Digital Wealth

Chapter 21 The Future of Wealth Management

“Prediction is very difficult, especially about the future.”

—Niels Bohr

The so-called FinTech industry has shown rapid growth in just a handful of years. Innovation is a powerful force, and many of the trends that have been true even before the onset of digital innovation are set to continue. In assessing the future direction of the industry, it is helpful to look back rather than forward because some of the most powerful trends we have seen continually in the past will likely have a significant impact on the future.

Lower Costs

Charles Jones of Columbia Business School has performed extensive research on trading costs¹ and found that they have halved every seven to eight years since 1976. For example, New York Stock Exchange commissions during the 1960s had the structure shown in Table 21.1.

Table 21.1 NYSE Trading Commissions 1959–1968

Money Involved	Minimum Commission per 100 Shares
$100 to $400	$3 + 2% of amount traded ($6 minimum)
$400 to $2,400	$7 + 1% of amount traded
$2,400 to $5,000	$19 + 0.5% of amount traded
Over $5,000	$39 + 0.1% of amount traded

Source: Charles Jones

Also, remember that the costs in Table 21.1 are not adjusted for inflation—that $39 fee from the 1960s would be $270 in 2015 dollars. As such, the decline in commissions is stark. With trades possible today at a cost of $7, that’s less than 3 percent of the cost of the 1960s in real terms.

For comparison, many popular exchange-traded ...