Possible Scenarios
“All in.” In this case, Wealthfront replaces advisors.  Investors choose an online provider over the personal service of an advisor and manage their entire portfolio online.

A hybrid model. In this situation, a Wealthfront would complement investors’ existing investment portfolios, providing them with the best of both worlds—the personal service of an advisor and access to an online platform. This is consistent with the fact that, according to Spectrem Group, 55% of mass affluent clients, with a net worth between $100,000 and $1 million, are neither do-it-yourselfers only nor only advisor clients, but both, meaning they have both an advisor and a portion of their assets in an account at Schwab, E*Trade, Wealthfront, etc.

A feeder. In this scenario, Wealthfront serves as the lead generation for advisors. The site’s low-cost structure and $5,000 minimum (compared with average advisor minimums that can range from $100,000 to $1 million) capture the long tail of clients, and when clients reach a certain level of affluence or complexity, they will “upgrade” to an advisor.

Clients’ needs are based on the complexities of their financial positions and stations in life. A college graduate has little need for estate planning as opposed to a more seasoned investor who may own a home, have a family and have serious concerns about college education expenses, retirement and aging parents. As the complexity increases, so does the need for greater financial advice and direction.

Avoiding The Fate Of Travel Agents
What got us here won’t get us there. There is no question that today’s average advisor is at risk of becoming obsolete within 10 years. But advisors as a whole do not have to become obsolete if they are willing to adapt. A Formula One-winning race car in the ’80s would be outdated and inadequate to compete on today’s race circuit. Financial advisors want to avoid the same fate. They must “disrupt themselves” and learn to provide value in the new ways expected by clients.

This list is by no means complete, but here are four strategies I would recommend advisors consider to survive and thrive in the coming decade:

Provide Unique Value That Can’t Be Automated. Advisors can continue to add value by providing comprehensive, holistic advice based on the individual goals, time horizons and risk tolerance of their clients. By delivering advice that is not easily commoditized by an automated algorithm or online program, advisors will continue to survive even as the world automates.

Find Your Tribe. Advisors can leverage technology to develop a scalable practice focused on the target markets they’d like to serve. This then allows them to become a big fish in a small pond and focus their practice around clients who share common interests and values. For example, one successful advisor we know focuses solely on recent medical school graduates. Another focuses on high-tech employees.

Be High-Touch. The New York Times editor Quentin Hardy recently wrote, “Increasingly, the most valuable things in our world involve people looking at you, touching you and understanding you.” Today, the most valuable businesses and individuals are those who can connect and customize to serve their clients.

The U.S. Bureau of Labor Statistics forecasts a jump in the number of jobs (as well as pay) in home health, personal care, psychology, personal training and life coaching, at the same time the costs of goods and transactions continue to decline. Will the successful financial advisor of tomorrow be more therapist than investment advisor?

Be High-Tech. Clients are social, mobile and digital. Therefore, it’s not acceptable for the financial advisor of tomorrow to not be social, mobile and digital if the advisor wants to stay relevant in his or her clients’ lives.

Firms need to leverage technology to enhance an advisor’s practice and provide training as well as integrated tools—giving clients the ability to go online to trade, view transactions, learn and talk to someone when and how they want. In other words, if firms and advisors don’t race with the machine, they will quickly find themselves racing against the machine, and that is not likely a race they can win when it comes to cost or convenience.

The financial services industry is not immune to change, and those who adapt improve their chances for relevance and survival against a growing threat of new technologies. Playing it safe is risky, and the opportunity for advisors today lies in leveraging technology to improve the service they provide clients and to differentiate the uniqueness of their practice.

In the future, there will be a premium on businesses that provide uniquely human experiences coupled with the convenience of technology. In a world of big data and automation, the human touch and personal relationships will become scarce—and therefore more valuable than ever.

Clara Shih is CEO and founder of Hearsay Social, provider of the leading social business platform for the financial services industry. She is also a New York Times-featured best-selling author and has been named one of Fortune’s Most Powerful Women Entrepreneurs.


 

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