Financial Advice Just Gets Better With Technology

Financial Advice Just Gets Better With Technology
December 4, 2018 Krisztian Toth

There is no denying that the traditional role of a wealth manager or a financial advisor has been put to a test by the widespread use of technology. But is the rise of the robo-advisers really a deadly threat to them or simply a wake-up call?

financial advice


Combination, not Competition

As a consequence of technological advancement, there is a growing concern among financial advice professionals that the need for their services will disappear, too, and they will become redundant amidst the rise of the robo-advisers.

While technological development did make several jobs disappear in several industries, it has always hit lower-level jobs harder and sectors that were unable to transform themselves. On the other hand, the winning strategy has been that of a reinvented business model. As market financial market consulting firm Aite puts it: “there is a shift from a product-based business model to an advice-based one.”

Forward-thinking organizations are already thriving right now on a healthy mix of technology (automation) and human services. They realized that such a mix can bridge the gap between generation demands (being customer-focused never gets old) and compensate for otherwise eroding margins caused by fintech disruption. They have understood that there will always be a market for transactional-only services and they can only lose if they try to compete it. The keyword is a combination, not competition.

It is also interesting to note that, while the financial advisors currently working on the market are anxious about technology taking over or taking most of their income at the very least, those studying right now to become advisors have other concerns. Poor public perception of the profession, low entry-level wages, and gender inequality are on the top of the list, while technology is not a major factor in making career choices. At the end of the day, most advisor students also found helping people and working in a dynamic industry more appealing than earning (38%, 34%, and 30% respectively).


When the Robots (Should) Give Financial Advice

As clients increasingly want instant answers to their questions and convenient online access round the clock, it is inevitable that robo-advisors take over some of the tasks. If you add to that technology bringing a new type of trust through transparency (crucial in engaging the younger generation), it is easy to see why the industry tends towards implementing the so-called hybrid model. Different services offered on different channels result in cost savings as well that can counterbalance the eroding margins in the field.

Here are some of the (mainly transactional) services that, when automated, can create more value, especially for the younger generation and the mass-affluent client base, and in an evolving market:

  • Helping clients open an account
  • Perform simple tasks such as money transfer
  • Data aggregation
  • Recommend general investment or saving opportunities based on algorithms


When the Humans (Should) Give Financial Advice

In a customer-focused, advice-based operating model, the financial advisors have a well-defined role that builds on the strengths that only humans can possess. Empathy, emotional and social intelligence, the ability to adjust insights to complex events are just some of these traits.

A human advisor is able to build relationships with the clients that includes not only the management of their money but the care about the clients’ well-being – financially, but also emotionally, such as a therapist. When the sailing is not so smooth, the market is sluggish, the client is experiencing a new life situation, a good advisor not only recommends new products but gives advanced insight using all the information about the client and guides them through uncertainties. So the work will become more complex, but also more rewarding, and specialty expertise will be in high demand.

Let’s see some of the tasks that the new advisor role entails:

  • Educate the clients based on their best interests
  • Plan according to complex life situations, sudden events, prioritize goals
  • Resolve complex issues and investment situations, like tricky deals
  • Sell advanced insight using information about the client’s spending habits outside of the investments
  • Effectively protect client information

While the financial advisors of today and tomorrow have to build on their emotional capabilities as humans, they also have to be comfortable using technology without competing it. Remember the holistic approach: combination, not competition.


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