From Morningstar:

Last month, passively-managed funds controlled more assets than their actively-managed counterparts. Vanguard introduced the first publicly available index fund in 1976 and index funds’ success has now exceeded 30% of the industry’s assets and is expected to surpass 70% in the next decade. Indexing’s impact on financial advice has been significant, as it has forced a re-evaluation of the role of financial advisors.

The growth of indexing forced the financial advice industry to adapt. Instead of offering better funds, financial advisors were forced to offer better service, focusing more on client needs and goals. This resulted in improved financial advisors who are now more focused on client goals and less on products, showing that change was needed and beneficial.

The impact of indexing on the financial advice industry holds lessons for other occupations, such as the potential impact of artificial intelligence. Instead of focusing on specific knowledge, the focus should be on developing expertise that AI cannot mimic in order to adapt to technological advancements. Revolutions have consequences, and it is better to anticipate changes rather than chase them.



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