Ric Edelman, CEO at Edelman Financial Services, one of the top financial advisors in the US, recently said:
I firmly believe that in the next ten years, half of all the financial advisors in this country will be gone
The reduction will come because AI and other technologies will soon perform many of the technical aspects of financial advice better than their human counterparts. What won’t go away in the next ten years is the more human side of the job. Edelman says “We are therapists, counselors, marriage consultants, and psychologists as much as we are financial planners.”.
The interesting question is how the change will occur. There are two options:
- Existing firms like Edelman’s buy in or (less likely) develop the AI, make half their advisors redundant
- Startups develop the technology and launch a low cost service which takes market share from the incumbents
Both of these will happen. Edelman is clearly thinking about how they leverage the power of AI and there are multiple startups going after this opportunity already. The real question therefore is which option will win. The incumbents have the advantage of currently owning the customer relationships so the battle is theirs to lose, but to win they will have to develop the capability to innovate and find the courage to slash their charges. History has shown us that incumbents rarely succeed in disrupting themselves like this, but at some point incumbent CEOs will learn the lesson.
This same dynamic applies in many other professions too. Law is one that we’ve been thinking about recently.