THE LEAD | It’s the Economics, Stupid!

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I’m probably not who you expected this week.

I’m filling in on the spot for the great Bill Taylor due to an illness, so please bear with me. While Bill’s expertise is definitely in markets and, in particular, digital assets, I’m more of a wealth management and wealthtech guy and I think I’ll serve you best by sticking to my guns.

This is not a political post. Please don’t be put off by my headline borrowing and altering a phrase from political consultant James Carville, whose “It’s the economy, stupid” became one of the enduring but unofficial slogans of President Bill Clinton’s successful presidential campaigns, but I think it’s more relevant than ever, and not just politically. 

Sure, we are heading towards Donald Trump’s second presidential inauguration after a campaign season where simple household economics are being credited with shifting the electorate away from the Democratic Party, whose politics have been portrayed (fairly or not) as being concentrated around social issues, and towards a more populist element of the Republican Party. That’s not what I want to talk about, though. 

I want to talk about the issue of consumer choice in financial services and what it means for the future of the industry, and to discuss where I think we’re going to be in the future, we should start with a little look back. Until about a decade ago, wealth management services were for the wealthy. When we discussed wealth outside of purely academic settings, we weren’t talking about the slow accumulation of wealth by certain fortunate working- and middle-class households, we were talking about the maintenance of wealth of already wealthy high- and ultra-high-net-worth families and individuals. 

Really, until a few years ago, wealth management and its myriad benefits was almost entirely for these individuals to the exclusion of others. Technology began giving less wealthy people access to investing services decades ago, but true wealth management was out of reach for most of us, and by many definitions, it still is, as the technology-based analogues for wealth management didn’t provide the breadth or depth of services that a full-service financial advisor at a large firm could. 

Well, as 2025 unfolds, the reality is very different. High-end wealth management services are becoming more readily available to mom-and-pop investors. All one has to do is follow my weekly Advisor Tech Talk columns to see the creep of ever-more-sophisticated offerings, via technology, to the middle and working classes.

Just this week we have at least two new instances of direct indexing being made available via investech directly to the general public. It was just a handful of years ago that advisors were being told that direct indexing was a trend only accessible to their wealthiest clients. It’s not just direct indexing.

Automated financial planning, tax harvesting, alternative investing and cashflow management, among many other services, are now available to virtually anyone without the intermediation of a wealth manager. The rapid advancement and embrace of generative AI means that technology is now mastering many of the soft skills, like behavioral financial planning, that human advisors have looked to in recent years as a new focus for their value propositions. 

The next shoe to drop for wealth managers is when these advanced services are offered at a highly competitive price point and with less of the client’s time and attention required, and the wealthy start to take notice. There’s an assumption by industry watchdogs that wealthy investors aren’t going to want to sacrifice their household’s relationships to individual advisors or wealth management firms. After all, wealthy people still buy Bentleys and Maserati automobiles when Ford and Chrysler offer  viable alternatives at a lower price point, right? I, for one, doubt that Blue Suit, Red Tie Financial has the same cool factor as owning a Bugatti. Financial advisors and wealth managers are not viewed as exclusive luxury brands, no matter what they may think of themselves. They offer little that is unique or not available via other means to their clients. 

Instead, when it comes to receiving services like wealth management and financial advice, I believe wealthy families are just as price sensitive as anyone else. By and large, they’re not going to continue paying a huge premium for financial advice when technology is commoditizing financial advice and wealth management for a small fraction of the price. 

There are reasons certain families and households are wealthy and are able to promote multi-generational wealth, and it’s not because of their brand loyalty to relatively expensive financial services providers, nor their dependence on antiquated service models to manage their money. 

If they can get these services for cheaper and with less hassle—and, by the way, with far fewer conflicts of interest—by cutting out intermediaries like financial advisors, they will absolutely do so. To compete, advisors will have to continue evolving to more closely resemble their wealthtech and fintech challengers. 

At some point in the future, perhaps the near future, the economics of traditional wealth management will no longer make sense to high-net-worth investors and they will leave their providers.  

2025 may not be the year when their flight begins, but in my opinion, it’s only a matter of time. 

Get well soon, Bill!