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I, for one, welcome our new robot overlords



Greg Moss, Chartered Financial Planner, discusses the rise of technology in the financial industry

You can’t pick up an industry publication without being told professional services are in their death throes and that millennials – in those brief gaps between eating smashed avocados and killing the napkin industry – are barricading themselves in their bedrooms against waves of attacks by sinister men in charcoal suits representing traditional advice channels.

Conventional wisdom would have it that young people don’t want face-to-face advice of the crusty old kind their forebears enjoyed, be it from financial planners, private client lawyers or accountants, and even if they did they wouldn’t want to pay for it. Instead they want everything on an app, on a watch, for free, with haptics.

Well, as anyone decent in the financial planning industry knows, that’s a load of old smashed avocado. The real problem is that the industry as a whole, in its failure to articulate where it adds value for clients, and its sharp practices, has lazily allowed a generation of people who desperately need (and, in my experience, want) proper, high touch advice on their finances (and tax and legals), from real people, to get away with thinking it isn’t for them.

Robo shmobo

Here’s the thing. Advisers of all stripes get it wrong when they think about technology as the enemy of traditional face-to-face advice. Automation and systemisation are fantastic tools in the hands of the right adviser. Cashflow modelling software allows some incredible work to be done on the planning side and clients love it. Platforms and smart beta portfolios have added sophistication on the product side while driving costs down and helping investors get more of what they deserve from the markets. Advisers, meanwhile, can offer repeatable, evidence-based product solutions which mesh with and support all the good work they do on the strategic planning.

So what’s wrong with all that? What’s wrong is that so many firms and advisers are still stuck trying to operate a busted, old skool proposition where all the value is added by products and the picking of products. Millennials, like right-minded people of any generation, can see that under this model advisers exist as a kind of inconvenient and costly add on, a pile of misfiring wetware in the corner of your dining room slurping its tea, or stapling ten pound notes to trust deeds in dark corners of 1960s office blocks.

Wake up and smell the cold brew

The professional services industry’s dirty secret is that it loves wasted time. Inefficiency means busy people, which means more ‘utilisation’ and less time for practitioners to consider the profound pointlessness of their existence.
Meanwhile, good advisers, who get it, are embracing technology on the basis that the less time they spend on product selection, on nuts and bolts portfolio administration, the more time they get to spend on the stuff that really adds value.

Like, actual face-to-face time with actual clients. To stay close to the stories that should be steering the strategy. And not just at the beginning of the process, because it changes the whole way along. To work on and update the strategy together, using their skills and experience and the benefit of being a step away from the decisions to bring invaluable impartiality to the table. To coach through market turbulence, helping clients avoid the behavioural finance tics and irrational decisions that can act as a profound drag on long term investment performance. To listen to clients when they explain what they actually want, rather than trying to tell them, so that firms can innovate and evolve propositions to fit the way new generations make sense of the world.

Selfie stick

So back to millennials and whether they want or need advice, where the evidence so often cuts across the assumptions:

  • Millennials are great savers, way better than Baby Boomers and Generation X. 81% of millennials save in some capacity, compared with 77% for Boomers and 74% for Gen X (Discovery).
  • They are also more likely to have a written financial plan – 34% versus 21% for Gen X and 18% for Baby Boomers (Schwab)
  • Their need for good advice is arguably greater than that of previous generations, given they are more indebted, are more likely to want to become self-employed, and are likely to be less well insulated in retirement by state provision and guaranteed income from other sources, like final salary pensions. All of which implies a greater need to make private provision for future needs, which creates a need for good advice.
  • They are way more likely to make sustainable or Impact investments than previous generations, which introduces an extra consideration into their investment decisions (and makes them more complicated).
  • Given the choice, they are surprisingly traditional in how they consume financial services, favouring such ridiculously anachronistic concepts as branch banking and chequebooks (SurveyMonkey; Vocalink)

However, on the other side of the card, millennials have very low trust in financial institutions, significantly lower than Baby Boomers and Gen X (TNS Global). That may be something to do with the global banking system coming close to collapse in their formative years…

They also want to receive advice but believe it’s something that will become relevant to them only in later life. In fact, we know that financial planning is better the longer it has to do its work, since financial decisions have more leverage.
So, it seems to me like the millennial market is a good example of the desperate need for professionals to stop moaning about the threat of automation and start getting better at articulating and building trust in their services.

None of the above will be news to good financial planners, who knows these things intuitively. Financial planning has an advantage, being a relatively new profession, less burdened with legacy practices. But it would be good to hear forward thinking professionals from all disciplines talk less about the threat of automation and more about what great things they are going to do for clients with all that free time. Maybe – I dunno, just a hunch – that will make millennials more likely to put their fidget spinners down [/cliché quota breached] and engage with the professional advisers they probably need.

If you’re not ready to hand your wealth management over to an algorithm yet, contact Goodmans today.
Greg Moss is a Chartered Financial Planner heading up the Goodmans office in Bristol.