The Rise of Technology and Financial Advice

The rapid adoption of eCommerce, Zoom and other digital technologies has accelerated during COVID-19 in an unprecedented way.  At 4J Wealth Management, we are conducting virtually all of our client meetings via Zoom, and clients who are retired and over age 60 are now very comfortable using this technology.  While many retirees will increasingly become more comfortable using online services and technology, the demand for some services which require a human touch are actually highlighted more now than ever before.  The unique nature of some businesses, which cannot be scaled the way a Netflix, Facebook or Alphabet can, demonstrate how human relationship and trust continue to outweigh incredible technological advancements.

An example that continues to reoccur in our practice is a retired, married couple where one spouse wants to make sure the surviving spouse is taken care of if anything happens to him/her. Ensuring that a loved one has their financial needs attended to after the death of their spouse is a personal, private and sensitive matter that technology cannot fulfill. The reason is simple – money is personal, highly emotional, and matter of psychological security.

Over the past 7 years or so, the technology revolution has disrupted the financial services industry in material ways. Roboadvisors will manage money for people based on a series of risk tolerance questions and algorithms at lower management fees than human advisors. Some large discount brokerage firms have even added a human element on top of that offering, where you can call in and speak with a credentialed advisor and receive advice. 

Those firms are attempting to offer wealth management services to people using automation, algorithms, and massive scale. The evolution has made many advisors in the wealth management industry reevaluate the viability of their business models.  However over the past 8 years, despite some progress, roboadvisors have gained little market share from traditional advisory firms. Jason Zweig wrote a Wall Street Journal article on April 5, 2019 titled ‘YOU PAY FOR NETFLIX AND SPOTIFY MONTHLY. WHAT ABOUT FINANCIAL PLANNING? The article made the point about why would you not pay for financial advice the same way you pay a monthly fee to those services. In other words, why can financial advice not be provided with the same scale and ease as those other services. At a recent financial planning conference, one of the speakers asked how many advisors in the room were worried about losing clients to roboadvisors. Not one raised their hand. 

The continued persistence of the advisor/client human relationship owes itself to unique nature of providing financial advice. There are some professional service businesses which are extremely difficult, if not, impossible to scale. Customized financial advice is one those businesses. Just as it is impossible to have thousands of genuine friends, the relationship between advisor and client involves intangible elements like trust, vulnerability, rapport and even compassion. When a client makes a decision to work with a financial advisory firm based on the support and needs of the surviving spouse, so much more than just numbers and return enter the equation. Neither a robot nor an algorithm can replace that unique and special relationship.