[Editor's note: The following contained a misquote that has been corrected. It is the last sentence of the story.]
As many as half of the existing financial advisors now in practice are likely to disappear over the next decade as they decide that making the changes to adapt to a world slowly shifting to online money management isn’t worth the considerable effort, star financial advisor Ric Edelman says.
Edelman argues that many advisors now in the advisory traffic are closer to the end of their careers than the beginning, raising the likelihood that they will walk away from the business rather than buckle down and reinvent themselves in the face of technological challenges.
Edelman, appearing at the 8th annual Inside ETFs conference, engaged in a mano-a-mano discussion with Adam Nash, chief executive officer of Wealthfront. Nash’s Silicon Valley-based firm is the biggest of the newfangled “robo advisory” firms that manage money using ETFs and computers in a buy-hold-and-rebalance indexing approach. It has raised more than $2 billion in less than two years.
For his part, Nash argues that while his business is likely to resonate strongly with the millennial generation, there's plenty of room in the advisory business for all kinds of business plans. That means robo-advisory firms like Wealthfront don't really represent an existential threat to traditional hands-on approaches to providing financial advice, Nash says.
“I think Adam is being disingenuous. Adam, or someone like Adam, is going to put half of you out of business,” Edelman said to an audience of several hundred financial advisors attending the conference.
"I’m not sure Adam will survive, but his successor will,” Edelman added, clearly injecting a dose of anxiety into an auditorium full of advisors who may be wondering if information technology is about to bury their businesses.
About 1,900 people attended the four-day event, with about 60 percent of them financial advisors. Inside ETFs, the world’s biggest ETF conference, ran from Sunday, Jan. 25 through Wednesday, Jan. 28 at the Diplomat Resort & Spa in Hollywood, Florida. It was put on by ETF.com, the ETF news and data provider.
A Testy Exchange
The Edelman-Nash exchange was, for a few pregnant moments, a bit testy, and lived up to its billing as a debate. The panel, “The Future of Financial Advice: Man vs. Machine,” was moderated by ETF.com President Matt Hougan.
“Adam will do fine—it’s Wealthfront that may be toast,” Edelman added, in a belated gesture of politesse designed, it seemed, to cut the tension that had been building up.
For his part, Nash retained his composure and gestured sympathetically, acknowledging that there is a possibility that advisors will shrink in number and that Wealthfront itself could be a victim of its own success.
What was less clear is the finer points of the future.
Edelman sees the new Edelman Online unit as a big part of the future, but says clients will always need a human hand, particularly as assets grow and financial challenges become more complex over the arc of an investment lifetime.
Edelman Financial now has $14 billion in assets, and Edelman himself plans to step away from the day-to-day operations, in part to help build Edelman Online. His firm is designed to manage money with human advisors and computers, and doesn’t separate the charges of either.
But Nash isn’t so sure that the long arm of technology won’t one day be able to seamlessly offer a plethora of services online. He believes strongly in the power of technology, and aims to attract the best code writers in the world to his firm to help make his vision a reality.
“I don’t like to bet against technology. That doesn't mean I know all the limits of where this stuff goes. I don't think when Amazon launched in the 1990s you'd predict where it is today,” Nash said.