August 12, 2020

Wealth Matters: Technology’s Impact on the Value of Financial Advice

But is the technology good enough to replace guidance from financial advisers? Or is technology actually good for advisers because they can use it to do their jobs better?

Several new reports look at what technology will mean for an adviser, who, at his or her best, protects people from their worst investment ideas. And that brings up a corollary question: What will this trend, and enormous investment, in technology mean for the clients, the people whose money is at stake?

It seems almost heretical to propose that technology will not make an existing service better. But after reading the reports and talking to advisers who have embraced technology, I was not sure that this emphasis was going to be better for clients.

The report from Accenture looked at how younger clients sought relationships through technology and how advisers had to be available to provide it.

“When we talk to firms, they think social media is a new thing, and they’re trying to control the risk of it,” said Alex Pigliucci, global managing director of the wealth and asset management business at Accenture. “I see these tools as an advantage today. They’re not something to plan for in the next five to 10 years.”

The Out-of-Sync Advisor,” a report by Deloitte, imagined technology bringing clients who were managing their own money back to advisers and then allowing those advisers to give people with a couple of hundred thousand dollars the type of high-quality advice reserved for people with hundreds of millions of dollars.

Ed Tracy, leader of the wealth management and private banking practice at Deloitte, said this would be possible only if all the clients’ financial information was already in the system so the advisers could spend their time together talking about the clients’ goals.

Fidelity’s annual broker and adviser sentiment index, released late last year, tried to put a dollar amount on all of this: technology-adept advisers who were focused on clients in their 30s and 40s managed, on average, $8 million more than colleagues focused on baby boomers. Their clients also had slightly larger accounts. (Not in the data was how technology contributed directly to this.)

But is there any practical value to investors in this push for more technology? In some areas, yes. In others, it remains to be seen.

Patrick O’Connor, senior vice president for wealth, retirement, portfolio solutions at Raymond James, said some of the best technological innovations reminded him of a recent visit to his new dentist.

Instead of pointing to a murky X-ray and telling him to floss, his dentist wheeled around a monitor that showed his teeth — and the problems with them — from various angles. A bit more brushing here and flossing there, and the image changed to show healthier teeth.

“She was giving me more ownership of my teeth,” Mr. O’Connor said. “I’ve been much more diligent about flossing and paying attention to those areas. Before, I would have ignored her. I’d been lectured to for 10 years.”

Technology, he said, can do much the same thing for investors, showing them how they are doing and the consequences of their spending and saving. The technology also becomes the bearer of bad news, not the adviser. “Instead of saying, ‘Sorry you’re in the red,’ I become the facilitator in getting you from the red to the green,” he said.

And technology can help clients reduce mundane and time-consuming tasks and increase the amount of time they can talk about the things that matter most to them.

“If someone had my data, understood my goals, had buckets in my portfolio and I knew if I was on track or off track and they only spent three hours a year with me, I’d feel a lot better than I would with someone I sat down with who said, ‘Tell me what’s going on,’ ” Mr. Tracy said.

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