Technology will change financial advice

Technology will change financial advice

November 17, 2016

Technology allows for an efficient meeting to take place without the participants sitting in the same room.
Technology allows for an efficient meeting to take place without the participants sitting in the same room.

The way Canadians receive financial advice in the future could change significantly.

The biggest single factor allowing for the change is the advancement of technology. We can now do things easily that were considered impossible just a few years ago.

I predict this will affect the delivery of financial services advice in a few ways.

The first way will see many advisors displaced by Robo advisors. Simple tasks, such as rebalancing a portfolio, can easily be achieved by using a computer. There is no real value in a transaction, and transaction-based advisors will become extinct.

If a financial advisor is not providing advice and adding value to their client in the form of long-term goal setting and investment strategies, risk management, tax planning, estate planning and insurance, then that advisor is at risk of being regarded as obsolete.

The pending new disclosure rules set to be implemented this January 2017 will provide clients with more transparent information that will make it easier for clients to determine if an advisor is adding value, or just a hindrance to achieving their financial objectives.

For good advisors who do an excellent job at providing advice, the advancement of technology will provide them with better tools to serve their clients. In that regard, the quality of financial advice will improve.

Technology will allow for a change in the business model of how financial services are provided. Currently, most financial planning meetings are done face-to-face with a client and their advisor.

Under that model, the location of the advisor and the location of the client are critical factors in establishing and maintaining the business relationship. Now, location is no longer critical. Technology allows for an efficient meeting to take place without the participants sitting in the same room.

Currently, a productive financial planning meeting will likely include discussion of many agenda items, including reviewing past investment returns and completing a cash flow analysis to see if the client is on target to successfully achieve specific financial objectives.

That typical face-to-face meeting can be completed without the use of paper and everything including the agenda, investment returns and cash flow projections are done on a computer screen. Being in the same room is no longer critical because very little, if any, paper is being passed back and forth.

That opens up many different options on how a client and financial advisor interact. Perhaps the client’s busy schedule does not allow them to spend the time necessary to commute to an advisor’s office. Also, consider a person living in a rural area or small community that does not have good options of knowledgeable financial advisors. That client can now access good advisors in larger communities.

The flexibility of not having to be face-to-face during meetings is also an advantage to the advisor. An advisor might choose not to live close to a traditional office, or might want to continue servicing clients while they are out of town.

Technology has allowed the disruption of many well-established industries and the financial industry is not immune. Things will be different and many clients, who have value-added advisors, will benefit by receiving a better quality of financial advice in a more convenient way.

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