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Technology Will Continue to Transform Independent Advice, and Advisors

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If you haven’t read Jamie Green’s excellent cover story in the January issue of Investment AdvisorFive Disruptors That Will Transform Advisors’ Businesses—you need to go do it, like, now. It’s an insightful and well-supported analysis of five trends that will undoubtedly have major impacts on the way financial advisors do business for decades to come. The trends are:

  1. “The Mobile Trend”—the power of handheld computers, formerly called cellphones;
  2. “The Micro Trend”—essentially, the Internet;
  3. “The Longevity Trend”—clients, advisors, populations living longer;
  4. “The Politics Trend”—lawmakers playing increasingly larger roles in the regulation of advice; and
  5. “The Generations Trend”—frictions created by the conflicting interests of various age groups.

While each of these topics could, and do, fill libraries, Green does an amazing job of paring them down to the key points of their potential to affect the advisory industry. 

Although all five trends warrant further exploration and comment, my attention is currently captured by the first two—mobile and micro—which together might be labeled “technology.” We all pay lip service to how much “technology” has changed our world, but I find it’s enlightening to occasionally reflect on the specifics.

Over the holidays, a friend of mine was reminiscing about her grandmother, who was born in the 1880s. Having lived in a rural region of the country, she grew up without running water, indoor plumbing or electricity. People traveled by horse, or buggy, or on foot, on mostly unpaved roads. Trains and telegraph were “high-tech.” Imagine the shock to one’s system going from that world to one with telephones and televisions; cars and airplanes; swimming pools and air conditioning; and people landing on the moon. 

Technology hasn’t had quite that much of an impact on the advisory world, but the changes have been dramatic. When I started writing about advisors in 1984, financial planners calculated their plan projections on HP-12c hand-held calculators. Client trades were executed by computers: but they were hugely expensive, giant machines that filled entire floors of buildings and were owned by brokerage firms. Advisors communicated their trades by handwritten forms, which were then phoned in, or if their office was high-tech, faxed. 

Back then, “independence” wasn’t even an issue: what advisor could afford the labor costs of managing client portfolios, or of accumulating constantly changing information about investments and markets? Then came desktop computers, and the advisory world changed forever.

(As a quick aside: Bill Gates became the richest man in America, at least for a while, because IBM chairman Tom Watson couldn’t see any reason why business executives would ever want to have computers on their desks!)

Armed with desktop computers, advisors could quickly and easily perform complex calculations, store them, reuse them, and share them, via floppy disk, and eventually via modems over telephone lines. And they had access to libraries of information through the same channels. Suddenly, the need to affiliate with a large brokerage firm wasn’t nearly as great—and first as independent reps and then as RIAs, advisors in growing numbers started their own independent businesses.  Then came the Internet, offering greater access to information and services and the independent advisory business exploded to where it is today. My point is that independent financial advice exists today almost solely due to advancements in digital technology, which has transferred power from large financial businesses to small advisory firms. Additional advancements, such as faster, more powerful computers, more powerful programs, and independent platforms (Tamarac, Envestnet, etc.) have only served to accelerate this power shift, through the use of multiple custodians and trading desks. 

Green reports that Mike Walsh, author of “Futuretainment,” said: “The modern world began in 2007 with the introduction of the iPhone … there is a ‘new global generation’ growing up today who have never known a world without smartphones and high-speed digital connections. They are a living challenge to all of us to rethink the way we do business.” And he goes on to cite data on the exploding use of the Internet and cellphones, and the mobile apps to use them in the securities business, including electronic trading authorization.

Is all this a threat to independent advisors? Green concludes that: “Advisors must provide clients with state-of-the-art mobile access and tools or be co-opted by digital advice providers that make the consumer’s experience pleasurable and efficient.”

Maybe. Yet I think history shows us that technology empowers independent advice. And that this technology is almost never created or even provided by independent advisors: it’s provided by a growing number of institutions and businesses that support independent advisors.

I can’t help but believe that this trend will continue, with more platforms creating ever more technology tools for a growing number of independent advisors and their clients. For their part, independent advisors will continue to increase their independence by affiliating with platforms that provide the broadest access to the growing number of new technologies.

As far as I can see, new technology is just a win/win/win for the independent advisory industry.


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