At the same time, the one big trend is more and more money is going to passive investments. This puts more fee pressure on the active and traditional asset managers.
“We all know that we’re due for a market correction or a bear market.”
When that happens, will active management outperform passive? That is a question to think about.
It’s also happening to the advisor, so if you’re an advisor and your margins are starting to split based on fee compression, the one thing that you have control over is technology.
Specifically, FinTech is becoming even more important to advisors on a day-to-day basis because they have to find ways to automate tasks that they’ve traditionally done manually. If their pay based on the assets under their management is going to shrink, the only way that they can continue to generate the same amount of income is to expand their book.
“The importance of technology is not only in helping advisors automate tasks, but also in adhering to this changing regulatory and legal environment.”
If the DOL rule does go into effect next June, meaning that the DOL puts more of a fiduciary burden on everybody that’s in the financial services industry, then the business model of literally every advisor has to change.
This means that the way they deal with clients and document their decision making has to change as well. So, again, the only way that they can do that and continue to attract new assets is to begin to automate processes.
Vasyl Soloshchuk, CEO and co-owner at INSART, FinTech & Java engineering company. Vasyl is also author of the WealthTech Club blog, which conducts research into Fortune and Startup Robo-advisor and Wealth Management companies in terms of the technology ecosystem.