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According to a recent LinkedIn survey, 25% of finance professionals are worried about losing their jobs due to automation. Their fears are not misplaced, or unique to the industry. Just as technology hollowed out American manufacturing and eliminated the middle-man in commerce, it’s driving significant disruption and disintermediation on Wall Street. New technologies are squeezing out mediocre financial advisors, regardless of whether they work in wirehouses or fiduciary RIAs. Automation is forcing even talented advisors to significantly alter their approach. But technology no longer represents a competitive advantage, just mere table stakes. Powerful tools are necessary, but not fully sufficient, to compete. Skilled people are more important than ever.
No industry’s workforce is immune from the corrosive effects of technology.
Not even technology. While millennials flock to coding bootcamps, computer programming itself stands susceptible to automation. As Mark Cuban recently noted , artificially intelligent machines will soon be able to write better software than humans. As technology becomes omnipresent, creative thinking, strong interpersonal skills and experience will once again be in high demand.
An experienced financial advisor creates a financial plan based on both the client circumstances and their unique emotions shaping decisions. Why matters. Technology-driven analytics allow advisors to better understand client behavior, but only empathetic and seasoned humans can see the whole picture. Medicine provides a good analogy. Artificially-intelligent software can now spot tumors and blood clots, but can’t replicate human judgement developed from years of experience interpreting data.
Technology makes good advisors better, but not all have been able to adapt.
Fidelity research shows only 40% of advisors are eAdvisors, or ones predisposed to technology adoption. (They also found eAdvisors had more assets under management per client and earned higher compensation.)
Millennials, in particular, demand full transparency and instant access. For young people just getting started, robo-advisors often make sense. But when looking to start a family, buy a home or open a business, a person’s financial situation becomes much more complex. A 6 question risk questionnaire is not sufficient to capture the average person’s financial needs.
Robo-advisors are also “summer insects,” meaning they’ve never experienced a turbulent market. While 73% of those surveyed last year by the Financial Planning Association and Investopedia were satisfied with their robo-advisor experience, 40% said they would be uncomfortable using one during times of extreme volatility. Meanwhile, 19% of financial advisors surveyed by LinkedIn believe the largest threat to fintech is “human discomfort with automated financial services.”
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Humans use judgement and reason. Machines follow rules. While artificial intelligence holds great promise (63% of fintech professionals cited it as the key technology most worth watching), its application is too unpredictable to fully entrust with a family’s financial nest egg and peace of mind.
Big-box legacy financial advisors introduced automated investing services while robo-advisors added a human touch after conceding their algorithms alone were insufficient. Neither has struck the perfect balance. We stand firm in our belief that nothing in the marketplace can match the benefits of an experienced, un-conflicted, technology-enabled bionic financial advisor.