The robo-advice “threat” is an opportunity for entrepreneurial advisers…as is every other direct-to-consumer offering driven by fintechs.
The more I think about it the more certain I am that some advisory firms will prosper from it…but I am just as sure that many will “fail” due to the competition. By “fail” I mean that they will fail as independent small businesses, which is not necessarily the same as them no longer being financial advisers working for some other entity.
The difference between the winners and losers will I believe come down to attitude together with willingness to invest both time and money into incorporating tech solutions into practices.
Let’s begin with attitude. In financial advisory firms there is usually conflicting attitudes to tech….we sort of love the efficiency it can introduce but we hate the cost and the time required to implement new tech. Inevitably then the adoption fear leads the majority of financial advisory firms to be relatively slow adopters. The attitude can usually be summarised as “reluctant adopters”….but eventual adopters nevertheless.
But then think about how different those same practitioners are at home. Our commercial relationship with technology doesn’t exactly mirror our liesure relationship with it. When new gadgets or platforms delivering entertainment or games or improving household efficiency come along we cannot wait to give it a go. We race out and buy whatever the hot thing is, then spend countless hours figuring out how to use it, then congratulate ourselves upon how much more enjoyable life is now that we have a robot vacuum cleaner which can decide when it wants to work, and amuses the cat at the same time. Or we merrily dump the i-Tunes playlists we spent years creating now that we have Spotify. The point is that when it comes to having more fun or creating less stressful downtime we tend to be rapid adopters and willingly put up with the pain of figuring out how to incorporate the new tech into our daily lives. We also swiftly swiftly shrug our shoulders and forget the cost and time which went into organising years of much loved music in that i-Tunes account…we mentally write it off in minutes.
But most advisers do not have that same attitude when it comes to tech in their practice. As a result the time and financial investment in technology for business growth is a reluctant, hesitant and slow process.
Yet it makes no sense that we think this way. Each adviser has their own learning journey of course, but if we think back on it we’ll usually conclude that we “should have adopted faster”.
As I think back on my time in the workforce I just cannot remember the first time I received or sent a text. Or an email. Honestly. I don’t know when that happened.
But I do remember when I started seriously in the worforce as a young communications specialist in the navy and looking in wonder at the technology we had at our disposal….it was awesome. We could type messages directly to people right on the other side of the world….if they had a telex machine…and they could receive it within mere minutes. Who would have thought communication electronically on a one-to-one basis would even be possible at that speed? You could even send a message to someone in a plane, or a ship! We could even send messages from underwater….and they were getting it within minutes….we even had a sort of mobile phone thing…but you needed to carry it in a backpack….Awesome stuff.
Well, at the time it was state of the art. Hard to believe perhaps, but true nevertheless.
Some years later and I do remember being quite against the idea of getting a cellphone for a quite a while…and yet now I’d need surgery to remove me from my smartphone according to those closest to me. I should have done it faster.
Emails were an intrusion….but now they are the number 1 form of business communications. I should have done it faster. Social media was a gimmick and I steadfastly resisted using it even for entertainment for a couple of years….and then waited another couple before deciding it might have a business use too. I should have done it faster.
…and on it goes….These things run through my mind as I ponder the implications of robo-advice and other fintech offerings. The robo’s have been threatening to replace human expertise and provide real time product and advice solutions directly to consumers for a few years now. Skynet takes over Financial Planning has been the general theme.
“Woe is us” has been the refrain…just as it was from farm labourers when the first steam powered machine trundled around a paddock….or from scribes when the first commercial printing presses clattered into action. “Woe is us” was the refrain of telephone switchboard operators from the 1960’s and 1970’s too. Those old switchboard operators are now the fastest growing demographic for new social media accounts, and they all have smartphones, and can all “text speak” with their grandkids. They adapted pretty damned well.
But this Robo-advice thing, will it replace the human element in delivering financial advice? I look at what has happened in online dating and think I see some parallels. Not that many years ago online dating was seen as the last hope of the desperately dateless….I don’t think that was ever actually true, but that is the image it had. Yet it seems that something over half of long term relationships now began with online dating….it’s a real part of our world where real people being a courtship process.
Like online dating I think the various fintech offerings have a wonderful place for opening up markets and educating the masses on their choices in life. That is; they grow the market for all and create higher levels of awareness in products and services. They help reduce transaction costs and improve access. These are extremely useful outcomes for entrepreneurial advisory firms.
Like dating and ultimately courting the serious long term partner, financial planning is fundamentally a very personal experience for every consumer. No machine or platform or algorithm will understand humans quite the way other humans do. But there are certainly elements of the planning process and the delivery of advice where automation can enhance the consumer experience, improve convenience factors and deliver greater value. And we know that how the consumers figure out what their choices are and begin their “buying journey” has shifted dramatically in the last decade….
Consider this superb infograph courtesy of Swiss Re which highlights just how complex the purchase of insurance has become, and an insurance purchase is arguably one of the more sophisticated and difficult financial products to try and purchase.
How consumers access information has changed forever. How consumers assess the merit of product solutions is rapidly changing. How they access, consider and utilise advice is already a blend of technology-based solutions and human interaction.
Of course Robo-advice models will work. They work already. And they will take more business from some advisory firms. For any professional who wishes to be in business in 5 years time, the question now is not “how do I compete with Robo-Advice?“, but “how do I incorporate a robo-advice offering successfully into my business?”
It isn’t a matter of competing head-on with a demand-driven technology solution. That is a war most advisers simply cannot win. It is a case of working out how to make the demand-driven technology solution work for our clients in a way that still enables us to be the people that educate and coach the right behaviours and strategic choices for them.
Robo-advice presents us with the classic “adapt or die” dilemma. When you look at it that way, adapting and learning to live with it doesn’t seem a bad choice. Perhaps we should adapt and adopt faster.
The advisory firm which will be at the top of its game and a profitable enterprise in the next decade will be the one that becomes a hybrid-practice. It embraces automation where that creates greater convenience for clients, or delivers business efficiencies without detracting from service levels. It embraces data management as a means to get closer to clients and deliver ever more personalised solutions and strategies. It embraces robo-offerings particularly where they can assist with empowering and educating the clients or driving down transactional costs.
Hang on the human touch for sure. As the world gets faster, busier and crazier the human element will matter even more. But don’t make the mistake of thinking that is ALL that matters as a financial adviser. Embracing the advantages that the threatening fintechs can deliver will be just as important in building the practice which will prosper in the coming years.
The future of fantastic financial advisory firms is hybrid.