Josh Brown, CEO, Ritholtz Wealth Management Josh Brown, CEO of Ritholtz Wealth Management. (Photo: Bloomberg)

Josh Brown, CEO of Ritholtz Wealth Management, has some advice for advisors who are considering creating their own in-house robos or elaborate proprietary tech platforms or digging deep into their clients’ social media profiles to anticipate desires that they’ve never expressed: Don’t do it!

These are just three of the five “big ideas” for investment advisors that Brown, aka Downtown Josh Brown, presented in his morning keynote at the Inside ETFs conference in Hollywood, Florida. Here are his five ideas.

1. Financial advice is disruption-proof. Robots won’t replace you.

“The business of advice will carry on even if our roles in the business change,” said Brown. “Focus on where you will fit and the tools you will use.”

Brown explained that advisors shouldn’t fear AI because the type of AI in use today, which he called “narrow AI,” is not the same as AGI, or artificial general intelligence. The latter would require that computers have a consciousness, which is far from being developed since humans don’t understand where consciousness comes from.

Technological change isn’t new, and jobs will be lost while others will be created, said Brown, noting the low unemployment rate despite the decline of manufacturing from 30% of the U.S. economy in 1960 to around 10% now.

2. There is no first-mover advantage in the advisory industry, which is well-regulated. 

“Five years ago every RIA firm thought they had to have their own robo-advisor,” said Brown, explaining that Ritholtz Wealth was one of them. It created its own robo-advisor five years ago and it bombed.

“Most likely there will be five gigantic robo-advisors in the future,” said Brown — Vanguard, Betterment, Schwab, Fidelity and Merrill Edge. “Being first doesn’t matter in this business.” He proceeded to ask the audience if anyone remembered the first firm to add DocuSign or a model portfolio. “It doesn’t matter!”

3. Calm the f— down.

“Don’t be jealous of those firms spending millions to develop in-house technological platform. They are taking a huge unnecessary risk.”

The wirehouses did this in the 1990s and have been having issues ever since, constantly adding patches that don’t work too well, sometimes changing systems. “Don’t think a proprietary RIA technological platform built in-house will be any different.” He suggested talking to those advisors who fled the wirehouses after such experiences.

4. Set boundaries.

Don’t track your clients’ internet use, Instagram accounts, or match your database with email subscriber and traffic data for email solicitations. These are red lines that should not be crossed, said Brown.

“Advisors are not absolved from the responsibility to know right from wrong.”

5. Enough already.

Don’t add a geneticist to your staff or set an asset allocation based on body mass index, said Brown.

“Reflect on what you’re doing,” including the introduction of a new piece of software. Advisors will know when they need to add software, said Brown. “It will be obvious because your employees will be struggling or your clients will be demanding new and expanded services. There is absolutely no reason to solve problems before they become problems.”

Then he showed a slide with the 40 fintech programs he uses. “You have to say ‘No’ and maybe consider stripping things out.”

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