Two and a half years ago, in the heady days of mid-2023, I wrote about the impending collision of two supertrends: Artificial Intelligence and Blockchain. I argued that the financial services industry, specifically the ETF Model Portfolio ecosystem, was facing a hockey stick moment of exponential change, similar to the disruption the publishing industry faced from the printing press to the internet.
Writing today from the vantage point of early 2026, that hockey stick has firmly swung upward. The convergence of generative AI and distributed ledger technology has moved from theoretical disruption to operational reality. The three key predictions I made then have largely come to pass, though often faster and with more complexity than anticipated.
Here is the state of play in an industry upended.
The Hyper-Fragmentation of the ETF Landscape
In 2023, I drew a parallel to the 1990s music industry, predicting that tokenization would lower barriers to entry, allowing smaller players to bypass traditional gatekeepers like BlackRock and launch niche products - an explosion of indie label ETFs.
The 2026 Reality: This fragmentation has arrived with tremendous force. The barriers to launching investment vehicles have collapsed. We now have a sprawling ecosystem of themed ETFs and, increasingly, tokenized Real World Asset (RWA) funds.
However, the driver wasn't just tokenization lowering manufacturing costs. It was the synergy with AI. Major issuers weaponized generative AI to identify micro-trends, backtest strategies, and draft prospectuses in days rather than months. The result is a marketplace flooded with hyper-specific products. The challenge for the model portfolio constructor today is no longer access to unique exposures; it is the paralyzing problem of overchoice.
The Invisible Hand of Autonomous Distribution
My second prediction was that smart contracts would revolutionize the distribution chain, making universal fractional ownership possible and automating heavy lifting like portfolio rebalancing.
The 2026 Reality: Fractional investing is now mere table stakes for any retail platform; the idea of needing a minimum investment amount feels archaic. But the real revolution happened in the plumbing.
Smart contracts are increasingly handling settlement and reconciliation in the background, driving profound market efficiencies. Furthermore, the idea that AI-assisted processes would become the replacement term for alpha has many investment managers looking to launch Active ETFs rather that Index based trackers, in reality the opportunity to charge higher fees is just too hard to resist. Today's leading model portfolios don't just rebalance back to original weights; they look to make intelligent adjustments - tax-loss harvesting and dynamic risk management - welcome to a world driven by Claude's army of AI Agents.
Mass Personalization is the New Standard
Perhaps the most significant shift has been the democratization of bespoke investing. I argued that the high costs and complexity that once restricted personalized portfolios to high-net-worth clients would vanish, making personalized model portfolios the norm.
The 2026 Reality: The era of the average investor is over. Driven by online engagement and sophisticated questionnaires, AI driven investment engines can now construct unique portfolios for mass-market clients based on their specific theme preferences, tax situations, and financial goals.
This is realized through the widespread adoption of Direct Indexing, often utilizing the core/satellite framework I highlighted previously. An investor’s core holdings might be a low-cost, AI-optimized direct index, surrounded by satellite exposures to those hyper-fragmented themed ETFs mentioned earlier. Technology delivered on its promise to truly democratize the investment industry, giving the end investor significantly more for less.
The New Challenge
The debate over if AI and Blockchain would upend the industry is settled. They have. The mission of democratized, efficient access to financial markets has been largely achieved.
The new challenge for 2026 isn't technology; it's psychology. In a world of infinite choice and autonomous execution, the value of human advice has shifted from portfolio construction to behavioral coaching, helping clients navigate a financial landscape that is more accessible, yet more complex, than ever before.
Until next time.
Allan Lane