Technology Will Continue to Transform Independent Advice, and Advisors

If you haven’t read Jamie Green’s excellent cover story in the January issue of Investment Advisor—Five 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!)