One of my favorite sports debates is the definition of the Greatest of All Time. I’m especially intrigued by how sports legends from earlier eras would fare today. How would Babe Ruth’s stats hold up against today’s pitching? Could Wilt Chamberlain dominate today’s NBA courts as he did in the 1960s?
My conclusion: Maybe. The rules of the games are the same, but just about everything else is different. The Legends of Yore would today be competing against faster, stronger, better-informed opponents, products of on-going advancement in everything from nutrition and physical training to data analysis and racial inclusiveness. No matter how talented, the Legends would struggle today unless they took advantage of today’s tools.
The same is true of financial planners. Regardless of our natural talent and past stats, we need to keep up with the changes in our game. For while our client mission has remained constant over the past 50 years, just about everything else has changed at a whirlwind pace – and continues to do so, thanks largely to advances in technology. Advisors and firms that don’t keep up risk getting benched or cut by clients.
To get a sense of how fast things are changing, consider this brief history of investing. Stock trading in New York City began in 1792. The first retail stock brokerage, E.F. Hutton, debuted 112 years later in 1904. Just 71 years later, Schwab and Vanguard pioneered the discount brokerage. A mere 16 years after that, E*Trade introduced online trading.
By 1996 online trading by individuals had exploded into the mainstream powered by reduced commissions and increasingly powerful desktop computers. Suddenly, anyone could research a stock and make a trade at a fraction of the time and cost long associated with investing.
In 2008, Betterment.com introduced the Robo-advisor option to the financial planning industry.
We’ve also seen unprecedented growth in market value and investment vehicle options during this period. It took the Dow 100 years to grow 3150%. But in just the past 35 years, its already up 2015%. The first ETF was created in 1993. Today there are 1,756 US-based ETFs and 5,024 worldwide. Ever-evolving computer technology has fueled these trends by speeding trades and expanding access to information and the markets.
And this is one area where past performance does guarantee future results.
According to Moore’s Law, computing power will double about every two years, and the cost of that added capacity will decrease with every doubling. Since its pronouncement in 1965 by Intel co-founder Gordon Moore, that prediction has proven more than true. Computing power has sometimes doubled in just 18 months.
With technology’s lead foot on the pedal, the needle just keeps moving right on the innovation speedometer. Existing technologies, from clients’ smartphones to the exchanges’ supercomputers will continue to grow better, stronger and faster. Developing technologies such as Artificial Intelligence (AI), Virtual Reality (VR) and Augmented Reality (AR), will soon grow into tools with the power to utterly transform all businesses, including financial planning. AI is already helping savvy firms integrate and leverage their tech stacks. VR will one day soon allow advisors to help clients “see” the long-term results of their financial decisions and habits.
As current tech improves and new innovations debut, consumers’ expectations will also move ever faster toward the redline. Companies that harness new capabilities to provide instant communication and immediate gratification to their customers will set an ever-rising bar that every business will have to meet.
While this near-future scenario may sound scary, it’s really not. We have decades of evidence that tech-driven change is inevitable and beneficial. More change coming faster is a good thing for our industry.
And yet…
Some financial planning firms still balk at embracing the future – or even the present, for that matter. Many digital doubters worry that “the machines” will remove the critical human connection aspect of our profession. That attitude is unfortunate for two reasons. First, well-deployed technology actually supports the human element by providing advisors with more time to connect with and better serve clients and prospects. Second – to repeat – the change isn’t going to stop or slow down.
Firms that choose not to engage with financial technology are putting themselves at a competitive disadvantage in the endless season that is our industry. As their competitors implement new tools and methods, the slow-to-adopt firms will find themselves falling in the standings with diminished stats for client service, growth and margin.
If you want to be the Greatest of All Time, you have to keep up with the times.
It’s no longer OK for baseball players to smoke between innings, get drunk every night, and lay around in the off-season – even if they have Babe Ruthian talent. And it’s no longer acceptable for financial planning firms to ignore the impact and benefits of technology.