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Moshe Milevsky: Big Change Is Coming—The 2015 IA 35 for 35

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“If we were to go back in time 35 years, here we are in year 1980. How does a financial advisor’s life differ from the year 2015?” Moshe Milevsky, finance professor at the Schulich School of Business at York University, pondered in an interview with Investment Advisor.

There are three big differences that “really highlight the trends over the last 35 years,” he said.

First is that in 1980, interest rates were at “abnormally high levels,” between 15% and 20%. Over the next 35 years, they fall to almost zero.

“That’s an enormous change in that money doesn’t earn interest anymore. In fact, money is earning negative interest when you take into account inflation and taxes,” he said.

Second, the services advisors provide are different. Milevsky recalled that “35 years ago, investment advisors and money managers were stock pickers. […] Even mutual funds hadn’t become entrenched, let alone ETFs and managed portfolios.”

He continued, “Now an investment advisor doesn’t do stock picking. It’s almost futile. There’s this awareness of indexing that almost didn’t exist then.”

Indexing has led to a switch in the approach advisors take to managing portfolios. “We’ve gone from the default is active management to a default of passive management. That’s huge, completely transformative.”

The final big change over the past 35 years is in the nature of retirement. Three and a half decades ago, retirement was “a couple of years, a long vacation, and you get a pension from where you worked.” Now investors have to figure out how to make the money in a 401(k) or IRA last for a few decades.

“We’re living so much longer than we were in the 1980s. If you take a look at life expectancy and longevity, how long we’re living and how long we’re living in good health, the entire nature of pensions has been transformed.”

Although he pointed to specific transformations that have brought us to today, Milevsky insisted predicting the changes of the next 35 years was an impossible feat. “Forecasting the future is a mug’s game,” he said. “In some sense, I think that part of the secret to being useful and valuable is not trying to forecast.

“If you ask people, ‘Well, what made you successful?’ I don’t think the answer is, ‘Well, I was able to predict the future correctly.’ If anything, they’d probably answer, ‘I stayed away from predicting the future. I’ve tried to adapt to it or shape it.’”

He conceded that one potential change would be that over the next few decades, the industry would change so much it would be unrecognizable to the advisor of 2015. We’ve already seen that change, he said.

“We take a typical stockbroker. We put them in a time machine and we send them 35 years forward to the year 2015. They’re unemployable,” he said. “They’re not skilled to do any of the things that they have to do today. They aren’t aware of the technology.”

That’s something the next generation of advisors needs to keep in mind; that they may have very different skill sets in 30 years than their mentors do now.

“A financial advisor may be a social worker 30 years from now. A financial advisor may be a gerontologist 30 years from now. They may be a life coach. They may be doing things other than managing their money, because that’s all going to be done by robo-advisors and online platforms,” he said.

Instead of fielding endless questions about where they’ll ever find a job, new sociology majors might find themselves in demand. Milevsky said those non-finance-based students are valuable because they approach clients’ issues from “outside the box. They don’t come with a preconceived notion of how things are.”

He added that a lot of people in the industry are saying “’I don’t want to hire the typical economics graduate. We want someone that’s thinking about this a little bit differently.’”

See the full 2015 IA 35 for 35 and the calendar for extended profiles of each honoree.


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