The Future of the Advisory Business

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There’s a quote attributed to Sean Lennon (the son of John Lennon) that reflects my current thinking about the future of the advisory business: “We live in a pretty bleak time. I feel that in the air. Everything is uncertain. Everything feels like it’s on the precipice of some major transformation, whether we like it or not.”

Several events in the past week caused me to focus on where our industry is headed. I wanted to share them with you.

An inquiry from a reader

A reader contacted me with an interesting story. He’s using an advisory firm that charges him 0.9% a year. He told them he was considering going with a robo-advisor or investing on his own. Their initial response was to lower his fee to 0.6% to entice him to stay.

He wanted to know if he should remain with the firm. I gave him the pros and cons of doing so, but didn’t provide any specific recommendation.

The firm he was using is large, well known and highly regarded. I was struck by how rapidly they offered him a significant fee reduction. It validates my view that there will be increased pressure on advisors to lower fees in order to compete with robo-advisors.

A prediction about the future of medicine

A recent article discussed the future of medicine. It quoted Vinod Khosla, at Singularity University’s Exponential Medicine conference, Mr. Khosla was the founding CEO of Sun Microsystems and is currently a venture capitalist. Here’s his prediction for the future of medicine (in the next 10-15 years): “He sees a medical landscape seething with data-hungry, intelligent algorithms like Google's AlphaGo instead of doctors as we know them today.”