The Past as Prologue: Wealth Management

Is it possible that historical reference from other industries in the past can be used to gain some perspective of what might happen to the financial services industry in the future?

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    The Past as Prologue: Wealth Management

    The Past as Prologue: Wealth Management

    Mark Twain is often attributed to the aphorism, “History doesn’t repeat itself, but it does rhyme.” Like the anticipated cadence of verse, is it possible that historical reference from other industries in the past can be used to gain some perspective of what might happen to the financial services industry in the future? Are there signs that exist today shedding light on potential changes we might encounter at some point down the road?

    It’s hard to believe how much of American industry in the 1800s was literally fueled by whale oil. At the time, prevailing thought considered it to be a sustainable and abundant resource; however, by the late 19th century, whales had been harpooned to near extinction, necessitating far-distant travel to South America and into the Pacific Ocean to hunt down these diminishing, aquatic treasures.  Michael Dietz’s invention of the kerosene burner in 1868 created an immediate and massive negative impact on the whaling industry; a few years later, whale oil was ultimately driven off the market.

    If petroleum products, such as kerosene and machine oil, had not come into being, many species of whales most assuredly would have ceased to exist. The world’s dependence on whale oil shifted to an even greater dependence on fossil fuel as its primary source of energy. This echoes the belief of years’ past that fossil fuel, like whale oil, would be an abundant and sustainable resource for generations to come.  It’s an all-too-familiar rhyme, as we are faced with the same questions today.  From where will the world’s future source(s) of energy come? Will it take a black swan event to realize that the situation will change as it did during the 1800s?  Or, are the changes more predictable and apparent?

    Applying the sustainable energy scenario to the financial services industry begs the questions: How will the empowerment of individuals through automated systems and social networks transform the business of investment management? Will disruptive innovation in wealth management create pressure in the industry to improve the value delivered to its customers? Take a look at some of the key characteristics of the future of wealth management in a report from The World Economic Forum (June 2015), entitled “The Future of Financial Services: How disruptive innovations are reshaping the way financial services are structured, provisioned and consumed.”

    Accessibility Sophisticated wealth management platforms will become available to a broader customer base, including the mass affluent and mass market customers.

    Transparency and Control Customers will gain greater visibility into their financials and how their money is invested, and will be able to make adjustments to their financials more readily as more wealth management options become available.

    Convenience Online and mobile channels will be increasingly leveraged to interact with customers and deliver higher value services, providing access to financial information on-demand.

    Personalized As algorithms used in managing wealth become more sophisticated, the degree of customization and individualism will increase for services delivered to mass affluent and mass market customers.

    Low Cost The cost of receiving advisory and management services will decrease as automation lowers the operating costs and new disruptive entrants spur completion in the market.

    Key Implications

    The emergence and growing popularity of automated wealth management services and customer empowerment tools will pose a tangible threat to the traditional practices of the wealth management industry. However, incumbent institutions that can embrace these innovations and streamline processes will be able to provide higher value services to a broader customer base.

    At American Portfolios (AP), we continue to leverage against what we see coming down the road. The primary initiative is to maintain our technical and platform independence by having complete control over what, when and how we develop the technology and services we deliver to the professionals we support. The firm will continue to invest capital into the infrastructure and platform, always seeking strategic integration where available, while staying true to our goal of service and support. Most importantly, the focus remains on building the platform with an eye toward what is happening in our industry, as well as the challenges that our advisors are facing.

    In an effort to remain competitive against automated platforms, we will need to develop proprietary automation and efficiencies that will free up the advisor to concentrate on building and maintaining client relationships, while providing more specialized services that will deepen and improve the quality of those relationships. The demand for in-person meetings will always exist, but the management of assets will continue to be commoditized.

    Automation and workflow efficiencies developed by AP will create more capacity for our advisors to service more clients. There is no question there are going to be changes in the way financial services and investment advice are delivered to clients in the future. However, by working together, we can navigate those waters without straying too far from our core mission of providing a high level of support and service to the financial professionals who serve the investing public.

    The life and death of the American whaling industry is, in actuality, a modern story about innovation and how technology changed the course of an industry, the lives of its workers and the delivery of a vital commodity—energy. That modern story is about financial services and investment advice. ap-drop


    See referenced disclosure(s) (1) at .



    CEO, CIO & President of American Portfolios Financial Services, Inc. (APFS) 
    631.439.4600, ext. 106 


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