Tech Giants Are Creeping Into Finance. What's an Advisor to Do?

When [more aspects] of an advisor’s [work] are automated, their compensation is going to go down because clients will say, “I can go to Betterment, or I can get free financial planning. Why am I paying you for it?”

What are your thoughts about the influence of blockchain?

Blockchain is distributed ledger technology. It’s just another way to store data.

A centralized [monetary] authority using blockchain isn’t interesting to me. But with a cryptocurrency like Bitcoin, there’s no centralized authority. It’s an algorithm-based financial service: You can interact directly with the technology.

Blockchain has the capability to have [fast] settlement [of trades], which will help financial services. You don’t have to wait overnight or two days for settlement — which carries risk and requires payments to a custodian, transfer agents and other middlemen — because blockchain itself does the settlement.

But cryptocurrency is controversial. What’s the biggest plus?

It’s only controversial to people who are threatened by it. Cryptocurrency is an overnight success that took decades to create.

What’s great about cryptocurrency, such as Bitcoin, is that it’s all managed automatically because it’s designed as an algorithm. There’s no bank.

Now let’s look at technology’s biggest recent impact on practice management: Financial advisors were allowed — indeed, many were mandated by firms — to work from home during the pandemic.

Now some employers are saying that advisors must come back to the office. How do you see this issue shaking out?

The bubble has burst. Employers had the belief that people didn’t work as well at home, that they weren’t productive there.

The pandemic forced a massive nationwide test of that theory, but it didn’t hold water because in many cases people were even more productive working at home. So you can’t put the genie back in the bottle.

Which advisory channels might be working remotely in the near future?

Independent advisors, smaller and midsize firms. And RIAs — they have lots of flexibility.

You’ll see all kinds of hybrids. Companies will try a variety of things because they have the technology to do that.

Not only will you see people working from home full or part time, you’ll see variations of that: Some companies will say, “Work from home whenever you feel like it, and come to the office whenever you feel like it.”

Some will allow advisors to switch their offices to different locations — even different states — for a change of pace and different scenery.

Some advisors will say, “It doesn’t matter where I am: I want to live in Key West! I can work from anywhere, and my clients don’t care because they’re working from anywhere [they desire] too.”

Some clients may not even want face-to-face meetings because they’re used to seeing their advisors on Zoom and are happy with that. So it’s a win-win.

What about the more traditional advisors? Will they make that sort of shift, too?

They’ll go back to the old way and won’t change. They want to return to in-person as quickly as they can.

Will the wirehouses allow FAs to work from home?

No. They have their processes and a way of doing business that’s worked for them. In general, I wouldn’t expect to see much change from wirehouses when it comes to working at home. They want to get people back in the office.

Do you think that, since the pandemic brought health and life span into sharp focus, advisors should recommend insurance as part of retirement plans?

You saw your own mortality and were more open to buying insurance in the pandemic. 

I’ve always felt that more advisors should sell insurance because it’s part of being a holistic [FA]. Why should there be one professional handling investments, another handling insurance, a different one handling loans and someone else handling your mortgage? All your financial assets and liabilities should be in the same place. 

I’ve felt that advisors should sell insurance because it’s part of a client’s financial life.

As Gen Y becomes more important to the economy, should advisors customize their approach to serve this younger demographic?

I think [the notion of] millennials needing different financial services is overblown. I don’t believe in generational targeting, that you deal with people of a certain age in a certain way. 

Yes, there are life events that occur, like marriage and having children, when [younger] people need particular services. But I believe that advisors should treat people as individuals. Personality assessments are a better way to [get insight] than just by age: Are they outgoing or introverted? Are they risk-takers or conservative? Those types of characteristics are much more important than just age.

There’s the realistic issue that most Gen Y’s don’t have very much money for investing. Should advisors acquire them as clients anyway for the assets they’ll accumulate in the future?

It’s a double-edged sword. Many advisors don’t have the tools or the capability to get these clients. Just because you offer a robo platform isn’t a [guarantee] they’ll come. 

Advisors don’t know how to market to people without money. They’re busy — so the best way to grow their business, they [reason], is with clients who are rich.