Lex Sokolin’s financial services story starts in high school.
“It was the ’90s, and I made websites as an 18-year-old,” he said. That creative part of his brain got put on hold for four years during his first foray in financial services at Lehman Brothers. While at Lehman, Sokolin was inspired when he had to cull unprofitable accounts.
“From the point of view of a 24- or 23-year-old who needs financial advice and who has at the time a lot of respect for everyone around you — that sucks,” he said. “Essentially, everyone like me is getting fired as a client.”
So in 2010, Sokolin created NestEgg Wealth, a technology company and RIA that helped pioneer online wealth management in partnership with financial advisors.
“The idea for NestEgg was to combine those challenges with the solutions of the consumer web and ETFs,” Sokolin said. “In 2010, this was quite a new idea.”
Between 2010 and 2013, Sokolin said he had to push “very, very hard” to get meetings with investment firms and to get on their radar.
“The term robo-advisor didn’t exist, so people had no idea what this was, and I was essentially getting kicked out of these board rooms where people said, ‘Why would we change our ultra-high-net-worth business with this thing? It’s ridiculous.’”
Between 2013 and now, Sokolin said he’s had more incoming prospects of financial firms than he had in all the years before.
“It’s just this shift in popular perception of where the industry is,” he said.
In 2014, NestEgg was acquired by Vanare, which has helped the platform commercialize and expand.
Sokolin, who is now partner and chief operating officer of Vanare, is known for his tech expertise and his openness to how future technology will change advisors’ world.
Sokolin believes “bitcoin and blockchain” and “artificial intelligence” will be the next evolution in financial services.
The digital currency bitcoin operates under its own infrastructure, blockchain, which is a special type of database that created the ability to have scarcity for digital goods in a secure way. What this also did was decentralize trust, according to Sokolin, to the point where no financial institution is necessary to maintain bitcoin.
“What role will the financial brands play in the future? Do you need a large financial institution to guarantee something when the assets exist on an infrastructure that is self-sustaining and people believe in?” Sokolin asked. “Wikipedia, for example.”
Sokolin thinks artificial intelligence will also drastically change the industry by helping advisors build in-depth risk profiles of clients.
For example, today, when advisors wants to get somebody’s risk profile they give them a paper questionnaire that’s often 10 multiple-choice questions or something similar.
“Imagine, instead, that you have all the social data that a person has put out on Twitter or Facebook […] in order to build a personality profile,” he said. “Is this person anxious? Are they reserved? Are they outgoing? Are they extroverted, are they introverted?”
Not only will artificial intelligence help build a deeper profile, but it will be able to do so for all levels of clients, Sokolin believes.
“I think artificial intelligence can help build profiles of clients that are far richer than a 10-question paper questionnaire and have nothing to do with how wealthy a person is,” he said. “Software has zero marginal cost. It’s essentially free, so giving that level of high-level diagnosis to somebody will not depend on whether they’re high-net-worth or whether they have a thousand dollars to invest.”
Sokolin predicts both artificial intelligence and bitcoin and blockchain will be much more transformative than robo-advice on the industry.
“Robo-advice is about making business processes and automating them and putting the consumer web front on it, whereas these things will really change the financial product, and continue to challenge and change the role of the advisor,” he said.