The job of being a financial advisor is evolving both as a function of available technology and the financial realities that may confront Generation X and the Millennials.
Younger people (younger investors) are of course generally more comfortable with technology than older people and the entire automated advice industry is being built around this truism as well as the difficulty of “beating†the market. The fees are tiny for portfolio management but in a recent interview Wealthfront CEO Adam Nash said the better comparison was software subscriptions, he said the average $200 they make in revenue from each of their clients is a big number in the software context.
If you do a little research on the so called robo advisors you might conclude there is no money to be made in this business to which I would add the word yet. Complete dismissal of the idea is essentially a bet against technology and innovation and robo advisors don’t need to be wildly profitable to be competition for new clients for your practice.
The threat that Generation X and the Millennials are going to be financially worse off than their parents is also a threat to the traditional financial services industry; new prospective clients will have smaller accounts which means less revenue. There is no way to know absolutely whether this generational effect will play out but with jobs harder to come by and younger people having larger debt burdens after college it seems plausible and advisors should be paying attention to this and figuring out a strategy to overcome these threats. Relying on wealth transference may not be a good idea either as more and more boomers are likely to struggle with their retirements.
Over the weekend I found this article about “retirement coaches†who help people with various aspects of retirement, not just financial in fact some don’t even address planning issues. There is of course some form of fee for this service and while the comments on the article were plenty skeptical I can see this sort of thing as being a part of the value proposition that advisors will offer more overtly.
