Ric Edelman: Advisors’ Biggest Tech Threat Isn’t Robos

“College planning is no longer the dominant financial issue for most American families. Most American planners spend a lot of attention helping their clients save for college, but that’s going away,” Edelman continued. “It’s going to be replaced by lifelong learning. The notion that you’ll be able to get a college degree and work in that career for your whole life won’t exist because chances are, that career won’t exist in the future.”

For example, Edelman said there are 300,000 people working full time as app developers, even though smartphones are only about 10 years old. New jobs will exist a decade from now, “which college can’t prepare you for because they don’t exist,” he said. “You’re going to need to engage in lifelong learning. Every couple of years, you’re going to need to go back to school to get new skills.”

Financial planners already serve a quasi-therapist role for their clients as they help them work through behaviors and attitudes that prevent them from being as financially successful as advisors think they could be. Edelman believes that role will continue to change as they find ways to help clients stay relevant.

“We’re going to have to learn career planning to be able to help our clients identify the career that they’re passionate about, help them discover where to get the education and training, how to pay for it, and maintain their lifestyle while they’re transitioning,” he said.

Advisors aren’t immune to disappearing job functions either. Parts of their job are already being replaced or supplanted by automation in investment management, Edelman pointed out, and a “life coaching” approach to financial planning will become even more important.

“It’s very difficult to charge a lot of money to a client just for investment management because you have online sites that will do it for 15 basis points. You have Vanguard and other mutual fund providers that will do it for 5 basis points.”

21^st Century Investing

Furthermore, investment management requires advisors to look more closely at the securities their clients are holding.

In the 1930s, the typical company in the S&P 500 survived an average 65 years, Edelman said. Today, that average is 15, and “by 2025, 40% of the Fortune 500 won’t exist.”

Stock portfolios filled with huge, well-known firms could be a big mistake, he said. For example, Kodak, a 135-year-old brand, went bankrupt in 2012, the same year Instagram was sold for $1 billion, he said.

“Do you own the stocks that were successful over the last century or do you own stocks that are designed for success in this century?”

Edelman assisted BlackRock and Morningstar on the iShares Exponential Technologies ETF launched in March 2015, which consists of 200 global companies that are developing or using exponential technologies to grow their companies.

Another innovation advisors will want to work hard to understand is blockchain and distributed ledgers. “I’ve had technologists say to me that in terms of importance: the wheel, the internet and the blockchain.”

However, at conferences, Edelman routinely finds advisors who have never heard of blockchain or are unable to explain it. “For an advisor to be unable to explain the blockchain, to be illiterate when it comes to digital currencies, you have to question the validity of the advice they’re providing to their clients. If the advisor is as clueless as the client, there’s a problem.”

— Read Ric Edelman — Media-Savvy Advisor: The 2017 IA 25 on ThinkAdvisor.