More Ticking Time Bombs that Threaten Your Business
By Dan Richards
April 1, 2014
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
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Last week I discussed four inevitable changes in how Americans invest. This week and next, I’ll focus on four aspects of advisory practices that are unsustainable. These four issues will cause significant changes in the next 10 years – or perhaps sooner:
- A dramatic rise in minimum professional standards
- A redefinition of what constitutes value
- A shift in the structure of advisory practices
- A drop in average compensation
I will discuss the first two issues in this article and address the second two items next week.
The news is not entirely bad. Given current demographic trends, we will see increased demand for financial advice. The growing complexity faced by affluent investors and the proliferation of choices mean that most Americans need help in successfully plotting a path and navigating to a successful retirement.
As a result, exceptional advisors will do exceptionally well. While online tools have become better at providing guidance on routine issues — and an even more sophisticated new generation of tools is en route — for the foreseeable future, most people in their 50s, 60s and 70s will seek personal assistance on their finances.
The challenge is to position yourself to successfully provide that assistance, given some unsustainable realities that exist today.
My argument is simple. Anytime you identify something as irrational, you need to consider what impact a shift in that reality would have on your business.
Those inevitable changes are “ticking time bombs” – they’re going to go off, you just don’t know when. Even if these changes don’t come immediately, there’s evidence that once change starts, it picks up momentum and assumes a life of its own. Two examples of rapid change in last week’s article were the 1989 collapse of the Eastern Bloc over a two-month period and the downward spiral of the Big Three American automakers.
I’m not talking about investment bubbles like the ones we saw in tech and real estate and may be seeing in today’s social-media valuations. Rather, my focus is on unsustainable realities that run deeper and wider than overheated investments. Here are some of the inevitable changes ahead on how advisors run their businesses and interact with clients.
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