The Future Of Financial Advice

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“While there are primary care physicians for the average American, there is no personal CFO”

Despite the rise of Fintech companies and robo-advisors, the future of financial advice is human. That’s what Vanguard CEO Tim Buckley thinks anyway. An ironic statement coming from Vanguard which led the revolution of low cost, passive investing that has made it easier than ever to become a DIY investor and cut traditional financial advisors out of the equation.

Computers Are Simply Better At Some Things

Computers and algorithms can make the job of a financial advisor a lot easier. When I worked in the financial services industry ten years ago, I would spend more time on things like “establishing a risk profile” than I did establish a connection with my clients. A risk profile tells an advisor what level of risk a client is comfortable with, which is used to decide asset allocation. If you hate risk, you’ll have fewer stocks in your investments and vice-versa.

Today, algorithms can determine someone's risk profile within minutes and do it much more accurately than humans can. That means advisors can spend less time asking awkward, silly questions like “is the primary purpose of your investment portfolio to protect capital or accumulate wealth?” and ask more important questions like “how often do you and your husband talk about your household budget?

We Want and Need More Human Advice

The truth is, what computers do best are what people care about the least. I recently wrote about the impact money and finances are having on our mental health. In that article, I list eight areas Americans have said that they would be willing to pay to have someone help them with.

  1. Knowing if they’re paid fairly
  2. Maximizing their salary at their current job
  3. Planning career moves that earn them more money
  4. Monthly budgeting
  5. Getting a handle on their debt
  6. Planning affordable vacations
  7. Having someone to talk to holistically about their financial life
  8. Dealing with the spending pressures that status anxiety exerts.

Sadly, none of these eight needs are being met by the mainstream financial services industry. At least not if you have less than $100,000 to invest, which is almost everyone.

All of these needs can be better met by a human than an algorithm.

Sure, you could google the average salary for people in your job and compare that to what you make. But, Google can’t sit down at the table with you and ask you what your relationship with your boss is like or how your co-workers might perceive your attitude at work or give you tips on how to ask your boss for a raise.

You can download an app that will help you create a monthly budget. But creating a monthly budget is the easy part. Sticking to it is the hard part. An app can’t help you understand why you have a shopping addiction. No app can motivate you after a job loss or give you confidence that “yes you can pay off that debt”. No app can look you in the eye and say “I am with you”.

Money is as emotional of a subject as anything else in life. If you don’t believe that consider that 52% of Americans admit to having cried because they didn’t have enough money. To get to the root of that problem, we don’t need a “Robo-advisor” we need smart, trustworthy, empathetic people to talk to about our financial life.

My hope for the future of the financial services industry is to embrace technology. Let the robots do what robots do best and free up financial advisors to do what humans do best.

I would love to know what you guys think, would you pay for any of the eight services listed above? What kind of service would you want from a human and what kind of service do you think is best left to computers? Let me know in the comments.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.