The Rise of the Machines (and how to retain your advantage) - Episode 1

Episode 1: Understand Their Appeal

Elite Advisors focus on one thing – achieving their client’s financial goals.

Particularly now, when market returns and basic portfolio optimization techniques have become commoditized and are no longer competitive advantages, it is critical that Advisors deliver on this promise for their clients.  From a wealth management perspective, it is not good enough to simply buy and hold a portfolio of investments, whether expensive and actively-managed mutual funds, or cheap and passive ETFs.  If the average investor can achieve a market return for essentially nothing, then shouldn’t the elite advisor instead provide the highest probability of meeting or exceeding the financial goal as their investment deliverable?

As a Financial Advisor, what are you offering your clients?  Depending on the nature of your practice, the answer may be a host of things.  Certainly, for most Advisors, investment/asset management is one of the services that would be expected.  Over the last decade much has changed making it more difficult for Advisors to provide investment alpha – or excess return over a given benchmark.  In the past, Advisors and Brokers have had a practical monopoly as the access point to a representative market return and/or diversification.  Now, investors have multiple avenues to access these tools/services for a fraction of the cost due to improvements in technology and the emergence of Robo-Advisors and Index Funds/ETFs, among other things.

Think about it…multiple, significant tenets of demand for professional, Financial Advisory services are disappearing before our eyes at the same time that the highest fiduciary standard is becoming a requirement.  In the same way that people no longer visit bank branches to perform routine transactions, investors no longer need an advisor to execute trades and access the market.

Take, for example, the robo-advisor Betterment.  One can, for 25 bps, achieve a diversified portfolio replete with automated rebalancing, tax loss harvesting, and free trades.  Alternatively, one could do it themselves using Vanguard or another ETF company such as iShares, and pay less than 10 bps with no trade charges depending on the custodian.  Assuming the average annual advisory fee is above 1%, then are all the other services an Advisor provides worth 75-90+ bps? Are most Advisors outperforming the Indexes/Robos enough to justify the added expense?


Perhaps it’s better to think of it in terms of dollars - if I have a $1mm retirement account should I pay over $10k every year when I can do it myself or use a Robo for under $2,500 a year?  For most folks, the answer could still be yes, particularly segments of the population with larger accounts or more planning needs/questions.  However, the point is that flesh-and-blood Advisors face competition from a new source.  As exclusivity fades, regulatory scrutiny increases, and competitive advantages for Advisors erode, they are seemingly faced with three choices.


Do nothing and hope clients/prospects remain none the wiser

  • Offer the same services and reduce fees to compete on price, which reduces margins
  • Provide more services to continue justifying their current fee level, which reduces margins

Fortunately, where there are obstacles there is also opportunity – elite Advisors embrace chances to stand out from a crowd.  Blueprint wishes to offer these Advisors a fourth option. The same technology and other advances that are rendering Advisors obsolete in some ways are also providing them a major opportunity to be invaluable and more efficient.  Simultaneously, the fiduciary standard requirement has given those already embracing this philosophy a head start.

Imagine if Advisors can continue to offer the same high level of service or more while also improving the investment alpha they provide and remaining competitive on price.  In Episode 2 we will begin explaining how.



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This website and the data herein is not a solicitation to invest in any investment product nor is it intended to provide investment advice. It is intended for information purposes only and should be used by investment professionals and investors who are knowledgeable of the risks involved. No representation is made that any investment will or is likely to achieve results comparable to those shown or will make any profit at all or will be able to avoid incurring substantial losses. While every effort has been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Historical data are presented for informational purposes only. Investment programs described herein contain significant risks. A secondary market may not exist or develop for some investments portrayed. Past performance is not indicative of future performance.

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