I have great respect for Ric Edelman. First off, he’s a recovering financial journalist made good. How good? If you haven’t heard of Edelman Financial Group (of which he’s the president and CEO), it’s a Fairfax, Va. independent advisory firm, that, thanks to its merger with the Sanders Morris Harris Group in 2005—and Ric’s emergence as a publishing and media star—now has a cool $18 billion under management. Not bad for a husband and wife team who decided to make a career switch and become financial advisors in 1987.
I met Ric in the mid-90s, when his firm was just beginning to take off, and was impressed that he was following his own vision to serve the needs of the “middle market” with minimums of $50,000, rather than following the trend toward targeting ever-wealthier clients that still persists in the advisory world today. That vision involved providing whatever services his clients required to meet their financial goals, which back in that day included mortgage loans,which he provided in-house, making Edelman one of the forerunners of the current trend toward hybrid advisory firms. From 529 plans to ETFs to advising on 401(k) and IRA assets, he’s stayed on the leading edge of retail advice ever since.
So I took note the other day when I came across Andrew Osterland’s January 20 article on InvestmentNews.com about the new Edelman Online platform, with minimum investible asset limits of $5,000. Ric was quoted as calling the move a “long-term loyalty program,” in the hope when these new customers “receive their inheritances,” they’ll give it to him to manage. But Mr. Osterland pointed to research suggesting that smaller clients almost never become “wealthy” clients in the advisory business, which I believe to be the experience of most advisors—smaller clients may become affluent, but they usually don’t become rich.
That leads me to believe that Edelman—who undoubtedly knows this as well—was being coy rather than revealing. To my mind, Ric was probably being more forthcoming when he said: “This is the direction the world is moving, and we’re at the beginning stages of it. Technological advances in the next three to five years will have a radical, disruptive impact on financial advice and how it’s delivered.”
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That reminds me of one of my favorite quotes, by Dr. Paul Saffo of Stanford’s Institute for the Future: “It takes people about 100 years to figure out the best use for major technology advancements.” Think of the printing press, the internal combustion engine and electricity. And now the Internet. I believe Al Gore invented it back in the ‘70s, so that means we still have another 60 years or so to get this Internet thing right.