Sometimes I think that what we do in these pages, and what you do in your jobs, is all about adapting to change. Change in the markets and economy, change in your clients’ lives, change in the demographics of your prospective clients, change in the products and services you offer and change in your own lives. Standing still is not an option; that’s not what advisors do. (It’s not what journalists who serve advisors do, either.)
The independent retail financial advice profession is still quite young as professions go. You could argue that independent advice was born in the 1970s and 1980s from two major developments: the end of fixed commissions on Wall St. and the end of the tax benefits accruing to limited partnerships. Smart, entrepreneurial advisors tend to be business people whose ears prick up at the winds of change, whether that change comes from court decisions, revisions of the tax code or new technology.
Ah, technology. Desktop financial planning software was instrumental in making the indie advisor profession possible, and improvements in everything from CRM software to custodians’ and broker-dealers’ tech platforms, now more likely web-based (or “in the cloud,” if you prefer), have helped the profession grow to its current healthy state.
To continue to grow, to continue to compete, independent advisors need to embrace current technology and stay aware of next-tech (just coined that word, thank you).
In her cover story for our annual Careers Guide in the January issue of Investment Advisor, IA columnist and advisor consultant Angie Herbers placed technology in the next-gen context. “Just like 20 years ago when the industry had to embrace email, texting and online research,” Herbers wrote, “today’s owner-advisors need to embrace learning how to use technology platforms, online teaching and study groups, and integrate them into their firms. The $1 billion-plus firms are already doing it.”
In our cover story this month, Scott MacKillop of First Ascent Asset Management, who also happens to be a J.D., explores whether robo-advisors can be considered fiduciaries and whether there shouldn’t be a new regulatory framework for those digital advice providers. It’s a great read, but make no mistake: MacKillop is far from being a Luddite. His firm smartly uses tech to control the fees it charges all his clients. While he’s tough on robos’ legal standing in the story, MacKillop argues that robo technology has been — and will continue to be — “a powerful positive force in our industry. It is transformative and will be a part of every financial advisor’s practice in the years to come.”
In our off-lede this month, Matt Lynch of Strategy & Resources casts his gimlet eye on advisors whose existing business model is being threatened by — wait for it — change.
“You may be thinking that, with the Trump administration taking office, your business model is no longer under siege. Think again,” Lynch suggests. “In a technology-enabled world, the value of your services does not lie in access to and management of investments. People no longer need a highly compensated professional to call in an order to a trading floor or build a nicely diversified basket of ETFs and mutual funds; investments and decently managed portfolios are a click away. ”
In an interview with Bernie Clark 18 months ago, the head of Schwab’s RIA channel told me something that still rings true. Despite advisors’ generally healthy businesses and their competitive strength, Clark warned that advisors should always beware of complacency. Across multiple industries, older-model firms and even newer-model firms are either “evolving or dying,” he said. Like traditional but successful firms, advisors “can become outdated instantly.”
Clark urged advisors to participate in “the next wave of technology” so they could become the “next new model,” not the older “traditional” model. Like he said.