3. Living or Dying in the Mashup of American Financial Services: Literate Does Not Mean Competent

Clients are aging, passive investing is gaining favor, and client objectives are growing in detail and diversity. At the same time, advisors themselves are reaching retirement age with no clear succession plan in place. Technology disruption waves are transforming accounting, insurance, and estate planning, but it is the investment advisor who needs to adapt now or face extinction. We examine the risks facing the entire industry by focusing on the small independent advisory firm’s role and place in the ecosystem. We suggest that technology will accelerate the growth of the financial advising industry at the same time that the wealth accumulated by older generations migrates slowly to younger generations. We underscore the natural advantage of the small independent investment advisor as the trusted partner to a client’s life-cycle decision-making. We suggest that the small independent advisor can only survive and thrive through reinvention. The preferred trust relationship will remain between human client and human advisor but will be heavily machine augmented with analytics and big data, delivered via the cloud.