Vanguard CEO Bill McNabb called on financial advisors to “seize the opportunity presented by forces transforming the advice industry and show how they can add value for investors.”
During a speech at the ETF.com “Inside ETFs” conference, McNabb said financial advice is evolving, driven by changing demographics, technology, and a more powerful consumer. It’s a time of change, but also “tremendous opportunity” for advisors, he said.
“Financial advice is having a moment,” McNabb said. “The rise of more technology-based solutions has made advice part of a national conversation in the financial press and in the popular media. The best advisors are seizing this moment to tell their story.”
McNabb said there are five critical considerations for advisors.
We are in a low-cost revolution. Today’s investor expects to pay less for investment funds and services. Robo offerings are creating a new pricing floor. A traditional advisory firm can provide the in-person, individualized services that a robo advisor cannot. However, traditional advisors cannot hang their hat on that fact alone.
Advisors must adapt to a changing industry. Financial advice is evolving and technology is part of that evolution. Most advisors have been using financial technology tools for years. How can advisors further automate routine elements of their practice and digitize and mobilize some of the client experience?
In some ways, the world is not as complex. Investments are becoming more commoditized. Portfolio construction also is becoming commoditized. These functions can now be largely automated through model portfolios and even through target-date funds. That’s no longer a differentiated selling point for advisors.
In other ways, the world is not a simple. For most investors entering retirement, advice is the answer. And with the Baby Boom generation now entering retirement, demand for advice is great. The questions retirees face are increasingly complex. Rules of thumb and single-product solutions rarely provide a complete answer.
Advisors must tell their story. To differentiate themselves, advisors must explain their value proposition.
McNabb said Vanguard is a strong believer in advice and financial advisors, and has been helping advisors to tell their story for many years.
“These elements create real value for clients,” McNabb said. “It’s a truly compelling story.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.