If you're a financial advisor who is still giving clients advice based on today's life expectancy and goals, chances are you need to go back to the drawing board.
"Most of the advice you are offering is fatally flawed, and I would even argue criminally negligent," Ric Edelman, founder and executive chairman of Edelman Financial Services, told attendees at the Technology Tools for Today Advisor Conference in Fort Lauderdale, Florida, on Wednesday.
"If you continue to give the advice to your clients that you are currently giving them, you will soon be out of business," Edelman said.
Rapid technology advances coupled with changing life plans will fundamentally alter the way we live. And most of the financial plans that advisors come up with for clients are stuck on outdated expectations, said Edelman, author of the book, "The Truth About Your Future."
Today's advisors are falling short in three key ways, according to Edelman.
While the average life expectancy hovers at around 89 now, many individuals will live until 110 and 120. Yet, many advisors fail to factor those additional years into their equations.
"Your clients are going to live to 120, and if you haven't built that into your financial plan, you're not running accurate projections for them," Edelman said.
Those longer lives will also be more active, as developments in science eradicate diseases such as cancer and even reverse aging.
"The notion of saving up for 40 years to spend it in 20 will simply no longer exist," Edelman said.
Longer life expectancies will give way to completely new timelines, Edelman predicts. Instead of retiring indefinitely, people will work longer and will need to adjust their skills accordingly.
"It's the cyclical lifeline, where you go to school, get a job, go back to school and then you get a new job and go back to school and you get a new job," Edelman said.
But advisors are still stuck on planning for goals that are already outdated. One example: college planning.
"Stop worrying about how your clients are going to send their kids to college," Edelman said. "It's irrelevant."
That is because college will increasingly become free. New York, for example, is already offering free tuition for state residents, according to Edelman, and companies such as Starbucks are paying for their workers to get degrees.
Advisors can better provide value by helping clients navigate those transitions, he said.
"It's not just going to college, but paying for your education across your entire career, which is why it's career planning that matters," Edelman said.
People today are living their lives online, but many estate plans fail to make provisions for that.
Photographs that are typically stored on social media websites are vulnerable, Edelman said, as many social media websites will shutter an account once they find out a user has died.
"You have to incorporate into the estate plan the transference of digital assets," Edelman said. "Have you talked about this with your clients? If you haven't, you're negligent."
Advisors are also failing to anticipate how rapidly changing technology could upend clients' portfolios, Edelman said.
By 2025, 40 percent of today's Fortune 500 companies will not exist, he predicted. Kodak is one example of how that happens. The company went bankrupt in 2012, the same year Instagram was sold to Facebook for $1 billion.
"This is disruption," Edelman said. "Disruption destroys companies."
Advisors and investors need to ask themselves if they are investing in the companies of the past or those of the future that are working in areas such as big data, robotics, 3D printing and blockchain technology, Edelman said.
"What is the advice you're giving your clients?" Edelman asked. "Is it based on the world they are truly going to live in? That is the advice you need to be focusing on."