Many people will tell you that the financial services industry is changing. And it is, dramatically. But where most people think that it has to do with lowering fees or using technology to make things happen faster - I see something different. I see that the Myth of the Expert is a real thing.
The world is changing so fast. Ideas, strategies, information - all of it changes so fast, the days of the “expert” are over. We used to have a system where you went to an expert: a CPA, an investment manager, an insurance agent - because they knew everything. You knew the question (What’s the best life insurance policy for me) and the insurance agent knew the answer. In some cases, this assumption of expertise was earned and deserved. In many cases, it was not. But in all cases, they convinced the public that you had to pay them to get access to “the answer”.
But in today’s world, this is starting to fray. And it shows in interesting ways. The revolutionary idea of a robo-adviser is not that it lowers fees. It is that it takes the mental model of the person giving advice and delivers it automatically. It shattered the preconception that your situation was unique or special and you needed an “expert” to know the answer. The truth is, while robo-advisers are the most famous example of this, TurboTax has been doing it for years.
Most people don’t need specialized advice, they just need access to knowledge
And that knowledge can be stored in an “If-Then” formula. Granted, a fairly complex one. But still a formula.
What does this mean for advisers or experts? If they were simply applying the same mental model, sales pitch, or set of ideas over and over again - then they will be replaced. Computers have been replacing white collar workers for a long time - but over the next generation we will see financial “experts” reduced to bots. Except for one thing:
This all assumes you know the question.
There will be the few advisers who understand the landscape enough and who broaden their knowledge enough to have a different value proposition. Instead of giving you access to expertise, they will listen and help you discover the question. High-end advisers will help weed out questions that their clients didn’t even know they had. And when asked how to solve it, they’ll give my favorite answer:
“Huh, I don’t know. Let’s figure it out!”
If you are an expert who likes to stay within their area of expertise, that was fine fifteen years ago. Those areas are changing so fast that no one can stay in one for long. So either get comfortable saying “I don’t know” and venturing into the unknown, or get used to being a commodity.
Cheers to those that are always venturing out into the unknown!