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their reserves, just like a bank. All the incentives for stablecoin issuers are to invest at least some of their reserves in riskier assets to get higher returns. This will be a major source of vulnerability, particularly when issuers are licensed by permissive state authorities.
Indeed, from a systemic perspective, the GENIUS Act’ s main shortcoming is its failure to deal effectively with the inherent risk of stablecoin runs, because it prevents regulators from prescribing strong capital, liquidity and other safeguards. And when any stablecoin issuer— domestic or foreign— gets into trouble, who will step in, and with what authority, to prevent the problems from spreading to the real economy, like in the 1930s?
Simply applying the bankruptcy code to failed stablecoin issuers will inevitably impose severe costs on investors, including prolonged delays in receiving what’ s left of their money. It will almost certainly exacerbate runs on other stablecoin issuers.
Moreover, if the GENIUS Act’ s goals include preserving the U. S. dollar as the world’ s reserve currency and boosting demand for Treasurys( as stated by its advocates), why does Section 15 of the law allow foreign issuers to invest their reserves in assets such as their own country’ s( risky) government debt, even if that debt is not denominated in dollars? We should expect foreign regulators to condone or even favor such arrangements. But then we will have“ stablecoins” with fixed dollar obligations, backed in significant part by non-dollar assets— and one can easily imagine what a big appreciation in the value of the dollar will do to such arrangements( spoiler alert: immediate liquidity problems, insolvency fears and destabilizing runs).
There is a lot more trouble to come, particularly if any version of the CLAR- ITY Act passes the Senate. This legislation would allow conflicts of interest and self-dealing on a scale not allowed since the 1920s. There are also major national security concerns, to the extent that both the GENIUS Act and the CLARITY bill allow or even facilitate the continued use of stablecoins( and crypto more broadly) in illicit financial transactions.
The U. S. may well become the crypto capital of the world and, under its emerging legislative framework, a few rich people will surely get richer. But in its eagerness to do the crypto industry’ s bidding, Congress has exposed Americans and the world to the real possibility of the return of financial panics and severe economic damage, implying massive job losses and wealth destruction.
SIMON JOHNSON, a 2024 Nobel laureate in economics and a former chief economist at the International Monetary Fund, is a professor at the MIT Sloan School of Management, faculty director of MIT’ s Shaping the Future of Work initiative, and co-chair of the CFA Institute Systemic Risk Council. He is a coauthor( with Daron Acemoglu) of Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity( PublicAffairs, 2023). © Project Syndicate
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Maute at Mercer identifies three areas where she has seen firms and advisors fail. The first is“ ignoring your client segments. No client wants to feel they are getting a cookie-cutter solution.”
Overpromising and underdelivering is another surefire formula for client dissatisfaction and, when your firm is large, word not only gets around but goes far. And finally, she says firms run into trouble when they fail to put the right organizational structure in place and try to“ grow without a plan.”
Again, one of the big challenges facing advisors trying to grow is that their older clients are retiring and starting to withdraw assets— which means their portfolios are throwing off less revenues while the clients are simultaneously demanding more services for things like healthcare and estate planning.
Steve Gresham, a managing principal of Next Chapter, describes the problem this way:“ The implications of the Great Wealth Transition( don’ t call it a‘ Transfer’) include a greater scale of engagement and more complex service needs— more work but no increase in revenues.”
He illustrates the dilemma of one advisor in Next Chapter’ s study this way( paraphrasing):“ Let’ s say I have a $ 2.5 million client with four children and a spouse. If he dies, I may now have five clients for the same fees.” That’ s why many advisors are selective about“ family engagement.” When several generations become involved, the complexity of the client relationship inevitably increases, often without an immediate bump in income opportunities for the advisor. But over the long term, there is a chance to build on several relationships, even if the advisors keep some offspring as clients and lose others.
Family engagement is a choice, Next Chapter found.“ With the right systems and procedures in place, client families‘ grow’ into the practice,” Gresham says.“ This is where service model enhancements play a key role in supporting especially more DIY preferences of G2 and G3.”
There is one important new trend in family wealth transfer, advisors say: Older, affluent clients aren’ t waiting until they die to give money to their children. Previous generations of inheritors often didn’ t receive assets until they were in their 50s. But the cost of living for young families is soaring since the pandemic, and more affluent parents are seeking to help those children struggling in early adulthood.
Ultimately, Gresham and other consultants believe the“ math of wealth management works better with family engagement.” Even if younger family members have fewer assets and favor do-it-yourself platforms, they still want advice, he says.
And for all the surveys claiming 60 % to 80 % of clients’ children leave their parents’ advisor, it means the rest remain. Serious efforts to engage this group could result in a meaningful spike in family retention— and future growth.
58 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER 2025 WWW. FA-MAG. COM