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Subscription fees may mean higher costs for clients: Q&A with In|Vest speaker Jon Stein

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Are subscription fees good for investors?

You have to always look at the total cost. One fee structure isn’t necessarily better than the next. Sometimes a percentage of AUM might be better aligned and at a lower cost. These flat-dollar fees might be a thing of the moment but could be at a higher cost to clients. Ultimately, our role is to be an advisor and that means being a fiduciary in all cases. Part of making the most of client money is giving them fair fees.

Will subscriptions attract the next generation of investors?


What’s the next big step forward in advisor tech?

The thing I’m hearing more and more at conferences and in surveys is that advisors want client engagement tools. Things that will help them grow their practices. It’s no longer the back-end stuff, like rebalancing. It’s who’s going to give me the best mobile experience for my clients — because that’s what clients are demanding. They want to be able to do easy auto deposits or rollovers in a seamless and digital way. That is what’s driving growth.

What will most help improve the client experience?

A lot of advisors don’t have any mobile experience. They’re stuck in a world with a bunch of different technology and old-fashioned reporting software that don’t do a good job communicating with the end client. Technology should let clients manage their financial plans, views of overall tax situations and how much they have to be saving. Those tools help advisors that are looking to help their clients make better financial decisions and that’s where we can become another point of communication.

What will happen to digital platforms in a downturn?

I haven’t seen any evidence — and I’ve looked at a lot — that says active management outperforms in any certain market environment. In fact, it often underperforms by the amount of the additional fees. There are lots of different philosophies on what will beat the markets. The markets are efficient. What we can control is behavior and staying the course. Diversification and taxes. In a downturn, we would be tax-loss harvesting for clients, which would benefit them by offsetting some of those losses and encouraging them to continue to invest — buying things cheaper is always a good thing.

Will FAANGS enter wealth management?

We’re keeping an eye on it. Apple launched a card that was long anticipated. For Google and Amazon, it seems like payments might be the best place for them to continue to play and innovate. Financial advice seems a little further afield for them. All of these industries are changing rapidly, so firms with technological advantages stand to gain. There are just so many other priorities for these firms. Financial advice is just not top of mind for them.

What’s holding back innovation?

Regulation intentionally slows things down a bit. But, a larger problem is a lack of customer engagement. There is lots of inertia in our space because customers don’t like thinking about long-term financial health. It’s not fun or exciting. It’s not the thing you do when you’re falling asleep looking at your mobile phone. It’s work. It’s peeling vegetables and that naturally leads to inertia and a slower transition. Once you break through, it can be a very good. But, it certainly slows the pace of innovation.

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