As the fintech revolution expands, everyone from venture capitalists and budding entrepreneurs to established industry giants is vying to cash in this industry disruption. But industry analysts at this year’s Morningstar Investment Conference point to a surprising potential winner: the financial advisor.
The shift from pension funds to 401(k)s – and responsibility subsequently moving from corporations to investors themselves – has created demand for personalized advice and for professionals who can help de-clutter the marketplace.
“All Consumers Want Is Simplicity”
Although consumers have more choice than ever before, the plethora of information may actually make things more confusing. Excessive choice often leads to paralysis and increased uncertainty among consumers. That uncertainty leaves a void that the enterprising advisor can fill with the help of technology, according to industry experts at the conference.
Advisors who keep things simple for their clients are most likely to benefit. “Innovation in the financial world often comes in a complex package, when all consumers want is simplicity,” said Don Phillips, a managing director at Morningstar.
He pointed to indexes as an example. These instruments started out as a way to simplify investing, but have exploded over the years, leading to a seemingly overwhelming number of options. “The people best able to take advantage of a stronger toolkit are the professionals,” Phillips said.
“Several Decades, Not Years”
There’s a caveat, of course: learn and adopt new technology, Michael Kitces, of Pinnacle Advisory Group and the influential advisor blog “Nerd’s Eye View,” warned Morningstar attendees.
Although “most of you will not be replaced by robots in the future,” he said, “some of you are actually in trouble.”
The good news is that even as new technologies come in and internet giants look for an entry point, advisors still may have some time. “Disrupting the existing models is extremely hard to do,” said Colin Plunkett, an equity analyst for Morningstar. That kind of change typically takes “several decades, not years.”
Disruption by the Numbers:
- $8 billion: The amount venture capitalists have invested in fintech companies, Morningstar product manager Abby Magen estimates.
- 1,000: The number of fintech companies that have raised institutional capital over the past three years, according to Magen.
- 70%: The percentage of millennials who say they still want a human in the investment process, according to Magen.
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