For over 19 years, Alex has been dedicated to assisting his clients in working towards their financial goals. He has served as a financial consultant to many successful professionals, business owners, and retirees.
In this interview, Alex shares his views on the future for financial advisors depending on whether they take advantage of using robo-advisors; what types of robo-advising platforms may be most useful for his practice, and what he expects to see during the next few years.
Q: How did you come to the wealth management industry?
Alex: I started in the industry in ’97, so about 20 years ago. In college, I was initially studying to be an accountant. A partner I was working with at an accounting firm was telling me, “Instead of focusing on accounting, you should probably look more into financial planning,” because I had a knack for stocks, mutual funds, and investments. We would get together and look at the Wall Street Journal and analyze some different investment options.
He pushed me more in that direction. I didn’t really think much of it at the time, but then, as I continued in college, I realized that accounting wasn’t my passion. I was passionate about investments, passionate about managing money. I was doing it for free for my friends, family members. I figured, if I can get a career doing something that I really enjoy, I think that’s a good way to go.
I got the opportunity to get licensed in the industry. I was 21 at the time, so I figured, “I’m young. I don’t have a wife. I don’t have kids. I don’t have a house payment. I don’t have any of these things so I might as well try it while I can. If I do well, great. If I fail, I’m sure mom and dad will take me back home. I have nothing to lose.”
I started in ’97, working with friends, family members—and just grew the firm from there. Here we are 20 years later.
Q: What changes, if any, have you observed in the wealth management industry in recent years?
Alex: I think in the last three to five years, I’ve noticed some massive changes in the industry. Obviously, technology has ramped up and is growing at a faster and faster rate, so utilizing technology in your business is great. One of the things I realized early on was that, as much as we have that vision in our head, from 20 years ago, being able to have a laptop sitting at the beach, running your business where you get to say, “Oh, with the use of technology, we can have much more time because of the increased efficiency,” now I feel like it’s the opposite: we’re taking on 10 times the amount of work because of the technology we’re using. I get bombarded with emails, messages, so on and so forth. There’s just so much information coming in that it’s made things a lot more difficult for the solo practitioner. You have to work more on a team basis and have other staff members as well as other resources that can help you to do a good job for your clients.
Q: Do you think it’s a bit frustrating to have more and more information because of the technology?
Alex: It’s a double-edged sword. Having more technology and having more information makes you a better investor and gives you more information to make investment decisions. But sometimes it’s overkill, where you’re getting so much information there is no way to swallow it. You have to try to take in as much as you can or figure out good ways of filtering that data, and then use data that actually works to your advantage or helps you reach your financial goals.
Q: How do you think investors, both retail investors and B2B investors, can benefit from using Robo-advisors? What are the main benefits to using robo-advisors?
Alex: A lot of my colleagues either fear robo-advisors and think that it’s going to kill the industry to an extent, or are pretty naïve, thinking, “Oh, that’s not going to affect me or my practice.”
I think those are the two extremes. What I see happening in the near future, is something more in the middle. You can do one of two things: (a) ignore it and just see how the future goes, while you ride things out; or (b) embrace the technology and try to use it to the advantage of your practice.
We’re utilizing and looking at robo-advisors as a way of being able to bring scalability to our practice. Whether we want to use it for some of our clients, maybe the smaller clients, where we don’t want to be doing a lot of the trading and it’s not worthwhile for us to do that. Or we use it for all of our clients, and then marry that with the human aspect of financial advice and guidance, to create a hybrid solution. I think that’s where our firm, at least, is heading. More towards creating a hybrid solution and using the technology for most of our clients.
I think there’s some great aspects to it. But with regard to the B2C aspect, where Betterment, WealthFront, or some of these guys are going directly to clients, you can see that leading to issues down the line. All we need is a big market downturn, and a lot of those people might get hurt or wiped out. And then all of a sudden, they’re going to say, “Oh, maybe I need someone to guide me and hold my hand.” Because ultimately that is what we do as advisers. We’re here to make sure that the clients feel comfortable with the risk they’re taking. If they’re not, we adjust the risk, and we have to talk them through and explain why maybe the investments that we put them in are fundamentally still good and they should stay the course.
It’s a little bit different when you’re dealing with a robo solution, where you’re talking maybe to an email address or you’re calling an 800 number. They can’t really make any investment decisions for you. I know that some of these robo-advisors are starting to get a little bit smarter on that front, and Betterment is rolling out a situation where they have CFPs on staff, and they can give you a little bit more guidance. But remember that this person is probably dealing with thousands of clients and doesn’t really know your individual situation that well, and is not going to be able to build a good relationship with you.
I think the future for us is going to be where we can try to find a hybrid solution in which we utilize the technology to our advantage, but still offer the human touch.