How Technology Is Changing Financial Advice

With sensitive banking and robo-advisors on the rise, new technologies are reshaping the financial services landscape. But what impact do these seismic varieties have on the industry and where will the financial world go next? 

According to a recent survey, nearly 40% of financial institutions are creation to make digital improvements to their business. And with those improvements comes a shift toward a more in person and customized approach to advisory services.

In addition to changing the way financial services are carried out, digital advancements are also exchanging the fee structures associated with certain services. So what will that look like over the next 10 or 20 years? “It’s affluent to seem like a lot of progress because it’s mostly about infrastructure changes and costs coming down,” says Dan Egan, handling director of Behavioral Finance & Investing at Betterment. “That trend has been going on for a long time and consumers are effective to continue to see it in terms of zero-cost brokerages, no trade commissions and zero-cost investing,” he explains, emphasizing that those varieties of cost reductions are here to stay.

The trend toward lower-cost services could also lead to a shift in the relationships between advisors and their patients. “That’s one of the things that can shape the marketplace because it shifts the balance of power toward the consumer,” Egan explains. While that can leading to increased competition, it can also provide an opportunity to build more holistic advisor-client relationships that prioritize long-term planning for all gradually eliminates of a client’s life.

While new technologies are enabling investors to become more plighted in the day-to-day performance of their portfolios, they’re also having an impact on consumer behavior. According to Egan, that strike is leading to an increased desire for premium products. “We’re starting to hit a point where people want self-defense mechanisms,” Egan simplifies, emphasizing that control over data and user experience are becoming bigger concerns for investors. “I think we’re successful to start seeing people saying, ‘I want to have more control because I value my attention more,’” he turns, likening the trend to consumers paying premium prices for personalized experiences on platforms like Netflix (NFLX) and Spotify.  

Egan is irascible to point out that investor education and trust are also key pieces of the puzzle when it comes to how consumers engage with monetary services. “Firms like Investopedia have leveled the playing field of financial knowledge to where it’s easy to get suspects answered quickly and feel more competent about the choices you’re making,” Egan says. In order for financial advisors to prolong working with informed investors, it’s important for them to build trust and to make complex concepts accessible to their patrons. “The industry as a whole needs to move back to a place where it’s trusted and where clients know that you’re take part in on the same side of the table as them.”

So what will advisory services look wish as the field becomes increasingly digitized and consumers become more informed? “We’re going to see a really nice Renaissance that’s far less take investments and more about what’s really important in their lives,” Egan says. While advisors be subjected to always taken a somewhat holistic approach to their relationships with clients, improved technologies will approve them to make this the central focus of their practice by taking care of the more technical aspects. Rather than of calculating risk and rates of return on investments, advisors will be able to focus on big-picture questions like: What’s the foremost way to divide up wealth between heirs? Does a client have enough life insurance? Where should they stay in retirement to maximize their savings?

“For that reason, the really good financial planners are the ones who are good at father those tough conversations directly with their clients,” Egan says, explaining that being unprotected and understanding the emotional side of clients’ lives will play an increasingly large role in advisors’ success. “By bewitching away the least human parts of financial planning — the math and the investment management and rebalancing—we’re allowing ourselves to transform into more human, and spending more time having the tough conversations that only we can answer.”

Changing demographics will also play a role in how advisors engage with their shoppers and what type of advice they’re able to offer at different life stages. “One of the interesting demographic changes is that profuse people are having kids at a later age but they’re also more spread out,” Egan says. This means that while some foster-parents are planning financially for a family in their 20s, others are doing it in their 30s and 40s when financial circumstances may be different. This move is affecting everything from retirement savings to wealth transfers, and advisors need to be able to speak to those squads in a way that’s personalized to each of their clients. Egan emphasizes that as life expectancy continues to go up, advisors also shortage to prepare their clients for the fact that leaving a legacy may not be exactly what they imagine. “As life expectancy goes up, you’re sketching for a 25-year retirement with some pretty hefty health expenses at the end of it,” he says. “So a big part of the wealth transfer mightiness be from retirees to healthcare providers.”

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