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Edelman: Free Trading Will Kill Commissioned Brokers

April 3, 2017

Commission-based brokers will become a relic of the past when trading becomes free, an RIA executive tells ThinkAdvisor. And the timeframe for his prognostication is about two years.

Advisors who work on commissions will go out of business once technology inevitably makes online trading free, Ric Edelman, executive chairman of Edelman Financial Services, tells ThinkAdvisor.

In the interim, half of commission-based brokers will get out of the business as fiduciary advisors become more prevalent, he says. And that’s likely to happen even if the Department of Labor doesn’t implement its fiduciary rule, which purports to force retirement brokers to put clients’ interests first.

The rule, originally scheduled to go into effect April 10, may be delayed by 60 days already, with many critics calling for a longer delay or an outright repeal. The CEO believes the DOL’s fiduciary rule will get killed, but that consumers are already well aware of the fiduciary standard. Therefore, even if the law doesn’t require brokers to act as fiduciaries, “the marketplace will,” Edelman tells ThinkAdvisor.

And while he claims commission-based brokers are on the way out, he warns fiduciary advisors shouldn’t feel too confident either.

Advisors who don’t keep up with exponential technologies — the ones experiencing the fastest growth, including artificial intelligence and bionics — will probably go out of business within the next decade too, Edelman tells ThinkAdvisor.

Ric Edelman

Advisors need to pay attention to tech developments in payment transfers, digital currency and other areas, all of which can benefit their firms as well, he says.

Artificial intelligence, for example, will improve projections, analysis of scenarios for tax repercussions and a portfolio’s income capabilities, Edelman tells ThinkAdvisor.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.