A renowned financial advisor, lawyer, and CEO of Creative Planning, Peter Mallouk, has expressed concerns about the future of the Registered Investment Advisory (RIA) industry despite projections that it will exceed $2.92 trillion by 2029.
Mallouk discussed industry news with The Daily Upside at Future Proof, the world’s largest wealth festival, in Huntington Beach, CA.
“The market has been on a 15-year bull run and just gone straight up. When the markets normalize, there will be a mass slaughter. I mean, it's going to be really bad, and it's going to happen in a very short, multiyear period," he said, adding that many RIA's have grown complacent, owing to the success of the broad industry.
However, the market might struggle to hear him over the sounds of its fireworks. The FED has just cut interest rates by 50 basis points, equities are at fresh all-time highs, and the RIA industry seems to thrive.
Franklin Templeton BEN, an industry leader, manages as many as 455 open-ended mutual funds, while Invesco IVZ recently reported a 12% year-over-year increase in assets under management, surpassing $1.7 trillion. Despite these figures demonstrating the industry’s momentum, Mallouk believes many firms could be vulnerable if market conditions change.
Mallouk also points to larger economic risks, particularly related to deficit spending – which is set to reach $1.9 trillion in 2024, up from $1.7 trillion in 2023.
“It's really hard to get your brain around just how much money is sloshing around the system and what deficit spending does to the economy," he said.
Technology is another area where Mallouk sees both promise and peril. While advancements like artificial intelligence (AI) can enhance efficiency and scalability, they also introduce risks, including cybersecurity threats and misinformation.
Canadian veteran financial planner Jason Pereira recently echoed a similar sentiment, particularly addressing the hype surrounding generative AI.
“Generative AI is the most meaningful technological change since mobile computing,” he wrote for Kitces. While recognizing it as the biggest transformative advancement in years, he cautions that its full impact won’t be felt immediately.
“Can they expect to find an AI tool that changes everything today? Quite simply, no. Can it happen in 10 years? That's a much more probable outcome,” he noted.
Pereira stresses that while AI can speed up certain processes, its effectiveness depends on how well advisors understand and use the technology.
“It doesn't make things better; it makes things faster—if you know what you're doing,” he explained, suggesting that firms should focus on mastering technology rather than relying on it to solve all their problems.
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