THE financial world is continuing to grow and is now becoming far more accessible, which has led to the same happening when it comes to advice on the matter.
The growth in technology has meant that information can be easily found, so how exactly is the future of financial advice heading?
This is leading to people who are looking to invest ask the question, why pay an advisor a fee when I can already build my own portfolio online? This is a problem that arises regularly when wealth is passed down in generations, and their children not feeling they need help when there is easy access to information online. There is little doubt that there is a worry about this in the industry but the demand for financial advice is still set to remain strong moving forward.
One thing for certain is that financial advice continues to change as it matches technological advancements in the financial field. Technology is a great disruptor to the industry, as it makes everything so much more accessible. One of these advancements is down to Robo-advisors, which are expected to grow rapidly in the industry. It is now estimated that by 2023, total assets under Robo management could push over $1 trillion. A staggering statistic and one that shows the impact they are making within the industry for many of the top leading firms.
These Robo-advisors are a digital platform that is now becoming more and more sophisticated, which is why they are being pushed by firms. There are a number of positives to these such as offering high-quality low-cost portfolios, as well as them being easy to use and tax-efficient.
However, they also have a number of negatives in comparison to registered investment advisors (RIAs) in the fact they do not talk to people about how they can achieve their goals and adjust their plans when things change in their lives. There is never going to be the same interaction as you get when speaking to a human being, which is what many people want before parting with their finances. The relationship is all about building trust.
A small percentage will still be happy with the automated device approach but with RIAs, more time will be spent on the financial planning and approach to managing each portfolio.
However, technology is still playing a major role in other aspects of operations within these firms and helping with the way advisors can interact with their clients. This is one of the biggest challenges facing the financial world as it continues to advance, meaning firms have to keep up with this, and the ever-rising risks associated. Technology is now incorporated into the running of all associations, but it is also important for them to continue to give their personal touch to clients, which is one of the key selling points to using humans over robots.
One of the main use of technology in the field is with software. It helps to manage customer relationships and their investment portfolios. It also helps with efficiency in most aspects of the business, such as drafting financial plans. This leads to more time being able to be spent with the client. This process will help to amplify the human component that is key when looking to build strong successful relationships. If technology is not invested in, then firms face being left behind by the competition and the service they can offer. This is just another example of how technology is now working side by side with humans in the running of businesses.
Technology is not just all positives for the finance industry. It leads to the risk of theft and scams. With its growth, it means empowering cyber criminals to create new ways of getting to people’s personal data, which can be a very lucrative game. This is why cybersecurity of client data is now a huge challenge moving forward for the industry.
The risk of these scams and the growing threat has meant that debate continues to rise about how these finance firms will be regulated. This led to a rule being passed that is known as Regulation Best Interest. That works by establishing a new standard of conduct for brokers. This covers making sure that clients ‘best interests’ are always recommended. They must also disclose potential risks and conflicts of interest. This is just one example of rules being enforced and with technology continuing to influence the industry, more and more of these will be taking effect.