Bob Veres predicts new investment model that could give advisers edge over competition

Says advisers might one day get client portfolio advice directly from asset managers

Sep 7, 2017 @ 11:58 am

By Jeff Benjamin

In the future, advisers will subscribe to communities of asset managers for investment strategies that they will use to make decisions about client portfolios, according to Bob Veres, who delivered the keynote address at the Insider's Forum in Nashville on Wednesday.

Mr. Veres said the increased "adviser alpha" could be worth at least 2 percentage points in value to client portfolios.

"The new investment model will be crowdsourcing," he told the audience of nearly 400 financial advisers. "In the future, you'll be subscribing to communities of asset managers."

To that end, Mr. Veres predicts that mutual fund companies will be selling their intellectual capital directly to financial advisers that will enable the advisers to decide whether to buy or sell a position based on an individual client's situation.

"The value could be as high as 1.6% a year, and it eliminates the price-impact factor that moves markets when (the mutual funds and large institutional investors) buy and sell," he said.

Mr. Veres estimates the price-impact factor to be worth another 53 basis points, which brings the total value to over 2% per year.

Buying intellectual capital, in the form of portfolio trading decisions, directly from money managers, he explained, will "swing the pendulum back to where advisers have more information than the consumer."

"This will restore the value of asset management" at the adviser level, he said.

"Eventually fund companies will get out of the back office business of buying and selling, and simply sell their intellectual property to advisers," Mr. Veres said. "And the advice profession will be able to provide adviser alpha of 2% per year."

While he said the trend of selling intellectual capital is already showing up in various forms at firms such as Riskalyze, HedgeCoVest, and Trust Company of America, the pace will be ramped up with the next bear market.

"Right now, 37% of all managed assets are in passive portfolios," he said. "Passive management will go through hell in the next bear market."

This should represent good news for advisers who are feeling increasingly boxed out by the flow of financial data directly to consumers.

In an earlier presentation on Wednesday, Joel Bruckenstein, president of Technology Tools for Today, described investments as "largely commoditized."

"The investment process is an area where most advisers add little or no value," Mr. Bruckenstein said. "I believe there will be a lot more outsourcing of investments in the future."

Following Mr. Veres' comments on advisers buying portfolio-manager investment decisions, Mr. Bruckenstein agreed that it is a way to help advisers stay relevant when it comes to asset management.

In recapping his five-year predictions for the industry, Mr. Veres was in line with Mr. Bruckenstein in seeing a future that is heavily influenced by technological advancements.

Among the things Mr. Veres expects is "more face-to-screen meetings, that will be the end of geographic marketing limits."

He also sees increasing specialization among advisers, including a "cyborg service model that is heavily leveraging technology."

"We are going to see a real distinction between sales agents and real financial professionals," Mr. Veres added. "And a shift away from the AUM-revenue model, which I call trail commission in drag."


What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Featured video


Top questions surrounding future of DOL fiduciary rule

Reporter Greg Iacurci and managing editor Christina Nelson discuss the biggest uncertainties springing from the Fifth Circuit Court of Appeals' decision to vacate the regulation.

Latest news & opinion

What the next market downturn means for small RIAs

Firms that have enjoyed AUM growth because of the runup in stocks may find it hard to adjust to declining revenues if the market suffers a major correction.

DOL fiduciary rule likely to live on despite appeals court loss

Future developments will hinge on whether the Labor Department continues the fight to remake the regulation its own way.

DOL fiduciary rule: Industry reacts to Fifth Circuit ruling

Groups on both sides of the fiduciary debate had plenty to say.

Fifth Circuit Court of Appeals vacates DOL fiduciary rule

In split decision, judges say agency exceeded authority.

UBS, after dumping the broker protocol, continues to see brokers come and go

The wirehouse has seen 14 individuals or teams leave and five join for a net loss of $2.4 billion in AUM


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print