Search by author, topic or keyword

Embrace the Future

The future of all industries in the services sector will be shaped by technology. At different places and at different times, we have seen record labels, movie studios, grocery shopping, hotel booking and several other services revolutionized by new types of competition that have harnessed the power of technology.

Investment firms have not been immune to these forces, as we have seen with the rapid growth of passive investing tools, roboadvisers and mobile stock-trading platforms that allow investors to trade from a smartphone. It’s only natural to ask how new technologies will change the financial planning business.

Where We Are Today

According to the Bureau of Labor Statistics, in 2020, there were 275,200 personal financial advisers in the United States. We’ve read about the reduction in the number of advisers, and there are probably many outside the industry who believe advisers will meet the same fate as bank tellers, travel agents or secretaries.

However, people still want counseling when it comes to investing, and more broadly, to financial planning. Clients, especially affluent ones, will not rely solely on an algorithm to make some of the most critical decisions about their future.

A few weeks ago, I was rereading “Breaking Through,” an excellent guide to the industry published by CEG Worldwide’s partners in 2013. One number caught my eye: research showed that more than 90 percent of affluent individuals—those with more than $1 million in investible assets—want to work with a top financial adviser. My experience tells me that likely has not changed. When it comes to essential matters, people still want to see a doctor or confer with a lawyer. Or a financial adviser. Technology can facilitate these interactions, but it will not replace them.

The challenge for advisers is how to grow their business through engaging and, crucially, retaining profitable clients. Only one approach will work: spending more time devoted to them and attending to their needs and concerns. Even in a new, more tech-enabled world, a more client-centric practice is what advisers will still need. This almost sounds like a cliché, but technology presents an opportunity to move in that direction decisively.

Tech-driven, but Much More ...

Many advisers spend a lot of time in non- client-facing activities, which do not add much value. They need to build costly infrastructures, which then impact the fees they charge to run a profitable business. This is where I envision the first significant change in the financial advisory industry.

Thanks to new tech-driven financial services innovations, advisers will have access to platforms built by third parties that provide almost all the infrastructure they need to run their businesses by themselves. For example, they will be able to have detailed, real-time information about investments, insurance policies, wills and other products of each client.

To market their services, they will be able to reach out to current and prospective clients, and monitor marketing ROI by keeping registries of all of these interactions. To increase both speed and ease of service, they will send relevant documents to be signed electronically and provide additional information, including timely market insights at the most helpful time for clients and prospects. Finally, by leveraging various social media and private network channels, they will be able to build their investment communities to address needs, also crossing geographic and socio-economic boundaries to expand their clientele.

Technology will have three direct impacts on the practice of financial advisers.

The first is, as already mentioned, cost reductions. More specifically, advisers will need to work with fewer vendors (I’m thinking of a substantial reduction, from a hypothetical 12 to three). Cost reductions could very well reach 80 percent. By itself, however, this won’t necessarily immediately improve margins for advisers, as we can expect these lower costs to be passed to the client in the form of more competitive fees. But longer term, many advisers could see their business from existing clients grow significantly thanks to this cost advantage.

Second, technology will allow advisers to spend more of their time serving clients, which is what adds value and builds trust— probably the essential element to sustaining long-term relationships. This offers the potential for higher margins, given that more in-depth and more effective service with higher standards will be worth more to clients.

And third, it will enable advisers to scale their businesses significantly. If a sole practitioner can serve perhaps up to 100 clients today with the help of a team, a well- built and comprehensive platform could empower an individual adviser to serve up to 200 clients. A small team would then be able to assist 1,000 clients without sacrificing service quality—and even improving it. It may be hard to fathom, but productivity could shoot up by five times, with revenues and profitability increasing accordingly.

Technology’s potential benefit is there, and advisers ready to hop on this train will reap the rewards. There will be a reshuffling of opportunities and clients. Technology will commoditize many aspects of the financial services industry so that the key differentiator will come from personal client service. Attending and anticipating their needs and serving them and their families will be crucial to sustaining the business as it becomes more relational. Moreover, advisers will have the time and resources to serve clients with more complex needs and provide those necessary services with added value. This leads to higher margin services.

The technological platforms that will revolutionize the business will allow advisers to work with different custodian banks, invest in the strategies of a broader range of skilled asset managers, shop between more accounting services, hire from a larger pool of lawyers and much more. These professional interactions will happen within online marketplaces, the same concept most of us are already familiar with when shopping for cars, homes, clothing, and even some medical treatments. Online marketplaces offer frictionless environments, where it’s easy to compare and evaluate competing, and increasing alternatives (see Figure 1).

Regulatory Landscape: Better Service, More Access

These changes also will result in more demanding clients. Just like the adviser, they will be empowered by technology. What’s more, regulation will move toward stricter standards for all professionals within the financial industry. Technological developments will only make the need for change more obvious and urgent in the eyes of lawmakers. The good news is that most of us have already adopted the most important feature required from all professionals in the future: the fiduciary standard.

The financial planning industry was in no small part developed because clients were not adequately protected from abusive practices, which encouraged them to buy expensive products that were not necessarily the best for them.

Many actors in the industry will be required to modify their businesses dramatically when stricter regulations become law (and with time, they will). But most planners will be ready from day one to take advantage of a more transparent and technology-enabled investing environment.

The other fundamental change that the government will push is that of access. We have seen this with retirement plans. As people live longer, the fact that many of them do not have enough savings to live through retirement has become a public- policy problem. The SECURE Act passed in 2019 is a good example of what the government can do. Measures like allowing part-time employees and the employees of smaller businesses to benefit from 401(k) plans and delaying the age at which mandatory withdrawals need to be made speak to the government’s concern regarding pensions. The fact that still many Americans are not invested in the markets, and therefore lack the opportunity to build long-term wealth, will create pressure to enact legislation that opens the doors of investing to more Americans.

Technology’s Positive Impact

These changes will create a trend that will move more businesses from investment advice toward comprehensive financial planning. If technology allows for services to be integrated at lower costs, why wouldn’t clients take advantage? Crucially, this will put the financial planner at the center of the equation, tasked with matching an array of products to each client’s specific needs.

Technology will make it easier for the financial planner to know the client better, making the conversation about financial goals and risk tolerance more straightforward and engaging, while moving away from the sole focus on investments that many clients arrive with. Importantly, advisers will be in control: technological improvements will not tell clients where to go. Artificial intelligence and other tools will help them know clients better and predict their needs more precisely. Technology will drive advisers to serve clients better, but will not replace their role as financial planners.

Better technology deployment does not need to be a synonym with doing things on the cheap. In fact, it’s quite the contrary: the service will become better and at a lower cost. Furthermore, as more clients understand that seemingly more affordable services result in higher overall costs, they will become more willing to embrace advisory services from fiduciary financial planners. Both regulation and the transparency brought by technology will contribute to pushing these changes faster.

As more aspects of the business become commoditized, including investments themselves, true value to clients will come from informed financial planning advice. We need to be ready to embrace these changes and make them work in our favor.

Glenn Freed, Ph.D., CPA (Florida), PFS is a founder and executive vice president at Altafid. You can reach him at

This article was originally published in the California CPA Magazine, June 2022.

This material is for informational purposes and is intended to be used for educational and illustrative purposes only. It is not designed to cover every aspect of the relevant markets and is not intended to be used as a general guide to investing or as a source of any specific investment recommendation. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. This material does not constitute investment advice, nor is it a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. In preparing this material we have relied upon data supplied to us by third parties. The information has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by Altafid, PBC or its affiliates, as to its accuracy, completeness or correctness. Altafid, PBC or its affiliates do not guarantee that the information supplied is accurate, complete, or timely, or make any warranties with regard to the results obtained from its use. Altafid, PBC or its affiliates have no obligations to update any such information.

 Austin, USA
13215 Bee Cave Pkwy, Ste. A240,
Austin, TX 78738
 Santiago, Chile
Rosario Norte 555, oficina 1604,
Las Condes

Members of:

This property and any marketing on the property are provided by Altafid and their affiliates.
Investment advisory services are provided by Innealta Capital, LLC, an investment adviser registered with the SEC. Please be aware that registration with the SEC does not in any way constitute an endorsement by the SEC of an investment adviser’s skill or expertise. Further, registration does not imply or guarantee that a registered adviser has achieved a certain level of skill, competency, sophistication, expertise or training in providing advisory services to its advisory clients.
Brokerage services for our advisory clients can be provided by Charles Schwab & Co., Inc. , Apex Clearing Corporation and Pershing LLC, each a SEC-registered broker-dealer and member of FINRA/SIPC. These broker-dealers are not affiliated with Altafid or its affiliates.
Please consider your objectives before investing. A diversified portfolio does not ensure a profit or protect against a loss. Past performance does not guarantee future results. Investment outcomes, simulations, and projections are forward-looking statements and hypothetical in nature. Neither this website nor any of its contents shall constitute an offer, solicitation, or advice to buy or sell securities in any jurisdictions where Innealta Capital, LLC is not registered. Any information provided prior to opening an advisory account is on the basis that it will not constitute investment advice and that we are not a fiduciary to any person by reason of providing such information.
Any descriptions involving investment process, portfolio construction or characteristics, investment strategies, research methodology or analysis, statistical analysis, goals, risk management are preliminary, provided for illustration purposes only, and are not complete and will not apply in all situations. The content herein may be changed at any time in our discretion . Performance targets or objectives should not be relied upon as an indication of actual or projected future performance.
Investment products and investments in securities are: NOT FDIC INSURED • NOT A DEPOSIT OR OTHER OBLIGATION OF,OR GUARANTEED BY A BANK • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities including possible loss of the principal amount invested. Before investing, consider your investment objectives and our fees and expenses. Our internet-based advisory services are designed to assist clients in achieving discrete financial goals. They are not intended to provide tax advice, nor financial planning with respect to every aspect of a client’s financial situation, and do not incorporate specific investments that clients hold elsewhere. Prospective and current clients should consult their own tax and legal advisers and financial planners. For more details, see links above to CRS (Part 3 of Form ADV) for natural person clients; Part 2A and 2B of Form ADV for all clients regarding important disclosures.
The IN logo is a registered trademark of LinkedIn Corporation and its affiliates.
©2023 All rights reserved. 1095-INN-06/23/2022