The Future of Advice
The Future of Advice
How consumers engage advisors is changing.
TLDR? Check out our recent episode of The Money Alchemist on your favorite podcast app!
The Fed announced on Wednesday that they are cutting rates by 50 basis points. What do you do with this information? If there’s a genuine interest, chances are you’ve already asked your web browser.
The hip might have even used one of the many Large Language Models, colloquially known as AIs, for a deeper dive. My opinion on the matter is that it encourages asset prices, already at all-time highs, to move higher.
If you’re an owner of assets, this is good. If you’re looking to convert cash into assets, such as an entry homebuyer, this is not so good. But my opinion on the Fed rate cut decision is just a side note.
The point is you probably just investigated this topic online and did not need a traditional engagement with a financial professional to learn how it may impact you. The shift in consumer preference from scheduled (in-person) to on-demand (online) interactions is nothing new.
We see this in the growth of online sales, food delivery services, transportation apps, entertainment and information services such as financial advice. It’s easy to see why. Why warp your schedule into an inconvenient tangle when you can just “click here”.
Believe me when I tell you that you can easily get access to high-quality, accurate advice without paying a nickel. Furthermore, most major financial custodians have made it so easy to construct a sensible portfolio that it’s never been easier to DIY.
Yesterday’s stockbrokers and even some contemporary financial advisors act as gate keepers to an increasingly accessible industry. This is not a viable business model given the potential for LLMs to further shake up the industry. And this is a good thing.
If all your financial professional does is portfolio construction, their business model is about two or three decades out of date. Good advisors today understand mission critical variables like the Internal Revenue Code, time-value money analysis, and asset allocation are beyond the scope of common understanding.
They incorporate these complex factors into ‘financial plans’, which are essentially action plans, to help you keep more of your money. There’s value in this. Big value. It’s how most advisors can justify their fees, which can be substantial.
The potential for AI puts this whole information arbitrage in limbo and I believe it will disintegrate it altogether. It’s only a matter of time before consumers can build customized and accurate financial plans using low-cost tools available on demand. If you know that right prompts, you probably could do this now with current models available.
So that’s that. I’m toast. Call the wife! Inform the kids! For many advisors with outdated service models, this is a very real future scenario. People will naturally gravitate to higher value propositions. It’s economic law.
Humans will be humans though. Information, ideas and fleeting thoughts are cheap. Implementation is difficult and valuable. Effective advisors do not act as gatekeepers, they break down the barriers that discourage productive action.
This is something that an online interface cannot do because there is little to no emotional engagement. Think about it, what is preventing you from logging into your employer plan portal right now and assessing your strategy for retirement? You know you need to do this. Just go do it.
95% of you will not do it. The 5% that do only do so because they want to prove me wrong. Good, but acknowledge that it was an emotional engagement that motivated you into action. See, I am an effective advisor after all.
Personal accountability, encouragement, hot-button motivation, comparative assessment, these are the things that move the needle because they kick you into gear. My prediction is qualified advisors will outsource busy work to LLMs and focus on the more human elements of wealth building.
I look forward to this.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial LLC. Member FINRA/SIPC. Advisory Services offered by National Wealth Management Group LLC, an SEC Registered Investment Advisory and separate entity from LPL Financial LLC.