New Report: Financial Advisors Are Still the Primary Source for Advice; Technology Utilized to Create Better Outcomes

In 2019, technology and the financial services industry are more intertwined than they have ever been. The meteoric rise of fintech disruptors and the widespread adoption of technology solutions by legacy financial institutions has caused speculation about the future role of humans across the entire financial services industry.

Rise of technology raises questions about role of financial advisors

Low or no-fee passive index funds are becoming increasingly more attractive to consumers than funds actively managed by portfolio managers at mutual funds that have been dominating headlines. However, concerns about the rise of technology have even spread into the financial planning and financial advisory space, with questions arising about whether the role of a financial advisor will be replaced by technological solution.

In 2018, CFP Board’s Digital Advice Working Group (DAWG) concluded a study that examined these concerns. Founded in 2016, DAWG is comprised of senior business executives, industry professionals and thought leaders in financial advice, wealth management, and technology to better study and prepare for this unknown future.

“Clients expect and deserve a human-powered, digitally-enabled solution to their financial needs. Financial advisors who utilize technology as a tool in the client-advisor relationship can differentiate themselves and create more meaningful, deeper conversations and longer-lasting relationships that produce better outcomes.”

— CFP board ceo kevin Keller, cae

DAWG report finds financial advisors are here to stay

In its report, which was conducted with support from Heidrick Consulting, DAWG found that financial advisors remain the primary source for the delivery of financial advice despite the availability of fully automated digital solutions, with clients expecting technology to be part of their relationship with advisors.

At the time of the report’s publication, CFP Board’s CEO Kevin Keller said, “Clients expect and deserve a human-powered, digitally-enabled solution to their financial needs. Financial advisors who utilize technology as a tool in the client-advisor relationship can differentiate themselves and create more meaningful, deeper conversations and longer-lasting relationships that produce better outcomes.”

Integrated solution combining technology and human expertise most desired

While there has been much speculation about the displacement of the human financial advisor by technology, the reality is that consumers want to have an integrated solution when getting financial advice. The integrated solution is part of the broader Digital Financial Advice Ecosystem, which contains five segments – technology, consumers themselves, regulation, firms and advisors.

Each one of these is important, but together they make up what the group believes is the future of financial advice. When it comes to financial services, consumers expect that they will have access to technology to make informed decisions and track their accounts. At the same time, consumers are recognizing more and more that they need the help of a financial professional to provide context to their finances – and help them understand the impact of their decisions.

Growth opportunities for human expertise

As the market for financial advice moves towards greater consumer comfort with digital interactions, AI can also enhance consumers’ experiences and elevate the role of advisors in providing more holistic advice. Thus, advisors should consider how their skillsets can complement digital platforms and technologies.

DAWG also found that decumulation (the process of spending your savings during retirement) is an area with a lot of room for human growth as the digital platforms and solutions get up to speed. At their best, these digital solutions can help users work through the complexity of decumulation by providing a more holistic view of financial health, but before they can be mass-produced, DAWG asserted that these services be ‘beta tested’ and run through a common decumulation framework developed by human advisers.

A seamless digital experience

The report points to a future where technology is much more scalable, accessible and useful in the consumer-advisor relationship. In fact, the report notes consumers and advisors will be “connected through a seamless digital experience.”

Fears of technology replacing human advisors remain largely unfounded, too. Rather, consumers will continue to gravitate toward working with financial professionals who utilize technology and grasp its importance. The report notes that this integrated approach can be found in areas of medicine where doctors and hospitals utilize technology to help lead to better patient outcomes.

Another factor driving this transition is the changing regulatory model that financial services firms operate in. Specifically, regulators – as well as consumers – are expecting advisors to put their clients’ interests first. Technology helps keep advisors in compliance with regulators while also ensuring that their clients stay informed and engaged in the decision-making process.

As improving the quality of financial advice and growing the size of the market is ultimately in the best interest of all firms (and their clients), the DAWG concluded its meeting with three important calls to action:

• Embrace new technology: It is imperative that firms and advisors quickly embrace new technologies rather than work against them, and focus the use of these tools on elevating the role and impact of skilled human advisors.
• Improve advisor experience: As the complexity of financial planning technology grows, advisors serve as a critical translation point for clients and can benefit from well-designed systems that enable them to focus on adding their uniquely human value to client interactions.
• Expand advisor training: Serving the clients of the future will require that advisors be equipped not only with the relevant financial knowledge but also with the digital skillsets and understanding of client psychology that will enable them to drive clients toward positive behavioral change in a digital world.