The role of an adviser in the age of technology

Technology is sometimes a scary subject when you consider the unlimited potential of advancements that will become part of our daily lives into the future. In particular, the FinTech industry is set to shake up traditional service providers who previously relied on people power to achieve an outcome for their clients. So keeping this in mind, what is the role of an adviser if so called ‘robo-advice’ can commoditize the delivery of ongoing value to our clients?

Firstly, lets establish the current dynamic of an adviser/client relationship which is true for most professionals specializing in tax, financial or legal advice for their clients:

  • The client will initially engage this individual who will provide  a solution to a current problem and put forward a strategy based on the ‘scope of advice’ eg. retirement planning, tax minimization, establishment of a trust etc
  • The professional will implement this advice as recommended and provide the client with updates throughout the process
  • The client will be scheduled for regular reviews (generally every 6-12 months) based on the amount of variables associated with the initial advice to ensure it runs efficiently long term

Most of the time this process requires the adviser to make a number of assumptions initially given that there are certain variables that can not always be accurately defined eg. investment return, consistency of income, inflation etc and as such, there can be somewhat significant deviations from the original strategy over time given the ever changing dynamic of these variables long term.

Does this mean the advice is not sound? No, it just means that the need for ‘ontrack management’ and review is important to ensure the end outcome is in line with the desired client outcome.

In my opinion the ontrack management role is the most important part of a client/adviser relationship given that an adviser can make recommendations but this does not guarantee the client will stick to the plan long term and ongoing accountability plays a crucial role in this.

So where does technology come into play here?

Imagine that an adviser could create a savings plan that allows a client to save $1,200 per month in order to fund their children’s private education in 5 years time. Historically, an adviser would complete a budget with the client, assist with understanding discretionary vs non-discretionary spending and aim to define surplus that can be allocated towards this. Typically, the adviser has no transparency around the client’s banking and personal spending which complicates the adviser’s ability to project manage this strategy.

Today, there are tools that allow an adviser to obtain data from all of the client’s bank accounts, be able to allocate each transaction towards a spending category and track trends in order to hold the client accountable to what they are trying to achieve. This can be a little scary given the confronting nature of having someone see how you live your life but this presents a significant opportunity that would have otherwise been unavailable.

What if we could go one step further and have a system that not only helped us understand our spending and keep on track for our goals, but also rounded up our transactions and invested it for us?

Well recently, an Australian FinTech company called Acorns has released this application which uses a principle of ‘micro-investing’ to take a percentage of each transaction eg. a coffee for $3,80 is rounded up to $4 and invest the spare change for you within the limits you define taking the pain out of trying to save significant amounts of money before investing lump sums towards your goals.

These examples prove to be ways that can enhance the client/adviser relationship where our role becomes more of a coach to utilize these tools in order to provide clients with high levels of ongoing value in between comprehensive review meetings.

As a client looking to find an adviser, look for those who are adopting these types of tools into their business and can assist with painting a picture towards your financial future instead of providing you with a single snapshot based on your current position.

As an adviser looking to stay relevant in this age of technology, look to evolve your value proposition by leveraging these tools into your business and allowing you to provide your clients with more certainty and peace of mind even as their situation changes between your regular reviews.

Thanks for reading,

Jackson | The Wealth Mentor

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