The broker-dealer industry has entered a period of profound change, one that is characterized by fundamental shifts in demographics and attitudes, and in the very nature of the advice model.
Yesterday’s advice model presented a simple choice for investors. They could either do it themselves using online tools and a discount broker, or they could work with an advisor. Today we are seeing a significant convergence of the two models.
The phenomenon is being driven by individuals who want the best of both worlds: the benefits of financial guidance coupled with the comfort of being in the driver’s seat.
Discounters are capitalizing on the opportunities presented by those investors with what I call the “Do-It-Yourself 2.0” model (DIY 2.0), with technology at its core. They offer control coupled with scalable advice using a mix of robust online planning tools and powerful websites.
Broker-dealers may want to explore engineering a similar transformation to reconfigure the current advisor model to what I’ll call Advisor 2.0.
I believe the Advisor 2.0 model may help BDs supplement or even leapfrog DIY 2.0 by taking the core of the model—the advisor—and combining it with online tools and channel integration. Broker-dealers may, as a result, be better able to offer scalable, repeatable advice via a personal relationship.