By James Langton
(September 20 – 09:00 ET) – Investment firms willing to embrace “creative destruction” will win the day in the retail financial services business, attendees at the Securities Industry retail conference in Chicago were told on Friday.
Traditional brokerage firms face radical price competition from online brokers and even broader competition in the form of technology companies trying to intervene in the advisor’s relationship with his or clients, says Harvard economist, Lester Thurow. So firms should embrace the philosophy of creative destruction to evolve in the new millennium.
Thurow is a proponent of the creative destruction theory of business. The theory states that companies must go through painful, unprofitable transitions, and be willing to cannibalize their own businesses to rejuvenate themselves to face a new set of circumstances.
In this case, the destruction is of the traditional retail brokerage business in favour of a tech savvy online service component. Most believe advice won’t disappear. Many conference participants felt the distribution of advice will have to change. It will have to be better integrated with, and in some cases subordinate to, online delivery channels.