The Demise of The Middleman

The internet is eliminating a whole category of businesses.  The helper group.  The ones who add access or a more complete service.   That has two characteristics.  One good.  One not.

On the good side is price. Save money or maybe gain convenience.

The elimination has been going on for a long time.  Probably self-serve gas stations were the first.  Maybe super-markets.  When I was young, if you bought gas, someone pumped it, someone else checked the oil and maybe the tire pressure.  Another cleaned the windshield.  Full service meant it then.

Now we take self serve for granted and it is unclear if the price of the fuel has declined commensurate with the reduction of service.

The internet will do a lot more.

Some examples have been there for a while.  Who remembers the travel agency where the people had actually been where you were planning to go?  See this.  Avoid that.  Be sure to take this side expedition.  If you leave on this day instead, I can get you a better fare.  Seat selection.  Here’s how to pack.  Some survive, but not many, and not for long.

Remember when the music business revolved around record companies.  No company to sign you, no career.  The Beatles started to change that, but the internet and digital music has accelerated it greatly.  It will not be long until we think of a record company as a quaint relic.

Bookstores.  Used ones survive.  Taxi companies.  The only unique part was dispatch and the internet can do that.  Full service stock brokers.  Ancient history.

Who is next?  There is a rather lengthy list of candidates.

Banks.  For many people a physical bank is already obsolete.  Many if not all of there services are, or could be available on the internet.  Nearly 40 years ago there was prescient article in Fortune or Forbes.  I forget which.  The title, “Banking is necessary. Banks are not”

Investment advisors.  While these people offer value in the area of keeping people on track, there is less value managing investments.  Exchange Traded Funds are a fast growing area and no end is in sight.

Insurance advisors.  For many people, insurance is a commodity.  Term 10 life insurance is like milk at a convenience store.  Entry level product.  The vast majority of people have simple needs and simple product will work for them.  Some day a site will help them understand the size of the problem and their product options.  Disability insurance, most casualty, and some complex situations in respect to life insurance will need an experienced helper.

Real estate agents.  No need to see 40 houses on foot.  You could narrow it down to 2 with a well designed site.

Think about Uberizing everything.

For the downside.  People are impatient and tend to think they know more than they actually do.  Arrogant and ignorant is a weak combination of attitudes.  Middlemen who motivate, create bespoke structures, or provide a continuing sounding board and review service, have value unrelated to their particular product.  They can keep their clients centered, focused, aware of change and achieving.  These advisors are their client’s conscience. Good value.

If someone merely provides access, arranges or delivers product, they are already in decline.

Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.


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One Response to The Demise of The Middleman

  1. Pingback: The Demise of The Middleman | Private Risk Advisor

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