Tag Archives: Advisers

Blockchain: the next revolution in finances

This is the buzzword right now in technologies and finances: blockchain. The most disruptive technology, something like personal computers in 1975 or internet in 1993, or, as the Harvard Business Review published: the first native digital medium for value, just as the internet was the first native digital medium for information.

But what is it? This article explains it very simply: think about a book where each page is a block with a statement of any transaction. Every time a block is filled and added to the chain (a new page), a new block is generated. Blocks are linked to each other in a chronological order, as pages in a book.

Initially, blockchain was created as the technology that sustained the cryptocurrency bitcoin. Now, banks are investing a huge amount of money here, because they perceive the disruption of this technology.

Blockchain is a huge ledger running on million of devices and it is capable of recording anything of value, as money, equities, funds, bonds, contracts…It is a safe and private peer-to-peer system because trust does not depend on central institutions, but on network consensus, cryptography, collaboration and clever code. What does it mean immediately? It is a risk for intermediaries, essentially in finances. People can sign contracts or exchange assets without knowing each other but being confident that they will not be cheated. Without intermediaries, there will be increasing savings (between $16 and $20 bn a year, from different sources).

Following a report from the international consultancy Deloitte, blockchain has several advantages:

  • Disintermediation. Counterpart risk disappears.
  • Empowering of users, because they control their information and transactions.
  • High quality data, widely available.
  • Durability, reliability and longevity, hacker-proof.
  • Immutability of transactions: nobody can erase an operation
  • Transparency, because block changes are viewable by all parties.
  • Simplification: there is an only ledger, not several.
  • Faster clearing and settlement transactions, in minutes.
  • Lower cost transactions, due to the elimination of intermediaries.

However, this technology has still some challenges. Deloitte mentions that it is a very new technology without any regulation that consumes a great deal of energy from computers. Although it helps save money, it also has huge initial costs. Finally, as it is a new technology, there are still concerns about security, privacy, integration with other systems and the leaning to accept it by the users.

Financial experts say that blockchain will change some processes as know-your-customer, due diligence and anti-money laundering. This banking compliancy costs will disappear. Once a bank did it with a customer, other financial entities will then be able to use it, because this data are under customer control. Several time-consuming processes will disappear (and the attached costs) and the role of the adviser will deeply change. It value will be linked to their knowledge, not to their ability to make transactions. This is only the beginning of the next future and its name is blockchain.

Financial planning: any new trend in sight?

Financial planning: Two hands squeeze a dollar. by T-Advisor

The immediate answer to the question at the top is clear: of course, a wide range of changes are taking places and creating next trends in the advisors industry. Beyond the crisis and the economic transformation that we all are living on, financial planning is moving through a wave of social and technological changes, apart from the effects on the current advisors’ tasks. We would like to underline the main ones:

  • The generation gap in the financial planning behaviour. People focus this behaviour linked not only with personal experiences, but mainly with social ones, conditioned by the economic and political environment (think about social security, health insurance or retirement). Older generations tend more to save money and healthy organize their accounts. Younger ones do not plan, design a budget or think so much about their future finances. Also, young people have less financial literacy and less knowledge about investment and financial products.
  • The influence of technology to plan our investments. Interactive experience, so experts, is going to be a very important trend in the next years. Tablets, mobile phones and apps are creating a self-sufficient little investor, who takes care for his money by himself from his device. Advisers will no longer control the planning experience and this trend will deeply change the industry. Moreover, sector companies will have to develop flexible tools for all devices and all kinds of browsers or operative systems, if they want to have a chance in the billion-app-world. By the way, they also will have to look heavily to the cloud.
  • The advisory industry will be conditioned by new ingredients. Technology will reduce costs to advisers, but also will pressure their customer fees. With the availability of new tools, private investors will access to markets at a very low price. But advisers should take the trend as a chance, because more people connected and interested in investments will be target for them if they are well-positioned. How? Taking into account social shifts in demography and longevity, which will create new priorities in investments. Apart of that, advisors will have to evolve into an all-in-one provider: tech tools, legal planning, career planning or even coaching.

To sum up, the advisory industry is facing a deep change in a changing world. Possibly, next three years are going to be critical and we are surely going to be witness of this transformation. Technology, effects of the social shifts linked to the end of the crisis and new players and models in financial planning are the main cards in this game.