Decentralized Finance Is Coming. Advisors Who Adapt Can Thrive.

DeFi’s DIY potential means people will need advisors less in general but, regarding informed advice for the coming DeFi age, perhaps more because of the eventual infinitude of options that blockchain technology will provide. Ironically, clients will need human advice to get more out of the independence that decentralized services will enable.

For advisors near the end of their careers, this evolving scenario isn’t really a matter of concern. But for mid-career practitioners, it poses an existential threat suggesting an urgent need to begin preparing by:

• Paying attention to what’s happening and learning about DeFi concepts and services, starting with gaining a fundamental understanding of current and developing blockchain applications. Few advisors seem to be preparing, if their absence at blockchain conferences and events is any indication.

• Imagining how DeFi will likely affect your practice and taking action based on likely impacts. Consumers may not need an advisor to trade in tokenized assets, but they’ll need advice on understanding the eventual broad range of these new assets, assessing risk/return and learning how to properly integrate them into their overall portfolios.

• Reexamining your practice’s role regarding life planning and financial coaching. As DeFi enables consumers to invest and conduct transactions on their own, they’ll still need the wisdom, experience, knowledge and expertise of a skilled advisor to properly tailor their investment holdings to their desired lifestyle — but in a wholly new context.

Perhaps the most apt metaphor for what will happen to advisory practices is what has happened with travel agents over the past 20 years, as resources became available or just more convenient for travelers to book their own trips, cutting commissions to a trickle. Today, the travel agents who are still earning a good living provide specialized guidance and advice based on the predilections of their clients.

This is the human factor — something that financial advisors will always be able to provide even after people start using their Alexa-like devices to get immediate financial advice (much as Ryan Gosling’s character used his ambient home computer for research in the movie, Blade Runner 2049). The advisory human factor will still be needed amid the growth of P2P social investing sites like eToro, which might disrupt thousands of money managers.

Yet disruption can be averted by adaptation. Advisors who adapt their practices and skills to the coming DeFi realm will not only survive. They’ll thrive in a less centralized financial world.

Eric C. Jansen is the founder, president and chief investment officer of Finivi | Financial Advisors. He founded BlockSocial.com, an online resource designed to help people better understand and capitalize on blockchain technology, digital assets and the coming decentralized world.