Today’s Advisors

The Real Value Of Good Advice

What crypto might teach us about the “middle man”

by Tamiko Toland

Ms. Toland wrote this while Director of Retirement Markets at Toronto-based Cannex Financial Exchanges. As Director of Retirement Markets for Cannex Financial Exchanges, she conducted research and provided thought leadership on solutions that increase retirement security. She is also a Certified Financial Education Instructor. Cannex provides data and analytics on annuities in North America. Learn more at

Everybody hates the “middle man,” right? After all, he just stands in the center of a transaction without providing value and we would all be better off—and keep more money in our pockets—if he just disappeared.

This premise has become canon in the dialogue about technology and progress: any layer added between parties in a transaction is unnecessary friction. But should we accept that this is always true? Worse, does it demonize middle men that provide important and valuable services?

I see where this mindset has infiltrated financial services in general and especially insidious when it comes to annuities. I fear that disdain for the middle man even prevents consumers from recognizing the value of advice and protection: factors that provide consumers with better outcomes, peace of mind, and access to expertise.

Why We Hate the Middle Man

The middle man is wasteful. Indeed, this can be the case and I don’t want to disregard the remarkable gains in speed and efficiency that come when we improve on or replace antiquated processes and systems. However, acknowledgement of these potential benefits should not translate into a knee-jerk rejection of all intermediaries.

The current obsession with decentralized finance and cryptocurrency risks doing exactly this. Even worse, the general mindset that it benefits consumers to remove fees and services is inaccurate and suggests that advice and protection are obstacles.

No, the middle man often serves a useful purpose and, in his absence, there’s a risk of losing important advice and oversight that is not only useful but valuable to consumers. And by valuable, I mean worth paying money for.

This message is important to articulate because, all around us, we hear that the benefit of new financial technology is the elimination of useless and expensive interlopers that unnaturally mooch off of transactions.

Democratization of Access Without Advice

The elimination of the middle man is a central thesis to the value of digital assets like cryptocurrency or non-fungible tokens (NFTs), especially when we consider applying the NFT concept to real estate. The new technology “democratizes” and enables fractional ownership of assets that would otherwise be out of reach for investors with thinner wallets.

Proponents offer the example of a luxury beachfront property in the Caribbean in an area with rapidly inflating prices. Through the mechanism of an NFT that tracks many tiny shares of that property, such an investment becomes accessible to a broad array of. On its face, this may sound useful and there’s no doubt that it is attractive to a segment of investors and the argument continues that this is a novel benefit for investors who otherwise could not afford to buy the entire property.

But the story does not start and end with the creation of an NFT. There must be some mechanism for the investor to decide which property or properties to invest in and this is where the lack of advice becomes a problem. Despite claims to the contrary, we already have a vehicle that allows fractional investment in real estate: the real estate investment trust (REIT).

A key element of the REIT is that it provides professional management and advice as part of the package. I can imagine a future where REITs invest in real estate NFTs or there is an NFT that is a managed basket of properties. But I fail to see the value of an advice-less model for a regular retail investor who is looking for portfolio diversification.

No, the middle man often serves a useful purpose and, in his absence, there’s a risk of losing important advice and oversight that is not only useful but valuable to consumers. And by valuable, I mean worth paying money for...

My point is not to argue about the validity of the role for NFTs in real estate or the pitfalls of existing solutions. Instead, it’s crucial to understand that professional guidance is tremendously valuable, not just in REITs but throughout financial services and insurance consumer offerings. By the same token (no pun intended), financial professionals who help their clients serve an important role for consumer that is worth compensating, regardless the compensation model.

Regulation as Demon

The absence of regulatory protection for consumers is, to me, a no-brainer. You don’t have to look very hard to find fraud and systemic issues in the field of crypto. We can start with the premise that disclosure and validation of a coin comes in the form of an academic white paper that is simultaneously unintelligible and insufficient to explain their benefits and risks. If nothing else, these makes prospectuses seem like a dream of disclosure and readability—no small feat.

Cryptocurrency is surrounded by a minefield of risks, most of which are not apparent to many investors. Consider the so-called “stablecoin,” which is a class of coin that purports to maintain a value pegged to a fiat currency and therefore constitute a more useful tool for business transactions and cross-border money transfers.

While this is a wonderful concept, a stablecoin holder would naturally assume that the coin will maintain its value. The larger question, since the coin simply represents money and is not in fact money, is this: where is the actual money and how is it being managed? This question opens up a can of worms that led financial stability expert Greg Gelzinis to assert that they look like either unregulated money market funds or unregulated banks. Both options make me queasy for the sake of consumers who are not aware of the underlying risk of this relationship.

There is no doubt that regulation is a double-edged sword, creating burdens that are often counter-productive and limiting. This is true, but let’s not ignore the importance of consumer protection measures. Regulation does not erupt into a vacuum. Regulation exists in response to incompetence, negligence, and bad actors.

Incompetence, negligence, and bad actors arise everywhere there are people and, ideally, the rules evolve in proportion to the risk to consumers. Certainly, it is impossible to modulate this balance perfectly and we know that overcorrection and gaps often exist simultaneously. But, for better or worse, regulation is there so that normal people don’t need to worry about how a bank or money market fund invests reserves and whether operational oversight is in place to make sure that insurance companies can meet their obligations.

Oversight is a Feature, Not a Flaw

Most people want protection from fraud and from risks they do not understand or care to keep track of. This means that a framework that provides consumer protection is valuable to consumers and is therefore is worth paying for.

Does regulation make various products and services more expensive? Yes, without a doubt. But is it a necessary evil? Tellingly, even the cryptocurrency crowd is starting to embrace regulation, so read from that what you will.

An annuity that provides a lifelong guarantee is a huge commitment between the insurer and the policyholder and, as such, it demands greater scrutiny than a money market fund. Do you think that consumers want to know that there is strong oversight of insurers and the products they offer? I do—and I think they are willing to pay for it. The industry shies away from talking about the cost of regulation because it means that insurance is expensive. But cheaper is not better when your retirement income is on the line.

It’s time to lean into the value that the middle man brings to consumers. Advice and guidance matter, most especially when people are making decisions with their hard-earned savings that will affect the security of their retirement. Regulation matters because no retiree wants to worry about failure in payments that they expect to receive for a lifetime.

Are annuities expensive? You’d better believe it but I’m willing to wager that consumers think they’re worth every penny for the financial assurance and peace of mind they offer.


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