Few phenomena in history have been as transformational as global warming. It has captured the attention of so many and provided a cause for people to unite, irrespective of cultural and political ideologies. The scale of global warming is so massive that it engulfs everyone to some extent.

There is a subtle but similar phenomenon taking place in private wealth management, specifically in the traditional advisor–client model. As with global warming, the relationship is evolving in response to the threats and opportunities facing the wealth management industry as a consequence of the financial crisis. Given national and cultural differences in the financial advisory business, there are also both macro- and micro-factors at play. While rising emissions are mainly to blame for global warming, embedded commissions are the cause of heat waves now felt by advisors globally. In particular, there are two noticeable trends changing the wealth management climate around the globe: advisors as fiduciaries and advisors online.

Advisors as Fiduciaries

The first trend has its roots in a more fundamental, ethical ideal—the role of advisors as fiduciaries. There is an apparent conflict of interest when advisors are paid by commissions on the products they sell, as opposed to fees based on assets under management only. This conflict is particularly problematic when the commissions are not disclosed to clients, creating the potential for biased financial advice. The conflict of interest in how advisors are paid is being widely debated, attracting the attention of local regulators and professional associations.

Major developed countries are already taking steps to tackle these conflicts. The Future of Financial Advice laws in Australia and the Retail Distribution Review in the U.K. have banned embedded commissions altogether; financial advice is now offered purely as a fee-only service. In the U.S., there is increasing pressure to hold brokers accountable for the products they sell and for advisors to act as fiduciaries for their clients. The Client Relationship Model in Canada is a step in the same direction. It mandates advisors to fully disclose all commission and fee breakdowns on client statements as well as to regularly evaluate suitability of investments based on clients’ investment objectives.

Advisors Online

The other trend that is slowly growing in the wealth management space stems from an increase in technology-savvy investors combined with investors’ mounting mistrust of the traditional advisor–client model. From this, a new breed of advisor is emerging—one with an online only presence. These advisors not only provide advice as a fee-only service, they also use pre-defined, rule-based methodologies for asset allocation and portfolio maintenance. Although several platforms are competing and there is no clear winner, such services can only grow in importance as Generations X and Y overtake the baby boomers.

Several different flavours of platform are available for those brave enough to try them. Some prominent start-ups such as Wealthfront, Betterment, and LearnVest are all registered as investment advisors with the U.S. Securities and Exchange Commission, and they provide low-cost asset allocation and management services based on assets under management. They create portfolios using exchange-traded funds (“ETFs”), rebalance them based on pre-defined rules, and provide add-ons such as tax loss harvesting and access to a live advisor either online or via phone There are others, such as Personal Capital, FutureAdvisor, Jemstep and SigFig, that provide slightly differentiated services. Some provide users with a holistic view of their entire portfolio by combining investments held in different brokerage accounts, along with asset allocation advice and buy/sell recommendations.

The online advisory business is still in its infancy and does not appear to provide comprehensive solutions for all situations. None of these platforms can satisfy a sophisticated, ultra-high-net-worth client with complex cross-border tax and estate planning needs. But platforms like these, niche as they might be, are slowly causing a revolutionary change in private wealth management. Some traditional advisors are even adopting these tools for more mechanical tasks such as creating low-cost, ETF-based portfolios, while focusing their efforts on managing the client relationship. FlexScore, for instance, is a tool designed specifically to help advisors extract all the information from their clients in order to cultivate a stronger relationship. More importantly, traditional advisor platforms such as Vanguard and Schwab have introduced similar tools on their portals for those who are technically savvy.

Whether they are targeting efficiency over the traditional model or overcoming some of its deficiencies, online advisors are gaining in importance and having an influence on the traditional advisory model. As clients with high-speed access to information become more sophisticated, they are asking their advisors tough questions about the true cost of their services. This will continue to change the climate in wealth management, and the onus will be on advisors to be more forthcoming about their compensation, more objective in their advice, and to provide an unambiguous value proposition. Like nature, the industry will reward those who embrace evolution and adapt, rather than those who refuse to change and blame the weather for their failure to act.