Ric Edelman, founder of Edelman Financial Services, and one of the driving forces behind the creation of the $1.35 billion iShares Exponential Technologies ETF (XT), has had an interest in technology as well as its implications for advisors and investors. His most recent book, "The Truth About Your Future," is all about how rapid technological advances will radically change how we live, invest and retire. ETF.com chatted with him about how fintech is helping bring to fruition the future he anticipates.
ETF.com: What do you consider to be a working definition of “fintech”?
Edelman: Fintech is the use of technology for the creation or delivery of financial products or services.
ETF.com: Do you see it mainly as something that advisors use? Or something that’s really affecting the lives of both retail investors and advisors?
Edelman: Financial technology is created by technology companies and financial service companies for the purpose of creating investment opportunities or for service delivery. And the products they create are used by consumers or advisors.
On the advisory side, the products or services are either for advisors to help them practice more efficiently or at lower cost, or they’re designed for the advisors to provide to their clients to improve the services they’re delivering to clients.
Fintech has a presence throughout the world. Your Visa card is an example of financial technology. The fact that you're able to make a purchase without having to have cash in your pocket is a result of technology. So financial technology has been around for decades, hundreds of years.
You could argue that currency itself is a technological innovation. Ever since we stopped the practices of trading food for fur, you could argue that we’ve been involved in financial technology.
More recently, we’re seeing amazing innovations at the consumer level, such as PayPal or Apple Pay, where you don’t even need your Visa card with you, you just use your smartphone to make a transaction. We’re seeing online banking, which is very commonplace now. A great many Americans never visit their bank to make deposits. They just take a photograph of their check and email it to their bank to make a deposit.
Many millennials don’t even have credit cards, they instead have a Venmo account. They transfer money between friends, or parents use Venmo to send money to their college-aged students instead of sending them checks. They just transfer money via a text in seconds for free. We’re seeing financial technology pervasive in the economy, not merely at the advisor level.
ETF.com: How is this changing how advisors do their jobs, though?
Edelman: Advisors have to become technologically proficient. Consumers are demanding technological solutions; for example, being able to talk with your client by video chat, or being able to aggregate your accounts.
Clients tend to have investment accounts at a wide variety of institutions, with their employers’ plan, with their bank. They might have a variety of brokerage accounts or IRA accounts at different institutions and mutual fund companies. And historically, that meant you’d get different statements from every institution, or you had to go to every different website to look at your assets.
Today there are account aggregators available. We provide one to our clients. They can list all of their assets, no matter what institution they're at, not just the assets we manage for them. And they can go to our website at Edelman Online, and they can see every account they have, no matter where it is, in one convenient location. This is a great convenience for the consumer.