YouSaid · the spoken record

Michael Kitces

lines on the record: 82
first: 2019-02-26
most recent: 2019-02-26
sittings or episodes: 1
sources: podcast

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“Its firms frankly realizing like we're not venture capital funded startups, there's no freaking way we're going to ever compete against a robo advisor. Like our only chance is to value out our way up and try to provide a higher value service for what it is we're already doing. And frankly, that's not unique to the financial services industry. There was a study that came out a year or two ago by, I think it was a French economist, Philippon, who did this study going back and hundreds something years like 150 years of the average revenue that the financial services industry extracts from the economy as it turns like savings into investments. They did this whole aggregate study of how the financial service industry extracts from GDP in the economy. And what they found is that the average fee that the financial services industry extracts has hovered almost precisely between 1.5% and 2% of saved.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“to justify my fees. And the way that plays out in the industry data, what you would expect to see is not fees going down. What you would expect to see is profit margins going down. Because I'm charging the same fee, but like I got to get more people who do more stuff with more talents so the wages are higher and I got to have more of the people. And that's what we're actually seeing in the benchmarking data. We are 10 years into a raging bull market. Advisor profit margins should be at blowout record highs. And the average profit margin for advisory firms has not been rising. It's been flat or even declining slightly through all of the scalability of the past 10 years, despite bull markets lifting assets, more technology making us more efficient. Like all this good stuff that should create like mind-blowing record highs and profit margins, the margins aren't showing up. And I think the reason is we are trying to defend our 1% by adding more value along the way. And like I don't think that's a bad thing. It's just.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“30 to 35 BIPs. And that's at scale, which not all of them will reach. So, okay, so yeah, the all-in fee is 70-something. The underlying ass allocation costs about half of that. What are you doing for the other half of your fee? And the answer from advisory firms is, well, crap, I guess we do have to do more. And so what you're seeing play out in advisory firms and the prediction I'd made a whole bunch of years ago was the way this is going to play out is advisors are going to try to defend the 1% and they're going to do it by not saying, I'll cut my fees to match the robos. They're going to do it by saying I'm going to value add my way up to justify my original fee, which means I do more financial planning, I give more comprehensive advice, I get deeper niches and specializations. You had a firm level, I upgrade my talent. So I got to put them all through CFP. If they already have CFP, I'm going to put them through CPWA and a bunch of other higher-end designations.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“up for the past seven years. Betterment started at 15 to 25 basis points, but then eventually they consolidated their fees at 25 basis points and they eliminated the lower price point. Well front started at 25 basis points, but then they added in their risk parity fund that really brings them more to like 30 to 35 basis points all in. Fidelity Go launched at 35 basis points. Schwab launched, quote, free, but the underlying funds average about 30-something basis points. Some of the large firm RoboAdvis that have launched have been as high as 40 and 50 basis points. And so the idea that we all have to collapse down to 25 bipuene was going to be lower than what human advisors were charging for their full service stuff. But it turns out the gap is probably a lot smaller than the difference between 1% and 25%. First of all, advisor revenue yield is more like 75 bits. And it turns out the Robo fee that really has to be there might be more like...”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes and no. It will absolutely respond. It will not respond the way that people expect. And I've actually been writing about this pounding the table about this for basically ever since the RoboAdvisors showed up. And it's only just recently starting to show up in the data itself. So here's the effect that actually happens. The presumption has been, well, so there are sort of two false presumptions in this idea that advisory fees have to collapse. The first is median advisor fee was 1%. Median a robo advisor fee was 0.25%. All the advisors are screwed because you're going to have to come down to the robo fee. Nobody actually knew if 25 bits was the right price point for Robos, though. That was sort of a hypothesis that they just tested and launched a product and even if it wasn't profitable for the first five or ten years, that's okay. You've got venture capital money to burn through. But the trend that we see even in the Robo space is that the average RoboAdvisor fee has just gone up and up.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“holds pretty well because advisors do have graduated fee schedules and frankly we tend to work with some fairly affluent folks in general. When you look at sort of the true revenue yield, which is the purest measure of advisory firm fees, like just literally add up all the fees, divide by all the assets, right? So you implicitly take into account all the breakpoints and graduated fee schedules and such. You see an average revenue yield for advisory firms that sits right around 75 basis points. And it's sort of fluctuated between about 72 and 78 basis points for 10, 15 plus years when you look at the benchmarking data. It wobbles a little because the sampling error, but it really hasn't moved materially with a very slight downward shift in the past few years, which most of us who follow this data think is actually probably not fee compression. It's just when we have graduated fee schedules and you get a basically a 10-year bull market, you're actually”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So a few things about advisor pricing models and what we see today. The classic sort of benchmark advisory fee is 1%. That 1% fee actually does still hold with sort of an asterisk. The median fee is really 1% on a $1 million account. It is typically a graduated fee schedule. Advisors tend to have higher fees on smaller accounts, smaller fees on higher accounts. So you usually actually see sort of a downward sloping line as your assets increase, your fee goes down. So the low end under $250,000 accounts is actually typically more like 1.3 to 1.5%. And then by the time you get up to multimillion dollar accounts, it's usually about 0.6 to 0.8. And then firms these days seem to be flattening at the top end to anywhere between about 0.25 and 0.5% as a fee by the time you get up to working with 5 million, 10 million plus dollar accounts. And, you know, if you're working with 100 millionaires, it's all negotiated. So the 1% benchmark fee actually...”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“We had him out on our financial advisor success podcast as well. He was a very popular episode talking about the model and what he's built.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So that kind of pricing pressure in the pure asset management space, I think just continues to play out. And as with anything that creates pressure in highly scalable commoditizable markets, you essentially see two winners. The first are the mega firms that just flat out use their size and economies of scale to outprice everybody else and try to squish them out of the market. And the group at the other end are the niche providers, the specialists, the boutiques who say, you know, yeah, they do that huge, massive mega thing at scale. Kudos to them, you get a basic commoditized service for a cheap price. But I have a special, you know, we have our special unique thing that we only do for our subset of people, whatever that is, in the asset management industry. That might be a particular investment management process for the financial advisor. That might mean I've got a special niche. I've got a special type of clientele that I do this for that's different than everybody else and what you get in a scaled mega firm environment.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's everything from Fidelity's launch of a Zero Fee ETF, the general erosion of expense ratios on ETFs by cross-subsidizing with securities-based lending and things like that. You see the rise of what are called model marketplaces, which are asset managers saying, hey, if you don't want to do all that model selection model management stuff, we'll give you the model. We'll even preload it into your rebalancing software. It's like you just have to hit a button and you get a model and your client's fully allocated and implemented and we'll do it all for free parentheses because the model's”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Price ward essentially take it as close to zero as they possibly can. So Schwab and the others just keep knocking the price down and down they have for continuously for 40 years actually we drop the cost executed stock trade by 90% from 75 to 95 and then another 90% from 95 to 2015. So when I look at that in the context of where the industry is right now, I see an investment management only asset allocation only fee that continues to decline and get compressed. And you're going to see that play out in a couple of ways that are actually starting already. One version will be firms that just drive down their costs by doing it with scale. So larger and larger firms that offer lower and lower AUM fees, right? Companies like Schwab have always been good at this. They use their economies as a scale to pressure pricing. You'll see models that try to cross-subsidize and increasingly commoditize service and take it down to zero.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“hang with it. So just it's not a high turnover industry, particularly those who are using advisors and third-party providers. They tend to hire them because they want to let go and not think of this so much. So change takes a while when the industry is this big and so many dollars are at stake in moving slowly. But I do think we're on the front end of it. And what essentially happens when you see this occur over time is you sort of twofold in the same manner as what's happened in the past. The old value proposition tends to get efficiencies up with technology pricing tends to continue to decline lower price plus volume means largest firms with economies of scale tend to do well. And we just look at this, the collapse of trading took millions of regional brokerage firms and knocked them out. And we ended up with just a small handful of ultra massive mega firms that engage in trade execution to the point now where they're engaging their own”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I have a few answers to that. One, we're still only in like the second inning of this. That's the first thing to bear in mind, right? The beginning of the beginning of the end of the mutual fund model, I would say is essentially the Schwab One source launch in 1998. It took about 15 years before mutual funds actually hit the stage of net outflows. And then we've been just watching them hemorrhage dollars for the past five years. It takes a while for these trends to get going. And so while I think we are on the front end of watching that value proposition for asset allocated portfolios essentially collapse as a pricing model, it'll still take 10 or 15 years to play out. I don't think you'll really see the most drastic levels of pricing pressure on this until the late 2020s, early 2030s maybe, just if it follows the historical trends and paths. It does take a while. And part of that is just consumers don't chin the change advisors or providers very often. We get comfortable with what we're doing and we tend to.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“We see the advisor community making this huge shift in index funds and ETFs, which I've said for years the industry has labeled it as the advisor shift to passive. And it's completely wrong. There's a small segment of advisors that are all in on passive investing. But the truth of what's really happening is advisors have been making themselves portfolio managers and disintermediating mutual funds. It's the infamous anytime there's competition up and down the vertical chain, whoever's closest to the client tends to win. The advisor sits across from the client. So when the client says, I feel like this portfolio is really expensive, the advisor doesn't cut their price. They cut the mutual fund manager's fee out and say, well, I'll just do this by managing a low-cost ETF portfolio for you instead.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“why the RA model and the fee-based model has grown so incredibly well for the past 20 years. We really were delivering a much higher value proposition than the prior generation. And you're now only seeing the tail end of it, which is the mutual fund distribution model is finally under the last stages of decline where you can see the entire mutual fund complex having net outflows. But as I would frame it, it started 20 years ago. It just took a while for the compounding to get to the point where advisors became mutual fund or I should say became portfolio managers and eventually said, why would I add my management fee on top of a mutual fund manager? I may as well just build the portfolio myself and charge my own advisory fee. And if I'm going to do it myself, I want to bring the cost down to my clients. The first thing I do is not cut my fee. First thing I do is I cut the mutual fund manager's fee. And so we see this giant shift for the advisor transfer.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so through that period, I think of the past 20 years, our value proposition was primarily tied around asset allocation and tying asset allocation to investment objectives or the broad label as goals-based planning. We've given a bunch of different labels over the years. But the essential core is I'm going to create a diversified asset allocated portfolio, which is self-washed from just selling you mutual funds or just selling you stocks. I'm going to create for you an asset allocated diversified portfolio. And instead of just buying something off the shelf, I'm going to tie it to your goals and objectives. So it's a retirement portfolio. It's a college portfolio, whatever those goals are, that's usually the two that covers most clients. But we were creating diversified asset allocated portfolios that would tie to goals, which if you compare that back to the prior cycle, everybody was a mutual fund salesport, that was a hell of an increase in the financial advisor value proposition. And that's part of.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Why didn't we just have one centralized manager do it for all 10? It's much more efficient with economies of scale than having 10 advisors make their own. And so TAMPS appeared in the late 1990s. Then a few years later, the first round of technology showed up, rebalancing software. I rebalan the early stage tamarack and some of those technology companies came and said, well, wait, wait, wait. If advisors are going to manage models and they want economies of scale, you don't have to offload this whole thing to a tamp if you don't want to. Just buy a piece of technology that manages models and you can hit the button to trade and rebalance yourself and kind of cut the tamp out of the picture. Then RoboAdvisor showed up, which to me was actually just, it was financial advisor model management and rebalancing software repackaged for consumers. Like there was nothing in the betterment and welfront trading process that you couldn't have done literally eight years earlier in iREBAL, which was the first rebalancing software.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“And they were the first two to launch a response, right? Schwab investment portfolio, SIP launched in 2015, and Vanguard Personal Advisor Services launched shortly thereafter. So it was really never a threat to human financial advisors. But what robo advisors epitomized absolutely is a threat and a transition to the industry and is really just an example of a larger picture, which is the minute we went into the asset allocation business in the very late 90s, early 2000s, that was the moment that technology started being applied to make that business model more efficient as well. And even this really ran in a couple of stages. The first actually was the rise of the TAMP, the turnkey asset management platform, where a couple of enterprising firms came forward pretty early and said, well, geez, if advisors can mean the ass allocation business, 10 advisors are going to make basically the same diversified portfolio.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“At the end of the day, robo advisors are really just, it's a technology-delivered managed account. It's a managed account for self-directed investors. Pick which website you want to go to and buy the technology that manages your managed account. And so I'd written at the time, like the primary competitors for robo advisors is not actually human financial advisors. It's anyone with the strong self-directed investor profile. So I've written at the time, the primary people who should be worried about robo advisors are Schwab and Vanguard as the leading direct to consumer asset manager and the leading direct-to-consumer platform. And sure enough, within three years,”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So first of all, just sort of affirm what you said. I mean, fully agree. The robo advisor model, like the literal RoboAdvisor model, has not in any way shape or form disrupted the financial advisor. And I was out pretty early on this. I was actually looking back. I wrote what as far as I can find was the first blog article in the industry that actually called RoboAdvisors RoboAdvisors all the way back in early 2012 when Betterman and Wealth Front first showed up and said we're declaring war on financial advisors you know those humans cost an arm and a leg that was literally Betterman's pricing on their on their website they would have like a column for human advisor and in the pricing row from advisor it said an arm and a leg and then you know in their column it said 0.25% so the robo advisor showed up in 2012 declaring war on on advisors they've been around a little bit earlier as they were building their products but that was really when they came on the scene and you know I'd written at the time like look”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“in our management fees. And so this is the cycle we've been in for the better part of 20 years now, the rise of the RAA, the rise of the fee-based account. And this world where advisors essentially function as portfolio managers for their clients, or at least portfolio manager pickers for their clients, not just stock pickers like the mutual funds, portfolio pickers.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So technology showed up again to disrupt the financial advisor business model again. We all got paid commissions to distribute mutual funds. It was a great model for 20 years through the 80s and 90s. And then technology companies launched internet websites and said, you can buy the fund directly and not pay the commission. They also relied in large part on the 12B1 fee that had been invented in the prior cycle. And the advisor business model was in trouble. And so we started the shift again. We said, well, anybody can sell you a mutual fund. I will create for you a diversified asset allocated portfolio of them. And we went into the AUM model. I would argue created a higher value proposition for clients, right? Diversified portfolio better than just buying random one-off managers, even if they're good managers. We ideally want to create fully diversified portfolios for clients. And it drove a new shift in the business model. We went from commissions plus maybe a small slice of 12B1 fees into a full focus of charging ongoing assets.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“RoboAdvisor disruption was scary today. That was more disruptive back then. At least RoboAdvisors charge a quarter of a point when everyone else charges one. They offered a commission for zero when the average upfront A share mutual fund commission was 5.75%. That's what I was getting paid when I started 20 years ago.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“A baby day trading stocks and mutual funds in his crib, in his actual crib, not crib crib, like real crib. And so the model began to get impacted again for financial advisors. All of a sudden, you couldn't get paid to sell a mutual fund because you could buy one directly online. This was the era of the launch of Schwab's OneSource program, which they lauded as this opportunity where you can buy a mutual fund yourself with no commission. It was a no load fund. And so we talk about no load funds rather ubiquitously today. The whole ETF structure is essentially a no load structure as well as the rise of no load index funds. But you have to keep it in context. In 1998, when Schwab launched one source, virtually 100% of advisors got paid 100% by commissions, and a technology firm offered a zero commission solution.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Phase two, right? So phase one was the financial advisor, a stockbroker through essentially 50s, 60s into the 70s. Phase two was the financial advisor as the mutual fund salesperson. That was from essentially the mid-70s until the mid to late 1990s, rise of the mutual funds model, rise of broker-dealers, independent broker dealers, I should say. And then the financial advisor model got disrupted again by technology. The internet showed up and platforms started marketing directly to consumers. You don't need a financial advisor to buy a mutual fund. Just come to our website and you can buy it yourself. And that was literally the e-trade commercial at the time. It's so easy a baby could do it. They would actually show”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“the mutual fund era in the 80s and 90s because of this rise of the 12b1 fee that went along with it for decades prior to that it didn't work that way like there was an unequivocal uh bright line divide stockbrokers got paid commissions to sell stocks and the only people who got paid fees were either registered investment advisors what we know today is rias or registered investment companies what we know is mutual funds and so the investment managers got paid fees the stock brokers got paid commissions and never the twain were supposed to meet until technology started undermining the stockbroker business model for financial advisors started driving us towards mutual funds and the industry innovated this new version of a mutual fund model where you could get paid an ongoing fee for the first time it began to shift the business model as well suddenly i was getting paid a little bit less upfront and a little bit more ongoing and started to shift the model for then”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“began to change. So stock brokers all the way up to the 1970s got paid commissions to execute stock trades. We talk about commissions like a commission for a sale back then it was really just the trading fee as we would think of it today. They literally got paid to execute and sell the stock, execute the trade and sell the stock. As the industry began to shift and Mayday happened, the brokerage industry actually saw the beginning of the end of stock broker profitability once competition was coming in. And so they lobbied the SEC for a change to create a new option in mutual funds. This thing called a 12B1 fee where advisors could get paid an ongoing shareholder servicing fee to support the advisory business that they were delivering to clients. And so we saw the first shift from commission-based advisors getting paid an ongoing fee in the rise.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“a trillion dollars to five trillion dollars that was back in 1990s dollars not 20 teens dollars today it's like the the explosion of mutual funds back then it was actually comparable i think even if you inflation adjust the math more extreme than the shift to etfs today driven entirely by a shift in the financial advisor business model because technology nuked the old one”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“value proposition model for consumers we're at least a little better aligned to say I'm going to find you a great stock picker then I'm just going to sell whatever they're telling me in the boiler room to sell this was a plus for consumers they got access to better investment solutions they had a less conflicted model they got better recommendations it began to change the entire model for financial services though because once I don't need to sell my company stocks I don't have to work for a wirehouse or a regional broker dealer with an investment banking division i can join an independent broker dealer who's not directly tied to the manufacturing of product and just helps distribution of independent third party products and so you look through the 80s and 90s you see the massive boom of the independent broker dealer model most of the major IBDs today either got started or had virtually all of their growth in the 1980s and 1990s and it was the boom of the mutual fund model from 1990 to 2011 the mutual fund industry went from half”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“You may have heard of them, the founder's name was Chuck Schwab. So in 1975, immediately after Mayday, Schwab was founded, Ameritrade was founded just a few months later, Scott Trade and the predecessor to e-trade all came forward, and a few years after that, and there was actually a massive wave of what at the time was tech innovation to disrupt the financial advisor business model of stockbrokering. And the computers won. In the span of 20 years from 1975 to 1995, the cost to execute a stock trade fell by 90%. And stock brokers went away. We talk about it historically as like consumers in the 80s had changing preferences and wanted more from their financial advisors. It's like, no, technology nuked our business model. We all had to find something else to do. And so we did. We went into the mutual fund business. We said like anybody can sell you a stock I will find for you a great stock picker. Now I would argue this was ultimately a higher”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“control of this so we're just going to set the trading fees and then no one can get gouged because they're set by the regulator. The problem of course is you also have no price competition when it's all set by the regulator and so the first wave of financial advisors was essentially the financial advisor as stockbroker and it changed in 1975 and for students of market history you'll know 1975 was what we now know as Mayday which was May 1st, 1975 the SEC deregulated stock trading commissions and allowed them to float and while the brokerage industry initially said oh this is awesome now we can charge $220 a trade you know we're not colluding we just all happen to do it at the same time a startup firm in northern California decided to use these newfangled things that were coming out called computers to see if they could scale stock brokering better than the human stock broker”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“As I view just our world of financial advisors, I think we've essentially gone through three stages of the business of financial advice. And we're on the cusp of the fourth right now, which I'll talk about in a few minutes. Stage one is our roots. If you are a financial advisor 40 plus years ago in the investment business, you were a stockbroker, which back in the 70s, like on a sizable trade, you could get paid as much as about 200 bucks a trade in 1975 to execute a trade. It was a very lucrative business for the people who were good enough to get a book of clients to whom they could sell some stocks. That was the model. And it had continued that way for decades before because all the trading fees back then were fixed. It was part of the rise of the SEC and the aftermath of the Great Depression and the crash of 1929 saying, geez, all these consumers basically got gouged during the bull market of the 20s and the crash of the 30s.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source