The Perils of Looking Downward
But Sha says that advisors shouldn’t necessarily be thinking about technology as a way to move down market and serve more mass affluent or middle-class Americans. Banks already have a big advantage here.
“It’s an incredible business model if you’re a retail bank because you have legions of mass-affluent consumers who are already your customers,” said Sha. “If you already have these consumers, you’re positioned to win with this strategy. Someone like a stand-alone robo-advisor is stuck trying to fight the customer acquisition war, and so are financial advisors who do this. For the banks, it’s a much easier fight to win.”
As banks increase their fintech investment, they are building the consolidated, holistic financial solution that many consumers seek, said Sha.
The non-bank fintechs “are really in a tough spot here, because they are usually starting in one place with lending, deposits, investments or something, and then they’re trying to win credibility across new product lines they are launching,” said Sha. “They have to fight so hard for relevance and trust and things like that, things that most banks already have.”
A Less Personal Future
The future of the industry is one where more clients are served by teams of advisors, and there isn’t necessarily a unique one-on-one relationship between advisor and client, said Sha.
“You might not have a dedicated advisor that you see at all,” he said. “You dial an 800 number and it ends up being whoever picks up the phone. That’s kind of the Vanguard-style centralized model.
“As we get more comfortable with remote engagement, we’re going to find ways to make ‘centralized’ not mean ‘anonymization.’ Pooled resources allow for quality and efficiency gains, especially if people are armed with the right technology to help them understand who the client is. It’s becoming less important to talk to the same person every time you make contact.”