The sums of money firms like LPL are spending on advice technology beg a question: how will the human adviser fit in a future wealth management firm?
LPL Chief Information Officer Victor Fetter says the IBD is implementing robo advice into its offerings with the understanding that evolution must occur within its own adviser network too.
"The adviser will have to understand that the way they do things now will not be the same in 20 years," he says.
In the second part of an edited transcript of the interview, Fetter discusses LPL's tech strategy beyond its partnership with BlackRock, and the lessons learned from NestWise, its early attempt at a digital platform.
If millennial investors grow up utilizing the automated format, why would they ever abandon that when further advances in digital advice are almost guaranteed?
As a technologist I think that there is a point that you will turn to personal advice. I think where the industry, or market, eventually figures out what that benchmark is, I don’t know. I’m not a futurist that can predict the size of assets that could tip you over.
But I can make the analogy that this happened in the medical space with the internet. You have some symptoms of a cold or allergy, you type it in and take some medicine, but then if you really feel sick enough you are going to go to the doctor. That is because there are some challenges that force you to say, “I am not an expert.”
As a result of that, you do want someone that can give you that confidence that your wealth plan is going to hold up so you can buy a lake house, send your kids to college and retire, and all of those goals and dreams that are out there. I think it’s a part of the equation, but I don’t think it will ever get to the point of replacement.
People do still hire tax preparers, however TurboTax has become very advanced since its original release. At what point when we’re developing all of this technology does it become a self-fulfilling prophecy and replaces us?
There has been positive progression and we have all gotten benefits from those developments, but you have never seen a complete disruption. You have never seen obsolescence come out of the tax industry, out of the physician space or out of the computer space, and I think the same holds true in the advice space.
Will you see some shifting landscape? Yes. But I don’t think you’ll ever see complete obsolescence. But the adviser will have to understand that the way they do things now will not be the same in 20 years.
If I can use our advisers as a benchmark; when we speak to them, they recognize the change. They recognize we are different from 20 years ago and there is going to be a difference 20 years from now. I think our advisers are fairly progressive in that view.
When we talked to our adviser council and they give us feedback, I think they see these macro shifts — whether it be in technology, or regulatory space, or whatever the case may be — and recognize that they need to be agile.
QuoteWill you see some shifting landscape? Yes. But I don’t think you’ll ever see complete obsolescence.
What I like about what we do, and why I’m passionate about LPL, is we’re willing to walk along side of them. We’re willing to help them through those changes and we helped them through the downturns of the markets, we helped them through that with new technology and we’ll continue to help them no matter what comes ahead.
From a CIO perspective — what do other executives in your position need to consider regarding building, buying or investing in technology?
For us, there are a couple of key points. What customer experience do you want to have? Are you sure you understand how you want to go to market and what to show your customers?
There is definitely a time dimension and time to market and understanding that, and that’s beyond automated advice; really any decision we make, there’s a cost associated with it… and all of those come into play when you make those decisions.
The one thing that trumps them all to us is, ‘Where are we unique, and where do we want to manage and own IP for the core of an experience?’ That has to enter the equation as well.
So, we look at different providers out there, different fintech offerings that are emerging, our own ideas and it’s a complex puzzle. You have to put all of this together because you have to make sure that you can find the right solution for all of those different levers.
What is the future for LPL’s technology strategy beyond its partnership with BlackRock?
We continue to evolve, taking advantage of the technologies available in the marketplace, in each of those areas that we have been talking about: automation, automated advice, big data, cloud (we run our own private cloud). Whatever that may be, you will see continued evolution.
One of the things that our advisers see the most is continued change at LPL. Not once every year, where there’s a big announcement, that’s it and check back next year.
QuoteWe look at different providers out there, different fintech offerings that are emerging, our own ideas and it’s a complex puzzle.
You see this continued evolution of solutions being deployed, so they know that we are making significant investments in technology and we are doing it in all of the areas that you would expect.
One analyst posited that had LPL kept up (early in-house digital platform) NestWise, there would be no reason to rent a solution. Could it have become the solution and negated the need for FutureAdviser?
That was a little bit before my time, and I am not an expert in NestWise, but I think what you do see us doing with the culture of the company is we are making various R&D decisions and plays to address different parts of the market and different strategies.
I think we learned a lot through NestWise, a lot of those learnings fold into not only the robo strategy, but all of what we do in training, new adviser development, etc. But, it would be premature for me to make a statement on whether or not that could or could not have met that specific need.