Quiz: Death of the Agency Problem | Learn

1. The agency problem in financial advising is that:

Advisors lack the knowledge to manage your moneyAdvisors earn fees on AUM, incentivizing them to keep assets on their platform rather than optimize for your goalsAdvisors are legally prohibited from giving personalized adviceAdvisors charge too little for their services

An AUM-based advisor earns more when more of your assets sit on their platform. This creates an incentive to discourage paying off your mortgage, investing in real estate, or any action that moves money off-platform, even when those actions benefit you.

2. Smart contracts eliminate the quarterly financial close because:

They make accounting regulations unnecessaryThey record and classify transactions in real time, making batch reconciliation obsoleteThey prevent companies from committing fraudThey replace the SEC's oversight function

The close exists because books are updated in batches. Smart contracts recording transactions on-chain in real time mean the books are always current. There is no backlog to reconcile.

3. When smart contracts automate the rule-based 85% of professional work, the remaining 15% involving judgment:

Also gets automated within 5 yearsBecomes less valuable because clients handle it themselvesBecomes more valuable as professionals focus on edge cases and expert interpretationStays exactly the same in value and demand

The elite professional freed from routine work concentrates on genuine judgment calls. The profession does not disappear. It concentrates around expertise. The physician reading 3 complex cases instead of 200 normal X-rays delivers more value per hour.

4. A smart contract handling escrow replaces the escrow officer by:

Eliminating the need for inspections and title checksHolding funds and releasing them automatically when verified conditions are metAllowing buyers to bypass closing requirementsReducing the purchase price of the property

Escrow is a conditional hold-and-release function. A smart contract holds deposited funds and executes the release when verified conditions (inspection, title, financing) are confirmed. No escrow officer, no processing delay, no $500 fee for a conditional database operation.

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