The Future of Financial Advice

A recent white paper by the CFA Institute focused on predicting the financial advisor of the future recently got me thinking about where this industry is going in the coming years.

I have the highest respect for the CFA Institute. And admittedly, as a charter holder, I may be a little biased, but the curriculum they routinely distribute and the studies they do are remarkable in terms of both moving the industry forward while also helping people to prepare for what is to come in this industry.

The highlights of the paper are their takes on how technology is going to be used in the financial services industry going forward and also what our clients are going to expect from us as we continue to grow.

One of the stats that stood out to me was that 51% of advisors say that the use of technology for client engagement is the top technology priority for their firm in the coming year. This stat is interesting because, depending on where you’re sitting, it could mean that you’re either comfortably ahead or significantly behind the majority in adopting technology. And at such a defining moment within our space, I think it’s valuable to look back at the substantial technological jumps we’ve made as an industry over the years as well as look forward to what the future of the space will look like at its current trajectory.

Looking back, our industry used to be one for only the uber-wealthy. Back in the late 1800’s only the rich ever talked to a broker. Then, in the mid-1970’s, two firms established the concept of the discount brokerage model. After doing so, RIA’s became more prominent. However, it wasn’t until the 80’s that RIAs became the leading way of doing business. Before then, it tended only to be brokers. Then In the 90’s ETrade and the talking baby gave DIY investors the capability to invest online. Presently, we’ve seen a rise in Robo advisors.
Over the past 30 years, our industry has seen three significant shifts. First, online trading. Secondly, RIAs and now Robo advisors.

Although this may seem small, take a look at the advancements that were made from the late 1800’s all the way until Schwab and Vanguard were founded. Have you found anything? Probably not, because there weren’t any.

My point is twofold; change is beginning to happen faster and faster and that this time, the change aligns with technological change. Think about it just ten years ago we didn’t have the iPhone; now we can talk to a speaker and get answers back. How long did it take to go from the cord phones to cordless phones? We are moving at lightning speed. Technology is exponential; every advancement builds on itself to allow us to advance even further than we ever thought.

I believe that we are going to continue to see this in our industry as well.
The future for us is one that we have “collective intelligence” where technology and human intelligence use the best of each world to create an experience that not only provides operational efficiencies and value to end customers but also allows us to provide extreme personalization for each person no matter how many clients we are managing. It will allow our clients to be a bigger part of the process from start to forever (hopefully.)

What this looks like is that as clients continue to push for transparency, they’ll continue to want a strategy that aligns with their overall values and both family and experiential goals. They will require their financial advisors and wealth management team to interact with them the same way they interact with their everyday lives. They’ll also expect their financial plan to be integrated into their everyday life.
This will be a world where, us as advisors, will need to figure out how to be more efficient and scalable. People won’t come to us simply because we have great returns. In actuality, great returns will likely continue to fall further and further down the charts as priorities when it comes to selecting an advisor. And it surely won’t differentiate advisors.
What will differentiate an advisor are three items: their client experience, their overall wealth management/financial planning solution, and the relationships they are able to create and build with their clients.
The last item is the most critical. People are going to continue to demand a human relationship and a technologically sound client experience. They want both. Technology shouldn’t be just to make you more efficient, it should also be to better engage and deliver value to the end client.

Staying ahead
And so what do you need to do to stay ahead? Well, that 51% stat should be 99%. Because what scares me-or provides me extreme optimism for many- is that many firms are going to be left in the dust if they don’t start investing in technology today. We just talked about how technology evolves exponentially. If you are waiting for technology to be fully adopted to feel fully comfortable with it, then you are going to be way behind. Because by the time you are comfortable with the technology, you’ll be behind. The leading firms will be on to the next great technology, and your clients will be too.

It’s the same idea as with investing, when our most conservative clients call in ready to invest in stocks, we know that it is likely a peak in the market. Because the moment they get comfortable with Facebook stock or Apple is the time that the gains have been made for that cycle.
And so, the 51% of people that are focusing on investing in new technologies for client engagement and communication, they are going to be ahead of the curve. The 49% that haven’t thought about this yet are going to be in a constant rat race to stay up with the innovation and the leading firms. It’s a race that will distract them from building relationships and will compound.
As you go throughout your workweek, think about if you’re in the 51% or the 49% because it makes a world of difference.

Your quick takeaways:
Don’t be part of the 49%, make it a strategic initiative to focus on new technologies… annually
Create a firm mentality around creating “collective intelligence” within your firm.