9 Technology continues to lower portfolio management fees.
The “robo-advisors” who are not yet profitable (as many still
are not) will disappear or merge (or they will be acquired by a
profitable hybrid-model firm). Advisors know “robo-advisor”
services are just a great integration of technology, with a slick
Technology integrations will continue to get better.
While larger RIA firms have deeper pockets to review
and implement technology solutions, smaller RIA firms
will continue to see software emerge for their use at
substantially less cost.
10 Mutual funds and ETFs will continue to see increasing usage for a period of time, but then
portfolios of individual securities will become dominant.
This latter trend will be aided by block trading and more
sophisticated portfolio management software. Tax and cost
efficiencies will continue to fuel this evolution, not only
for very large accounts, but increasingly for smaller and
Smaller RIAs may initially pay to outsource this form of
portfolio management, but when they reach the size to have
a dedicated trading desk staffed by three or more individuals
they will consider taking this form of portfolio management
11 Under the expert scrutiny of fiduciaries, sales of higher-cost variable annuities and fixed-index
annuities will decline.
Insurance companies increasingly will realize that the tail risk
assumed in various riders to VAs and FIAs is not justified by
the premiums received (net of commissions paid).
Fiduciary advisors will continue to use nonqualified VAs
where tax deferral is warranted, but policies will be stripped
of most riders and no-load, low mortality and low annual
expense fee policies will rise to the forefront.
Sales of FIAs will decline as more low-cost alternatives that
use similar strategies emerge (such as the SWAN ETF), and as
fiduciary advisors increasingly understand the uncertain risks
posed by insurance companies that possess unexceptional
financial strength, or the liquidity risks present for many
(even highly-rated) insurance companies should another
financial crisis occur.
Doubts concerning the continuation of unfunded state guarantee funds should another Great Depression arise also will be
a factor in fiduciary decision-making.
12 The title “financial planner” requires licensure in an increasing number of states.
Those who don’t meet certain minimum educational and testing requirements, such as those found in the CFP certification
(and/or some equivalent education and testing of foundational
knowledge), will not be able to utilize this term.
13 “Financial planning” becomes regulated as an add-on to state regulation of individual investment
Peer review structures will be put into
place in many of the states to assist in
evaluating complaints against individual financial planners or firms. While
efforts to have “financial planning”
established as a regulated profession
at the federal level will occur, absent
another major financial crisis such
efforts will not likely succeed.
14 Over time, consumer trust in personal financial
advisors explodes, and the
demand for personal financial
Once greater educational standards
exist for entry into the profession
and higher standards of conduct
are in place (and conflicts of interest are minimized), more and more
consumers (many of whom eschew
personal financial advisors for now,
for they “don’t know who to trust”) will seek out personal
financial advice. For many clients, “financial life” checkups
will become as routine as regular physician check-ups.
15 Personal financial advisors become “life coaches.” Financial planners, most of whom already embrace a large
breadth and depth of knowledge that can be applied to client
situations, will continue to embrace “financial life coaching.”
Personal financial advisors will continue to apply insights
into what drives most clients’ ultimate goals:
A to lead a life that results in greater happiness for both
clients and persons near and dear to them; and/or
B to leave a positive impact upon the community or world-at-large via leading a meaningful life.