On Technology

Bold predictions for 2019

Changes on the horizon for financial planning, robos, cybersecurity and cryptocurrencies

Jan 14, 2019 @ 2:47 pm

By Ryan W. Neal

With world events as chaotic and random as they are today, making predictions is a fool's game. Anyone claiming to know for certain what the future holds probably has a bridge to sell you.

That said, I have some predictions to make about the upcoming year in adviser technology! These are guaranteed accurate with no chance any will be completely ridiculous by the end of 2019.

The last time I made predictions for InvestmentNews, I said 2018 would be the year large financial institutions adopted blockchain technology, "Solo" would be the first Disney-era Star Wars movie to disappoint critics, and both the San Francisco Giants and the 49ers would make the playoffs.

These predictions turned out to be, not great. The Han Solo movie disappointed moviegoers while critics kind of liked it, but the rest was dead wrong. I'll give myself 0.5 points out of four.

Oh well, we soldier on. After all, past performance is no guarantee of future results. This time I'll stick to adviser fintech, and improve my prediction success rate.

(More:Are securities rules limiting the evolution of fintech?)

First, financial planning will go mainstream and mandatory.

Financial planning has been gaining momentum for years, but 2019 will be a turning point in its availability throughout the brokerage and advice industry. In fact, I expect at least one large firm to make financial planning a requirement for all new accounts before the end of the year.

Technology has removed many of the obstacles that traditionally kept advisers from offering planning services, which clients will increasingly demand. Millennials like myself are far too jaded about stock markets to be swayed by investment performance alone. But a strategy to pay off student loan debt, buy a car and optimally save for retirement while still having a fun and fulfilling life sounds like something worth paying for.

If this historically long bull market is indeed at an end, financial planning can keep clients from running. As one tech executive put it to me, "It's a lot easier to sell people on progress towards goals than on investment performance when markets are bad."

Next, robo-advisers aren't going anywhere.

Even if markets completely tank, Betterment and Wealthfront are large enough to survive, and traditional institutions have no reason to pull the plug on copycat services they've spent time and money developing.

That doesn't mean the venture capital community will keep making it rain. Investors are going to demand a payday eventually, especially if markets get shaky. Smaller digital startups will follow Hedgeable and WorthFM's lead and close up shop.

Neither Betterment nor Wealthfront have been shy about their intentions to go public eventually, and 2019 could be the year one or both do it.

(More:Advisers no longer fear automation taking their jobs)

But if I could bet on any fintech startup making an IPO this year, I'd pick Robinhood. Regulator concerns be damned, the firm has been aggressively expanding its products and services, and said publicly it's looking to hire a CFO who can put the company on the path to a public listing.

On cybersecurity, for years the Securities and Exchange Commission issued guidelines and stern warnings to the financial services industry to take it seriously. In 2018, the gloves came off. The SEC named cybersecurity as a top priority, hired four new staff members devoted to it and filed charges against Voya Financial Advisors, resulting in a $1 million settlement.

More is coming, and some believe the SEC is looking to send a message. Expect more enforcement actions coming with hefty price tags, and not just from the SEC. Finra and state regulators are also looking to prove their commitment to the cause.

(More: Crackdown showdown: Serious cybersecurity enforcement is coming in 2019, but are advisers ready?)

Finally, look for a crypto-ETF to hit the market.

SEC chairman Jay Clayton said cryptocurrencies are not securities, but that doesn't mean a crypto-ETF is out of the question. Ethan Silver, an attorney with Lowenstein Sandler who works with a lot of companies in the cryptocurrency space, said the SEC is still figuring out all the pieces when it comes to market manipulation and custody.

"How to verify these securities exist, rightful ownership, things like that. I think it's trying to take this new technology and fit it in within the existing SEC rule set," Mr. Silver said. "That is still the lynchpin that they are hesitating on approving."

But plenty of traditional financial players are jumping in and could help Mr. Clayton's agency feel more comfortable. For example, Fidelity launched a new company to custody cryptocurrencies.

Cryptocurrencies are arguably the most popular alternative investment among consumers. If traditional markets continue south in 2019, bitcoin and its peers could experience a renewed wave of interest.

If that happens, you can bet firms like Fidelity will put pressure on the SEC to figure things out.

(More:Advisers: Meet our new tech columnist)

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