Through a confluence of circumstances, the price of financial advice is experiencing a steep drop
An FKD Feature exclusive

There once was a time — not too long gone — when financial advice cost investors and regular folk looking for advice a ton of dough. Although things like mutual and index funds have dropped their high fees in order to cater to a new breed — and new generation — of investor, financial investment advisors have been the longtime holdout. That outlier is beginning to lessen more and more by the day as the financial environment begins to slowly shift. So, what exactly, is changing?

Technology is rapidly advancing

Financial advisors’ role is to look at an individual’s financial needs and help them with investments, tax issues, regulations and other monetary decisions such as saving for retirement. Financial advisors traditionally charge in several ways. Some are fee-only advisors who give advice on an hourly or one-time fee basis. Others may charge a monthly retainer, and some manage the assets involved and receive a percentage of the assets, usually 1 to 2 percent. But, the new financial advisor might be a robot and that will certainly reduce the fee no matter how you cut it.

Robo advisors and digital tools are on the upsweep and they are making the industry more and more efficient. Robo advisors especially are gaining in popularity with the millennial generation that is less skeptical about working with technology. The robo-advisement industry is expected to reach $600 billion by 2022! Even the biggest firms have been forced to lower their fees in order to be more competitive and not to lose their clientele.

Meanwhile, companies like Morgan Stanley are experimenting with other strategies; things like artificial intelligence that frees up brokers from menial tasks and — the theory goes — allows them to take on a larger volume of clients, thus offsetting the losses stemming from lower fees.

Heirs are a comin’

The rise of new investors — created by the transfer of financial wealth from baby boomers to millennials — is here. And this fact brings a new breed of clientele with different ways of thinking about things. The transfer of wealth from boomers to millennials is estimated at an amount of $30 trillion. Younger folk are more comfortable with robo-advisors. Because of this, traditional firms will have to cut costs even further to stay competitive with the newest, relevant generation.

A new arrangement of services

Many advisors are hoping to lure clientele today by offering a new and enlarged array of services. This change has also been to justify their fees. These services go beyond just mere investment allocations.

Some say they can handle taxes, advise on business, prepare clients for retirement years and plan for their children’s educations, as well as deliver more specialized services. For instance, Mr. Tom Halloran, president of the Voya unit, tells The Wall Street Journal that Voya advisers are being trained to work with clients who have children with special needs.


The financial game is changing. Advisors will have to become more adept at giving the new breed of investors what they want. This will most likely involve continuing to lower and lower fees until they become a mere speck. Just like the other financial sectors have had to do.


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Posted 03.11.2019 - 12:36 pm EDT