every other professional and stop taking advice from so many people whose opinion we are for some reason forced to listen too.