CHICAGO -- Wealth management executives at Morningstar’s ETF conference see a challenging future due to slower economic growth as well as competition from digital upstarts.

Still, they took the attitude that change was good for the industry. “Disruption is healthy for business,” said Jim Crowley, Pershing’s chief relationship officer and a managing director.

One inevitable change being brought on by digital, low-cost competition is how advisors will structure their compensation, said Brian Leitner, senior vice president of practice management with national firm Mariner Wealth Advisors.

“The future of the fee is going to change,” Leitner said. “It is going to become hourly. It is going to look like attorney’s fees, or an accountant’s fees.”

But the need for human interaction will not change, Leitner said; digital platforms will only increase the size of the market and drive up demand for personal advice.

“Look at WebMD, did it replace doctors? No. In fact, you actually want to see a doctor more after you go on WebMD.”

Leitner said that instead of seeing digital-first platforms as adversaries, financial professionals should take to them as tools to become more efficient, and as means for distribution.

But he stopped short of accepting the advisor capability of robos.

“When I look at advice — that’s not what I consider advice,” he said.

Crowley added that the stated goal of many digital platforms to democratize financial advice had already happened in a number of ways within the industry over the last two decades.

The popular advent of low cost, passive products such as mutual funds and ETFs, liquid alternatives, data aggregation and specialized accounting are just some of the instruments and services that were once only available to institutions but now can be had by a retail client, he said.

The industry also needs to adopt a theme of uniform delivery for any client, said Vincent Tiseo, vice president of business practices with Goldman Sachs Asset Management.

“It’s incumbent on advisors not to look at clients like gold, silver and bronze, but to treat everyone the same.”

Tiseo acknowledged though that message has been gleaned from the increased popularity of robo advisors, some of which have been featured as a low-cost retirement savings alternative during hearings on the Department of Labor’s fiduciary hearings.

“Maybe it’s a wake-up call,” Tiseo said. “You have to question, ‘What does your model look like?’”


Tiseo argued that firms needed to “embrace the robo,” and look to use the technology for scale and efficiency.

He referred to the example of a high-net-worth couple buying a summer home. A number of the paperwork aspects of the transaction could be outsourced to automated technology, he said.  The advisor could then concentrate on speaking to clients about the human aspect of the purchase, he said. “What is that home for, relaxation or for future generations?”

Leitner agreed, adding that there are already options for advisors to seamlessly integrate automated investing technology to buttress their practices.

“There is this focus on Betterment and Wealthfront, but in fact there are hundreds of robos out there,” Leitner said. “The client doesn’t need to know you’re using robos. They can just become part of your back office.”

The parallel development of the ETF market and robo advice platforms was not lost on some providers.

For some attendees, asset management giant BlackRock’s acquisition of robo platform FutureAdvisor in August served as an indication that traditional institutional providers needed to implement new technology, and consider robos as a way to offer retail distribution.

Two questions that some providers privately said they were pondering: did they need to follow suit with their own robo acquisition, and will there soon be a need to develop a distribution team focused on getting their ETFs into the baskets of robo platforms?

Some ETF providers said they were already capitalizing on investor awareness robos were creating among younger clients.

Catherine Wood, CEO and founder of New York-based ARK Invest, said that her firm was riding interest in ETFs generated by robo platforms, and had developed new strategies to reach out to millennial investors as a result.

It was extra important to her firm, Wood said, noting it tracks disruptive technologies, many of which are developing too fast for conventional indices to keep up with.

“We put all of our research up on our website and onto social media," Wood explained. “That’s part of crowdsourcing, they are educating us, and we are educating them.”


Vanguard’s Chief Economist Joe Davis touched on the transformation in the U.S. labor market caused by increased automation.

For a number of manual and repetitive professions, such as data entry, “the computer is not a friend, it is a substitute for labor,” and with those jobs forever lost to computers, that could increase income inequality in the country and affect economic policy.

But for traditionally white collar professions, including financial advice, Davis said that increased automation should be viewed as a complement, and provide developed countries an economic edge over less-skilled nations.

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