Tadas Viskanta asks a group of well-known, independent financial bloggers a simple question: If venture capital for robo advisors has reached a peak, whither the future? While no one makes specific predictions for specific providers, there is consensus among the cognoscenti: Robos are really robo-allocators, not advice givers; they will be ubiquitous and the large brokerages (Schwab, Fidelity) will dominate the space. Savvy advisors will use them as a tool for the kids and smaller accounts, but they will never replace the flesh-and-blood relationship that more affluent clients need. Tom Brakke of the Research Puzzle blog predicts that advisors will have to re-price their services to reflect the fact that asset management has become a commoditized service: “Advisors are going to have to figure out how to get away from the AUM fees that most still use. The value that a good advisor adds has always been about everything other than investment management; now the pricing model is going to have to start reflecting that.”
Portion of Law Grad’s Debt Forgiven in Bankruptcy
A federal judge recently ruled that a law school graduate who filed for bankruptcy protection could cancel her debt for a loan taken out while studying for the bar exam, the Wall Street Journal reports. Though the court was careful to differentiate the loan in this case (taken to cover living expenses while studying full time for the bar exam) from traditional federal student loans, which are only forgiven under bankruptcy in cases of severe hardship, this decision represents a notable escalation in what could be considered “student debt” and canceled under bankruptcy. Student loans are generally considered untouchable in bankruptcy proceedings, so any decision that chips away at that veneer is significant.
The Knowledge Gap
A client’s retirement nest egg may be the most important part of their overall financial picture. Yet 64 percent of advisors are worried that retirement income advisors are unable to perform their jobs because of inadequate training, according to a recent survey from The American College of Financial Services. And 68 percent of respondents were concerned that their colleagues are not keeping up with the legal changes that impact their clients’ retirement income plans, the Ethical Issues in Retirement Income Planning Survey found. Advisors assume clients’ knowledge levels are even worse, with 88 percent of respondents concerned about their clients’ ability to properly understand their retirement income plans. Eighty-five percent expressed concern that clients do not understand the products and services they’re offered. “The bottom line is that practitioners are concerned that harm will be caused not through deliberate malfeasance, but through lack of education,” said Julie Ragatz, director of the Center for Ethics in Financial Services at The American College.