Thursday, August 06, 2015
Say "HI" to your new financial planner? #roboadvisor
The afternoon advice concurrent session at Day 2 of the FSC Annual Conference canvassed trust, digital delivery and the ability to scale advice.
Will so-called "robo advice" replace human financial planners?
Not a chance.
One panellist's research shows that when someone wants to start a planing relationship eight out of 10 want to eyeball the planner first.
Why? To establish trust, see the office and surroundings, the pictures on the wall and the quality of the individual.
But let's be really clear: after that they're really happy NOT to see their planner.
After a face-to-face meeting five out of 10 people are then more than happy to be served in alternative ways - online, digital and phone based channels.
Back to "robo advice", what is it anyway? Anything from investment advice and personal portfolio creation to software that helps make overall financial planning decisions.
Does using Google qualify? More people over 40 are using Google searches to access planning advice than are using financial planners.
Or, as the lawyer on the panel asked, is that "ro-oh-no" advice?
Importantly, robo advice in any form probably can't be done properly under the existing legislative regime. It can be done, but it won't be a quick fix.
The question and answer section in these sessions is always where it gets really interesting.
Q: Is robo advice conflict free?
Not necessarily. If a human can be conflicted so too can be the person who writes the algorithm
Q: Isn't people's trust in planners misplaced - history tells us people make poor decisions about whether they can trust someone - so isn't robo advice a much better option?
Simply put we still live in a world where financial services are sold, not bought. Can a program sufficiently encompass all the exchanges in a financial planning interaction?
Q: What kinds of robo advice work offshore?
Portfolio management, for one, which works well to rebalance and more. But it's important to note that this is off the back of an industry that did this well already. In the UK there's a provider than uses social media to track likes of various brands and stocks - and recommend investment portfolios accordingly. Dangerous, maybe, but it does access the trend to trust others' recommendations via social media. The wisdom of crowds - perhaps. Or think of this: technology that allows you to walk through a supermarket, scan a brand barcode and invest on the spot.
In summary, when only three in a hundred people (according to a Harvard study cited) left to their own devices will actually act on a plan, it seems human planners are pretty safe for now. Behaviour finance and decades of experience shows most of us won't act in our own self-interest without a human holding our feet to the fire.
Apple are an investing case study - they launched online stores but because significantly more successful actually selling stuff once they launched a physical store.
Why? Humans trust humans.
Long may it remain. I'm not sure I want to live in a world where a machine can read my emotions, access my deepest hopes and fears and then tell me how to organise my finances as a result.