Last May (2017), the Wealth Management League of the CFA Society of Los Angeles hosted a fascinating program in which Steve Lockshin (Founder - AdvicePeriod) and Sebastian Dovey (Managing Partner - Scorpio Partnership) held a debate. The debate challenged the attendees (mostly private wealth advisors) to answer the following question:
Will technology i.e.,"Robo Advising" be disruptive or transformative to our profession/industry?
The audience was polled on this question prior to the debate, and the result was discouraging: The majority of attendees believed that technology would be disruptive to our industry. The audience anticipated many challenges - such as the push to lower fees (due to automation) and a number of other factors that complicated the pathway for human advisors to demonstrate their value more clearly.
There were a number of topics discussed in the interchange, but we began with a dialogue regarding how the professionals might embrace technology as a tool to make their practices more efficient - and - leverage their ability to help their clients.
A few examples were -
Using software systems to allow more efficient client reporting.
Employing automated distribution of information pieces to clients that are aligned with their specific interests.
Using automatic discretionary trading systems designed to re-balance portfolios on a more timely basis.
Using more risk profiling tools that could help advisors in formulating the target investment mix aligned with their clients' risk tolerance AND risk capacity.
Additionally, one of the ancillary questions that seemed to surface given the "either/or" nature of the initial question was, "could human advisors somehow ultimately be replaced by robo advisors?"
By and large, everyone agreed that the answer to this question was NO. Human advisors have the capacity for emotional empathy and the ability to build a relationship of trust with their clients in a way that transcends automation.
Toward the end of the back and forth discussion, the attendees were re-polled for their opinion to the original question: Will technology (i.e., "robo advising") be disruptive or transformative to our profession/industry? (NOTE: An interesting resource on this topic is the book, Only Humans Need Apply: Winners and Losers in the Age of Smart Machines by Thomas H. Davenport and Julia Kirby)
Interestingly, the preponderance of attendees switched their perspective of technology from disruptive to transformative, ultimately concluding that financial advisors of the future would have to adopt emerging technology yet maintain their unique human contribution to client personality discovery.
More specifically, the development and utilization of the appropriately unique framework for decisions and communications specifically aligned with their client's (and their families) personalities in order to build a relationship of trust.
We think the key to the "advisor of the future" value proposition is to more effectively explore the uniqueness of each client and align our services to their specific styles and needs.
While there are a number of automated risk assessment tools that allow an advisor to map a portfolio to each client, we believe more value and relationship substance is needed to forge a relationship build on trust.
Examples of the valuable human skills are -
- The capacity to explore and understand how a client's personality traits (such as are identified by using the Big Five Personality Factors model) allow services to be aligned uniquely to each client.
- The ability to relate to (and understand) family dynamics that can present unusual challenges to yet opportunities for more effectively managing the client service relationship.
- A personal capacity to understand, appreciate, and relate to client fundamental beliefs, principles, and values that impact the framework for decisions and clients' perspectives.
MarketPsych Insights is committed to helping advisors prove the value of their humanity in serving their clients. We provide specific support not only for the initial risk assessment, but we support taking a deeper dive into Investor Personality by utilizing the Big Five Personality Factors.
The result is more efficient and effective client personality assessment and management that enhances value and generates greater returns on your investment in client relationships.