Old is Gold! Does the saying hold true any longer? The value creators are getting younger and younger leaving the old businesses way behind. All you require to do is look at the value creators and value destroyers in equity indices across the globe to understand the surge of the young brigade. Gold is losing value everyday after it touched peaks of USD 1900/oz in 2011. Clearly both old and gold are not seen as valuable anymore, at least by the markets.
The world of investment advice too is still going by the phrase of “Old is Gold”. The way advice is delivered to the advice itself is still to keep pace with the changing times. However the transactions have become completely up to date, right from buying and selling of investments to settlement of trades. The client is completely online, carrying out all banking transactions electronically, reading and analysing information electronically and acting on the analysis electronically.
Investment advice on the other hand has not gone online. Globally online platforms are coming up for providing investment advice but it is yet to displace the traditional investment advisory business, which is people intensive. But the fact is that there is a big worry in the investment advisory industry on technology disrupting the business and there is conscious effort to digitize the whole process.
Leaving out the delivery part, the investment advice itself has not changed much. A lot of importance is still given to life cycle type investments notwithstanding the fact that the life cycle itself has changed completely. Going to a young entrepreneur or to a young profession working in a fast track industry and talking about asset allocation based on life cycle would be met with a complete lack of understanding. On the other hand, taking investment ideas that appeal to such minds would grab their attention.
Retirement investment advice has particularly not moved ahead. The stocks:bonds:other asset classes ratio still prevails. The issue here is that every single pension fund in the world is struggling to keep up with the required returns necessary to meet liabilities. These funds too traditionally invest in a mix of asset classes and over the years, the performance of the mix has lagged the liabilities leaving the funds with gaping holes. Taking the same solution to individuals who want to secure their financial future needs to have a very strong reasoning.
Investors too would have to think through the investment advice given to them. Does the advice make sense in the current environment? How can the advice itself be supported? Is there hard core content and analytics that is made available online to support the advice? Is the advice followed up regularly and given the fast changing dynamics in the global economic and business and market environment, does the original advice stand?
The longer the investment advisory industry resists change, the shorter the time the disruption will happen.