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American Portfolios' Lon Dolber on Advisors & 'Life at 100'

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Robo-advisors introduced a new element into the client service model of professional advisors with easier onboarding and account opening services.

(Related: Opening New Accounts Is About to Get a Lot Easier)

However, the benefit of that offering to DIY-oriented digital natives was offset by the huge costs of client acquisition. Today, the automated platforms with the most assets aren’t the disruptive startups, they’re the established firms.

Vanguard’s Personal Advisor Services has a massive $83 billion in assets, while Schwab’s Intelligent Portfolios platform has $19.4 billion and TD Ameritrade’s platforms have a combined $16 billion.

By comparison, Betterment’s assets under management is just $10 billion while Wealthfront manages $6.7 billion.

Lon Dolber, CEO of American Portfolios Financial Services, winner in Division III of the 2017 Broker-Dealer of the Year, wonders what the long-term effect of automated services will be on the industry.

Read his comments below, and click here to see more from our discussion with this year’s winners.

Lon Dolber, American Portfolios Financial Services:  Maybe the question is not whether [advisors] can open accounts. Maybe the bigger question is life at 100. Think about it.

I’m going to be speaking about this at our conference. I’m going to tell the advisors, “Baby boomers might live to 100. You better get your planning together because you’re going to have to plan for a longer retirement.”

Imagine having to manage money all in — when I say all in, [I mean] the cost, the underlying cost and what you make — under 100 basis points. Maybe we have to start from that. 

How can you survive your practice managing life at 100 basis points all in? That’s what I’m thinking about. What do [advisors] need to manage and to survive in their practice with the number of hours they have, how many clients they’re going to have to get?

It’s not so much about opening accounts. It’s about living at 100 basis points, if not less, which mean the advisor might be living at 40, 50 or 60 basis points.

How can they do that based on their core structure that they have right now? How can we do it with the core structure that we have right now? …

The robos are not profitable. If they haven’t made any money in a rising market, what’s going to happen when the market goes the other way? …

They haven’t made money because the acquisition of a client is too expensive, but the advisor’s practices already have the acquisition.

This is the thing. If you give the client more operating leverage, the advisor, they already have the relationship. The robo found out that it was about the relationship and the cost of acquiring the relationship exceeded the small piece they were going to make through the automation of opening accounts.

That’s the game right there. The reason [robos] want to work with advisors is they figured out very quickly that the advisors have the clients, they have the relationships. It’s a relationship business.

(Related: Betterment Users Can Now Contact CFPs via App)

Subsequently, that’s the thing that we have going for us. It’s a relationship business. If we can couple that with good automation and good operating leverage, they can live with 50, 60 basis points because the advisors already have the relationships. They don’t have to acquire them the way the robo did, but the robo jumped the shark. That’s already been proven.

— Read Firms Announce Tech Plans; One Strikes a Deal on ThinkAdvisor. 

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