The Future of Advice is Hiding in Plain Sight

What are the industry's biggest dysfunction and its biggest opportunity? What business model is most likely to succeed, and what operational trend is most important?

March 28th, 2019

By  Steve Gresham

On March 5, InvestmentNews convened a group of advice industry leaders to talk about the future of advice. I listened, hoping to hear that undiscovered nugget, the silver bullet of success we should fire to capture the rich opportunities discussed everyone in the room. Alas.

As a savvy reader of InvestmentNews,you know all too well that great ideas are just that, and true innovation is execution. There was plenty of wisdom that day — all about the reality of success. It's not the knife, it's the chef; it's not the club, it's the golfer.

So what is the state of the industry? What should we be concerned about, focus on, invest in and avoid? I made a list based on my observations. Consider them and weigh in with your perspective. At the end of the day, your success depends mostly on your blend of skill and will — and circumstances and objectives. If you're missing the Oscars, here are my Future of Advice awards:

Biggest dysfunction: Technology

Enterprise solutions do not organically sprout and grow into seamless ecosystems supporting of clients and advisers. There is a deliberate and important path to success that includes identifying and evaluating potential solutions and vendors. Then the work begins: how best to acquire and what functionality to introduce and how to drive adoption. How do you set goals for the tech's impact, how do you measure success? And eventually, what is the upgrade path? Most fintech companies I know have a hard time identifying and understanding the actual customer in any advice firm of more than about 20 people. And then there is the path to full adoption of all capabilities — the real minefield.

Biggest opportunity: Technology

Read the preceding section upside down. And execute.

Most impactful macro factor: Baby boomers

They got us this far, powering the economy and markets to historic levels for more than 30 years. Tiburon's Chip Roame makes the statistical case for boomers continuing to drive industry profitability for the next 20 years. Have fun chasing the millennials, but be sure not to ignore the actual paying clients. As they age. And need more service. And want to talk about health care. Most boomers are working with five to six providers now, but will consolidate. Be a winner, not a loser.

Topics advisers are most likely to avoid: Death and taxes

I think there's a tie here. Taxes are every client's biggest fixed expense and health care is every client's biggest variable expense. Most advisers don't talk about taxes with any specificity because they lack the systems to do so safely and accurately. And even the simplest online retirement calculator depends on a prediction of longevity that too often is just a spitball. Tools exist to help plan for longevity's risks and preferences. We can do better here.

Most complicated financial risk for clients: Longevity

The typical advice practice grew up on boomer savings and accumulation. That was great in 2009, when their median age was 54 and the markets hit bottom. Now the Dow is up 4X and the median age is 64. What now? Still have that long-term confidence? And what will the advice practice look like when typical clients are in their 70s or 80s? That's a very different service model that can't be solved by fintech. 

The most important issue is figuring out how you accommodate these changes and support that most uneven and unfair of life forces — aging. 


Business model most likely to succeed: Advice

There will always be someone seeking market share by cutting prices. Count on it. I'm equally confident there will always be demand for good advice, and clients willing to pay for it. The "free" business is a big scale play. The rest of us should stick to advice for people who value it and are willing to pay. There are plenty of them.

Advice model most likely to succeed: Ensemble practice

Even health-care providers have proven that ensemble works. Related specialists gather under an umbrella of seamless solutions, housed and managed together with unified service, marketing and patient data. The single-stop shop but with uniform skills. True customer-centricity.

Big company model most likely to succeed: Multiple platforms

How do you take on the multiple client engagement challenges of aging baby boomers, their aging parents, their millennial kids and all the different preferences among them for how they digest financial services? The modern advice client is really a household of three to four generations. Think about taking a family vacation — isn't it important to make sure there is something for everyone? You know how bad that trip can be if anyone is left out or can't do what they want to do. 

The big box players now are mostly able to offer robo, active trader, planning, wealth management and trust services, a la carte. Something for everyone and easy movement from one ride to the next. But crucial to the multiple platform strategy is both white space and stratification. Make sure the offerings are distinct, like a shopping mall, and also stratified by cost and profitability so you preserve pricing integrity and a progressive path to better service to incentivize additional investments.

Best hidden opportunity: Direct-to-consumer sales

Don't wait for Amazon or Microsoft. Any company selling products today cannot depend solely on the limited human resources of the advice industry. There are not enough advisers to reach all of the potential clients, and the demographic wave is only getting stronger. Create a strategy that reflects your brand and value proposition and start building some name recognition.

Lifetime achievement award: Gravity

Newton would admonish us all to understand that everything inflated will eventually deflate unless it receives anti-gravitational energy. Product costs, brokerage fees and the number of great advisers stand out to me as continuing to lose ground over time. The offsetting factors of alpha generation, processing speed and price improvement, and hiring of young people are fighting hard but face steep climbs.

Less obvious is technology, which rolls downhill in organizations better than uphill as innovations are better understood and adopted and then applied more broadly across the clientele. Much as Porsche engineers invent ideas that trickle down to Audis and Volkswagens in the same company, market leaders will leverage technology both down into more mass market offerings as well as more broadly across their target markets.

Most important operational trend: DIY

I was going to offer "limited capacity" but instead opted for the solution. The advice industry can gain significant efficiencies by being more efficient. Too much time is being consumed by menial and administrative tasks — most a function of antiquated systems or obsolete protocols. 

How many advisers and clients shy away from products and planning because they are too time-consuming and complex? How many activities could be completed by clients with better systems and tech? Appointment setting and changing, wire transfers, beneficiary needs, POAs, portfolio updates, reregistration of accounts at death, annuity and life applications and manual financial planning data entry are all candidates for simplification in most firms. Equally important is the need to patiently educate people on how to self-serve and wean clients off the need to call for everything.

The glide path to achieving more DIY is creating urgency around the action and super simple action steps to address it. This is where AI triggers will help when merged with the client information in your CRM. A prompt alerts the client to a needed action and supplies the simple instructions and simple process, and follows up until the action is completed.

Most elusive skill: The value proposition

Most advisers and firms lack a compelling story that is easy to understand and simple for clients to value, and to share with friends.

Steve Gresham chairs the advisory board at Cogniscient Inc. He was previously head of the private client group at Fidelity Investments and adjunct lecturer in public policy at Brown University. See more at