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Thread on the future wealth management wrt crypto: Over the next decade, the financial industry is going to become dramatically transformed, we are already beginning to see it with retail banking. As a teen i remember opening my first bank account, the fees were charged monthly.
Unless you had a large balance, that was the cost of doing business. You had no choice. I was ok with it as I knew no other option. I accepted it as reality. Wires? Fee as well. The bank holds your money, gives you basically nothing for it, and charges fees at the same time.
Taxi services, hotels, same thing. You want the service? You pay. There was no other alternative. We accepted rates and service as fair and true, if you don't know anything else, what do you have to compare it to? The last decade has radically changed all of this.
And we are seeing the effects take strong hold in the financial industry, a space that has been dominated by monopolies and heavy lobbyist power. Background: right out of college I started my career at Merrill Lynch-Wealth Management. I've seen it from the inside.
I eventually left and cofounded a firm and performed that work for 5 years before pivoting to angel investing and consulting on blockchain/DLT. Wealth management will be radically changed in the next decade. Millennials, gen Y, gen Xers, are a bit "over" the traditional wealth..
..management model that babyboomers and prior generations subscribed to. The big wirehouse advisory firms are nothing but sales-shops. They're all the same, unless you're a ultra high net worth client. Most advisors (especially those soliciting you) who claim to be portfolio..
..managers can NOT beat the markets. The competition is stiff. Comp sci, physicists, math quant hedge funds dominate the markets now. These wirehouse investment strategies ("smart beta") are marketing gimmicks. They're not smart. They don't understand the markets.
The real value of these advisors comes solely from the financial planning side. Estate planning, tax efficient strategies, legal structure, etc. Those are valuable services. But don't think that your advisor's analyst is going to beat the market. Most were crushed in 2008 as...
..they dont understand risk. Read any of @nntaleb's works. You will see why. MOST financial advisors are terrible market risk-managers. Most outsource your portfolio management to someone else who also doesn't understand risk. These advisors need you invested to get their fee.
What does this amount to? Our generation is seeing through the smoke and mirrors. Equities are at all time highs, and in the next few years will experience a correction that will again burn many retail investors. This time, i think many will look for other outlets.
They'll be over the whole game. They'll look for assets that aren't propped up by centralized entities and govt programs (wall street banks, Fed QE programs, etc). This is why Bitcoin and, more broadly, cryptoassets are going to change the game.
Cryptoassets lift the veil on an industry that has been heavily controlled by a select few since the beginning of times. The transparency and ease of access in cryptoassets are something the financial industry has never provided.
In @naval's podcast he talks about services like uber and airbnb carving out entirely new business models in century old industries and from there creating multi-hundred billion dollar industries themselves. This same thing will happen to finance, certainly in wealth management.
Many of these services will be disintermediated. We are already seeing this with robo-advisor services like Wealthfront and Betterment but these services are still lacking and their portfolio management services are fraught with issues. It's a step in the right direction.
I expect to see the industry pulled apart where u have specialists in each aspect of the wealth management process take their piece. This is on top of the fact that distributed ledger networks and cryptoassets will also be disintermediating certain public and private companies.
The way investors pick stocks/assets going forward is going to need to change as well. This is one of the rare times in history that you have one industry (wealth management) being disrupted and the industry it relies on (stock market/other asset classes) is ALSO being disrupted.
Your investment decisions going forward will be heavily leveraged (up or down). If you're being sold something traditional by someone in a suit, think again. Times are changing. "Where there's mystery there's margin." Crypto removes the mystery-margin in finance.
