I turned 40 this past January. In a time of enhanced longevity and aphoristic sayings about age, feeling and youth, I don’t know if turning 40 continues to be a significant personal milestone in today’s cultural zeitgeist. But, it has been to me, and so this year has been, appropriately enough for my birth month, a Janus-faced one: looking both forward and backward.
The Robots are Coming
In a 2011 essay published in the Wall Street Journal, Marc Andreessen of famed venture capital firm Andreessen Horowitz said that software was eating the world. From the number of articles published since then on the rise of software and its kin, AI and the socio-economic wreckage that’ll ensue, Andreessen’s thesis hasn’t just simply been accepted, but it’s also expected to lead to a dystopian future, one not to be embraced but to be feared.
Fear is an emotion or mood certainly present within the legal industry. The mot du jour to describe what’ll happen is “disruption.” Namely, AI will replace many professionals by handling much of the work they currently do and at a fraction of the cost. A dystopian future indeed, for practitioners at the very least.
Whatever the source of the feeling, there’s that underlying fear, an anxiety about the future. Are we then looking at a moth-eaten practice, where both low-end or commodity work and high-end or sophisticated tax planning work are ravaged by AI? Speculating about the future, especially when technology is involved, can often seem uninformative, in my opinion, but I do think that the prevailing anxiety may be overdone, at least in the near to intermediate term. Presently, AI is good at work that’s structured, when an advisor’s processes can be modeled into instructions, and at work when the universe of outcomes, or phrased differently, when the number of contingencies, is limited. AI isn’t adept when creativity, strategy, judgment and emotional intelligence (that is, the very skills and qualities that are the sine qua nons of effective and successful practitioners) are required. In addition, it’s not a foregone conclusion that AI will fully and completely dominate the advice industry; there are broader social trends that could mitigate or dampen its effect.
The preceding isn’t meant to minimize the potential impact AI will have. The robots are indeed coming, and their arrival and presence may create a sizable dislocation of practitioners. We have time to prepare ourselves though, in particular by continuing to hone those aforementioned skills and qualities, and, in so doing, developing and solidifying our relationships with our clients and becoming that trusted advisor.
The Golden Girls and Boys
The Baby Boomer generation was front and center to one of the most turbulent years—if not the most turbulent year—in modern U.S. history. They too have been remainder beneficiaries so to speak of what appears to have been a unique period in civilizational human history: post-war America, in particular the unprecedented economic prosperity of the 1950s and the emergence of the middle class.
As they enter into their golden years, the Baby Boomers are now poised to transmit wealth estimated at over $30 trillion in financial and non-financial assets. With longer life expectancies, Baby Boomers may spend down some of this wealth during their lifetimes. Even so, the amount of wealth that’ll be transmitted, whatever the actual number, will be prodigious.
The role that practitioners will play in the transmission process is a story that more or less writes itself. What may not be as obvious are the secondary effects of an aging Baby Boomer population. First, their eventual decline due to mortality will result, in part, in a more racially and ethnically diverse total U.S. population. Second, in 2029, when they’ll all be age 65 or older, they’ll represent at least 20 percent of the U.S. population.
As the demographics of the country change over time and the diversity of clients broadens, it’ll demand a greater sensitivity and empathy from practitioners. Our ability and capacity to connect, understand and relate will be both tested and will have to expand.
The overall graying of the population will have effects across multiple vectors of society. For practitioners, it may necessitate closer coordination with a client’s other advisors to ensure that the client’s overall plan is appropriate in light of his spending needs and increased life expectancy; it may lead to expectations among clients that we’ll be able to advise on matters outside of our traditional bailiwicks; we may have to restructure our practices in response; and it’ll certainly mean that we’ll have to be more attuned to the possibility of elder abuse.
The Avocado Toasters
Millennials. There may not be another generation in U.S. history, except possibly for the Baby Boomers, who provoke as much of a visceral reaction. Loathing. Inspiration. Disgust. The best hope. The partisan divide is great, and the intensity is white hot.
At this moment, the Millennial generation is the largest, even larger than the Baby Boomers, and is estimated to number 75 million. Generalizations are hazardous, but there are certain features Millennials broadly share or have in common with one another that function like connective tissue and are worth noting. And no, I’m not talking about a gastronomic affection for avocado toast. Namely:
- Millennials represent nearly a quarter of the total U.S. population, 30 percent of the voting age population and almost two-fifths of the working age population.
- Millennials are more racially and ethnically diverse than previous generations.
- Millennials are waiting longer to marry and have children. They’re “still starting relationships at the same age as their parents, but they are trading marriage for cohabitation.”
- Millennials are more educated than previous generations, but with that, shouldering significant student loan debt. In 2013, 41 percent of young families had student debt, up from 17 percent in 1989. Not only do more young families have student debt, they are deeper in debt, too. The amount owed on student loans nearly tripled, rising from a median of $6,000 to $17,300 across the same period (in 2013 dollars).”
- Homeownership has been delayed.
- Although the median income of a young woman is less than the median income of a young man, young women have economically outpaced young men.
- Millennials are leaders in the adoption and use of technology.
- On the whole, Millennials have a negative view of banks and financial institutions.
Under the foregoing facts, the issues discussed in the preceding rubrics may, from a practitioner’s point of view, come to a sobering and troubling intersection with the Millennial generation and where, as a result, the most wrenching structural changes may occur in the practice, to wit: Homeownership is often thought to be a key way of accumulating wealth. With that delayed among Millennials, coupled with the student loan debt they’re carrying, there may be a knock-on effect as practitioners’ services are less needed. The reduction in demand from Millennials may be further compounded by their high comfort level with adopting new technology and their relative distrust of wealth management firms. Accordingly, even with the imminent Baby Boomer wealth transfer, practitioners may be locked out to a non-trivial extent as Millennials look to DIY it.
I have to admit, this is all disquieting to me. I may have to stop here and fix myself some avocado toast as comfort food. Even I, a Gen-Xer, can acknowledge the greatness that’s avocado toast.
As a mentor once said to, practices are built on relationships. If we can accordingly develop relationships in which we’re able to demonstrate our indispensability and our advice and counsel are both sought and deemed necessary, we can weather the forthcoming storm. That means an increased focus on the cultivation of what are sometimes derided as the softer skills and qualities.
This is an adapted version of the author’s original article in the October 2018 issue of Trusts & Estates.