Financial Planning in the next 30 years will be wildly different than it is today and those who ensure that they build their knowledge in key development areas stand to gain a significant advantage over the rest, but sadly, I don’t believe we will get flying cars.
Regularly over each of the last three decades we have collectively believed that we have achieved the pinnacle of customer focussed delivery, professionalism through qualifications, product innovation and governance through regulation (I eagerly await responses in the comments section to that last one). However, each time we have climbed one mountain we have realised that we are simply in the foothills of the next.
Today’s profession would be largely unrecognisable to a financial adviser from 1980 so to believe that the financial planning in 2050 will look the same as it does today would be a bigger stretch than some of the predictions we might make.
Present day financial planning is focused heavily on the human factor. Planners working with clients to understand their goals and helping them to manage their behaviours to achieve the outcome that is closest to these goals.
I believe that we are seeing the emergence of three key drivers that will influence all of our lives and also heavily influence the financial planning profession over the next 30 years and these will drive a new age of innovation that we cannot yet imagine.
The Internet of Things
We are beginning to see the internet of things bringing benefits in the home. Already, many of us use a smart speaker to access the internet without needing to turn on a PC or reach for our smartphone. We can manage our home security, heating and lighting without being there and we can access the data simply by standing in a room and asking a question.
As our relationship with this technology becomes more intimate, the smart speaker in our home will lose the novelty factor and it will become as ubiquitous as the TV remote. It is worth remembering that 30 years ago, the TV remote was still encased in fake wood vinyl and hard wired into the television.
Many of us already offer up huge amounts of information about ourselves for free to the likes of Amazon via our smart speakers and video doorbells. Companies can monitor our TV and internet viewing habits, know when we are at home, and record our shopping behaviours.
What has it taken to convince so many of us to give up all of this detail about our lives? Free delivery and a heavily subsidised household device with a friendly voice.
We have understood since the 1970s that if you are not paying for the product, you are the product. However, if the data is managed correctly, in the best interests of the consumer and with properly informed consent the internet of things has the potential to be transformative in terms of financial planning.
There are obvious benefits of being able stand in your living room and ask how your investment portfolio is doing. It does away of the idea of having information at your fingertips as fingertips are no longer required. However the real power comes from the nudges that this can give the financial planner. A client who is worried by breaking news of stockmarket crash may access their real time valuations multiple times via their smart speaker in a day. This information could easily be forwarded to their financial planner via their wearable smart device and nudge them to give the client a call.
I know that there will be many of you reading this who will be reaching for your keyboards to say that good financial planning means that your clients shouldn’t be doing this in times of market volatility and I would not disagree with that. However, are you monitoring how many times a day your clients check at the moment when they can only access their portfolio valuations after turning on a device and clicking through the login process? Now imagine how many times they might want to check if all they had to do was ask Alexa.
Human-like Artificial Intelligence
I am always interested to hear people talk about robo-advice. Often it is framed in the context that we will always need human interaction and that robo can never replace the financial planner. To some extent, based on the current technology, I can understand why this narrative would be comforting but we are already seeing artificial intelligence more accurately diagnosing patients than human doctors in areas where the technology has been properly developed. It surely can’t be too big a leap to imagine that AI will more accurately diagnose a client’s financial challenges and formulate a plan based on their goals and risk profile if the same development was to take place in our profession.
However, I don’t believe that AI will replace the human element of the financial planning process. I believe that it will supplement it. Already, deep learning algorithms are becoming adept at recognising objects, people, and even detailed characteristics of these people and objects. It is entirely possible, if not likely, that over the next 30 years, AI will be able to identify things that humans cannot in other humans.
Thirty years ago at the peak of the first wave of the NLP craze, many people believed that certain body language movements and eye accessing cues could be interpreted using a set of rules and this could give an insight into a person’s inner thoughts. In the intervening years we have begun to understand that it is so much more complicated that simply watching if someone folds their arms or looks up before they answer a question. Most of us are still not very good at identifying and interpreting those micro-expressions that help us to understand how our clients are feeling.
In a reality where AI can do this better than humans, the question will inevitably come as to whether it should be allowed to. There will be questions around privacy and accuracy but as an opt-in option for clients who want their human adviser to use the best possible diagnostic tools, I believe that there is a place for this technology.
5G and beyond
The coronavirus has been the catalyst for many to adopt flexible working practices and to shed the ancient formal practices the face to face meeting. However, for those still getting used to running virtual meetings with 4G technology, the next step, to 5G, will see the biggest advance since the introduction of SMS text messaging. The communications industry has high hopes of untethered virtual reality gaming being the primary method of recouping the vast investment that is going in to the 5G network. Away from gaming technology, 5G gives us the opportunities to create smart cities built on the foundation of a fully functioning internet of things. Autonomous vehicles and other infrastructure integrations will dramatically increase public safety, reduce congestion, create significant cost savings and in the process, potentially reduce some of the stresses we experience.
This will be the backdrop to game changing innovation in financial planning. Imagine the benefits to the financial planning process where untethered virtual reality meetings become the norm. Planners will be able to be miles away from their clients but meeting in a virtual 3D rendered office, it will feel like they are sitting next to them. Without the need to travel to meeting venues, client and planner time will be saved and finding mutually convenient appointment times will be easier. All of this will be achieved with little or no loss of the feeling of personal service in the virtual 3D space. Furthermore, paraplanners and specialists will be able to join the virtual meeting from anywhere.
You may be thinking that we already have this with the current virtual meeting platforms. The difference in the future will be that the technology will be such that people won’t be able to tell the difference between a virtual and a real meeting. Virtual meetings will be seen as having at least as much, if not more value than a real meeting. When this is achieved, they will simply be called, meetings.
The Importance of Human Agency
Rather than being threatened by these technologies I believe that the role of a financial planner will be more vital than ever because of them.
Humans have always leaked data. We give away our emotions in our body language, our tone, in those various micro-tells that people close to us instantly recognise but others around us also pick up on. The same is true of digital micro-tells. A reply to a tweet, a picture posted in Facebook, the apparently innocuous act of liking something on Instagram.
All of this swirls around in the global soup of human data. There is so much data that the terminology used to measure it is simply mind boggling. The amount of digital data created worldwide is predicted to reach 180 zettabytes by 2025. For anyone wanting to know what a zettabyte is, write 21 zeros on page.
We all have a data identity and through data mining and the application of data science, value can be extracted from this and the more trusting we are of technology, the more we grow our data identity.
As technology becomes more prevalent and complex, most people will continue to view the tech brands that they trust as a series of “black box” devices simply to plug and play and provide immediate convenience.
The clients of the future will be unlikely to challenge the lack input and won’t learn the context of how the tools they use work. As we are seeing already, they will sacrifice privacy, independence and power over convenience and consumer choice becoming at times, irresponsible with their data.
This is where Financial Planners can coach clients to be more responsible with their data. In matters of money, it will be as important for Financial Planners to advise their clients in what technologies they adopt, becoming the custodians of their client’s privacy, acting as curators of technology and guardians of information so that clients can achieve a balance between convenience and independence.