Will Net Neutrality Impact Financial Planning? Perspectives from a Financial Advisor:
You’re probably tired of hearing about, talking about and thinking about Net Neutrality. And I suspect your opinions on this topic are along ideological lines. But from my perspective as a financial advisor, the idea of repealing Net Neutrality is worrisome. Let me explain.
As most know, “Net Neutrality” is the basic principle that prohibits internet service providers (like AT&T, Comcast or Verizon) from slowing down, speeding up or completely blocking content, websites or web-based applications you and I want to use.
Let’s Ignore the Free Speech Issue for a Second
I don’t want to get into a divisive discussion about whether Net Neutrality enables and protects free speech. Nor do I want to debate how much Net Neutrality will devastate certain communities that cannot afford to pay. And I don’t want to get into an argument about whether Net Neutrality stifles or encourages innovation.
Instead, I want to tell you what I think the practical implications will be for the financial planning community and the families we serve.
Financial Planners Will Eliminate Technology
As a financial planner, I rely on a lot of web-based tools to provide wealth management services.
These tools include financial planning software, a CRM, multiple research databases, and my firm’s back-office technology that allows my clients to access their statements and other useful information with one click from their cell phone.
If suddenly it becomes more expensive for these technology companies to provide my team with the financial planning technologies we need, then the cost to me will absolutely go up. And while I don’t want to pass along these added expenses to my clients, I will likely be forced to eliminate some technologies from my practice – and that by definition diminishes my services to my clients.
The Big Mutual Funds Will Win
First off, let’s agree that there are way too many investment products – almost 20,000 mutual funds, ETFs, closed-end funds and UITs at the end of last year. But you might not know how I receive information from the handful of fund companies that I do work with because each fund company is different.
The really big mutual fund companies can afford to send someone to my office (a mutual fund wholesaler) and give me quarterly fact sheets, unique white-papers and market commentaries that allow me to be better informed.
The smaller fund companies, on the other hand,
rely almost exclusively on their websites to deliver information to me.
What do you think happens when I can’t get information from the smaller fund companies? That’s easy: I won’t be able to use them anymore. And if I can’t use them, I’m sure other financial planners won’t use them either, leading them to disappear.
That’s bad for investors.
Researching Will Be Difficult
All financial planning firms do quite a bit of research on behalf of their clients. We research investment offerings, we research tax laws, and we research things that help our clients reach their financial goals.
Take Morningstar as an example. Morningstar is a leading provider of independent investment research and provides my firm data on approximately 570,000 investment offerings, along with real-time global market data on nearly 18 million equities, indexes, futures, options, commodities, foreign exchanges and Treasury markets. That’s a lot of research and data.
What do you think might happen if Morningstar issues a report that Verizon doesn’t agree with?
Communication Will Suffer
Social media allows me to reach my clients and their kids in new ways. While I might not be “teenager-proficient” at all of them, communication with clients is one of the most important things I can possibly do. So, if clients want to receive communication via social media, want to digest information from me via their smartphones, then I need the right tools to accommodate. And Facebook, YouTube, Twitter and LinkedIn are great tools.
But what if your internet service provider won’t let you receive content from me via Facebook?
Costs Will Increase
According to Gareth R. Jones, author of Organizational Theory, Design and Change, transaction costs increase when these conditions exist:
- Organizations begin to exchange more specific goods and services
- Uncertainty increases
- The number of possible exchange partners falls.
With the repeal of Net Neutrality, all three of those conditions exist.
Again, no financial planner wants to pass along added expenses to their clients. But investors can expect some mutual fund companies to consider adding to their expense ratios and additional expenses layered onto the technologies that we all use.
The fact that internet service providers could possibly slow down content or block opinions they disagree with will, in my opinion, set the financial planning profession back to the early 1970s. The fact that internet service providers could charge extra fees to the few companies that can afford to pay for preferential treatment will lead to more expenses and less investing choices for my clients.
I just don’t see how repealing Net Neutrality is beneficial to the financial planning community and the millions of individuals and families we serve.
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