In the not too distant future of drone-delivered shipments and self-driving cars, the way in which we invest is going to change, too. The current landscape in Canada for getting advice and managing investments is out-of-date and is a huge cost to investors and the country. But there are changes happening now that are paving the path for a new way to save, one where efficiencies, quality, and customization will change the industry and create better financial security for Canadians.
Access to experts
Generally, improvements in productivity have made it possible for the average person to access what has traditionally only been available to the wealthy. This will ring true for the investment industry, where high net worth planners will have access to accountants, estate experts, insurance experts, and investment experts so their clients get the right advice for every situation.
With the right tools, custom advice could be made available to everyone. Smart tools will guide you in creating an investment plan, while responsive tools to answer specific questions will tap into expert knowledge in each field. For example, in the future you may be able to connect your financial plan to your CRA information, so that your existing income, tax, and investment account data is updated automatically. This means you would get the best advice as to which account types to use for your tax situation so you don’t have to worry about understanding all of the ins and outs of TFSAs, RRSPs and RESPs.
Time is precious. Meeting with an advisor multiple times to fill out stacks of paperwork and wait weeks for an account to be opened are unnecessary holdups. The interaction you’ll have with an advisor in the future will be driven by you. You’ll be able to review your information when you want, as many times as you want, from wherever you want. Modern methods of identity verification like fingerprints, retina scans or something not yet thought of, will replace signatures. Documentation will only involve what’s relevant, and will be confirmed once instead of putting multiple pages in front of clients to vet and sign.
You may or may not have heard about CRM2, but it’s a reform that will quickly have a big impact on how investment firms offer their services. The reform will require firms to show clients how much they are actually paying. Once investors become aware of the costs embedded in their investments, the landscape should shift into a fee-based model where you see what you’re paying at every step of the way. The advisor will become less of a salesperson looking for the largest commissions and more of a fiduciary consultant acting in their client’s best interest, recommending portfolios that are more cost-conscious and suitable for their clients.
No more on size fits all. Portfolios should be constructed based on your exact time horizon, risk preferences, tax situation, and other holdings. They should also be built by people whose only job is to manage money. Traditionally, an advisor would make calls based on their own biases and judgement, and would struggle to stay on top the individual preferences of each client. Again, smart tools will make this easier with simple algorithms that account for all aspects of your situation. One portfolio manager will set rules for how each financial situation is customized, while others will manage what is held in each part of the account. Technology will tie everything together to create easy solutions for each investor.
It may sound like a lot of change still needs to come, but a lot of these changes are already available. Many firms have popped-up with the do-it-yourself model, but the advice landscape, led by the robo-advice model, is starting to work its way into the mainstream. These changes are only early signs of what’s to come. Keep informed about your options as they continue to develop and remember to invest smart.