Financial advisors should prepare for the spread of artificial intelligence and digital technology, an explosion in health savings accounts, and more consolidation in the financial sectors over the years to come. That's according to Charles Schwab Chief Executive Walt Bettinger, who laid out what he sees happening during a question and answer session at the firm's IMPACT conference earlier this month.
Bettinger told the close to 2,000 advisors that attended the annual confab that artificial intelligence and digital technology will continue to spread and will become "ubiquitous" as more companies and financial firms rely on technology to make better predictions for customers. He said that advisors will have to embrace the technology while still engaging with people in the physical world, creating a balancing act, reported FinancialPlanning, the independent advisor publication that covered the keynote address.
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According to Bettinger, having a robo-advisory component, for example, is a tool, not a way to stand out from the pack. "Everyone will have digital technology. The question is how do you combine it with people," he said. The CEO of The Charles Schwab Corporation (SCHW) also noted that cybersecurity is one of the biggest concerns keeping advisors up at night. According to Bettinger, guaranteeing that systems will be 100% protected is similar to trying to time the market: "It's all but impossible." Schwab has committed to spending hundreds of millions of dollars to beef up its cybersecurity, the executive said. "The days of log-ins and passwords are going away," said Bettinger, noting that biometrics and other advanced security measures will become more common.
On the health savings account front, as consumers play a bigger role in managing their healthcare and the associated costs, the Schwab CEO predicted that health savings accounts (HSAs) will grow in popularity, becoming "the big wave of the future." That means advisors will have to include HSAs in the financial planning process at an increasing rate as they become "compelling and ubiquitous."
As for consolidation in the financial services market, Bettinger said that there appears to be "excess capacity" and that more consolidation is likely to occur. The CEO said that Schwab focuses more on strategic fit when looking at purchases rather than aiming to boost revenue.
In late October, rival E*TRADE acquired Trust Company of America (TCA), a provider of technology and custody services to registered investment advisers (RIAs). E*TRADE is paying $275 million in cash for the company, which has around $17 billion in institutional assets under custody and more than 180 active RIAs using its platform as of September. The transaction raised eyebrows among some Wall Street analysts who are skeptical of the deal given the companies do not have much in common. In a rebuttal to critics, E*TRADE said that it is still focused on organic growth, but TCA is a way to diversify its revenue and stop customers from jumping ship to access the types of products that TCA offers.