The FPSB has examined how fintech platforms, tools and automated advice could shape the future of financial planning globally.
For the last two years, Financial Planning Standards Board Ltd. (FPSB), the nonprofit professional standards-setting body for the global financial planning profession, has examined how the advent of fintech platforms and tools and automated advice could shape the future of financial planning. In 2015, FPSB conducted research on the potential impact of automated advice, getting 92 responses from CERTIFIED FINANCIAL PLANNER professionals and FPSB member organizations in 20 territories. In 2016, FPSB expanded the scope of its research on automated advice to include questions about the impact and implications of fintech. In 2016, FPSB heard from its 26 member organizations and almost 1,700 CFP professionals in 29 territories.
FPSB asked the global CERTIFIED FINANCIAL PLANNER professional community which aspects of the process and practice of financial planning could benefit, and which could suffer, from being delivered using fintech tools. The responses ranged from an embrace of emerging technology to a sense that the client-centric financial planning process couldn’t be adequately performed by nonhuman applications, to a lot of uncertainty as to what the opportunities and threats of fintech and automated advice will be for financial planning and financial planners.
In 2015, financial planners saw automated advice tools as both a threat and an opportunity, in nearly equal numbers. A year later, financial planners are less concerned about the disruptive potential of fully automated advice, and are talking about fintech more as a complement to their businesses: automated advice and fintech tools enable financial planners and financial advisers to increase practice efficiencies or cost-effectiveness; serve clients who are younger, lower-income and with fewer investable assets; and free financial planners to devote more time to activities that bring added value to clients.
Financial planners see fintech as a tool to support the delivery of financial planning in the areas of: data collection, speeding up client onboarding, data aggregation, checking calculations and allocating investments; delivery of documents; updates on real-time market changes; portfolio construction and asset allocation. One financial planner proposed that anything that is rules-based, or that can be standardized in the financial planning process, will benefit from the use of fintech.
In response to FPSB’s 2015 survey, financial planners said automated advice tools should not be viewed as a replacement for human interaction with a client, and they’re sticking with that. In 2016, financial planners feel that the practice of financial planning relies on human interaction and that the “personal touch,” the listening, feeling, exploring and interpreting of qualitative information that is central to the financial planning process, cannot be replaced by automated advice tools. One planner commented, “The most important planning outcomes for my clients cannot be replicated by an algorithm. Often, it’s in the second or third hour of conversation in which we are reviewing the finer points of a client’s life, goals, family, fears or health that we get to the really central issues of the planning process.” Another thought that the holistic financial planning approach is not one that artificial intelligence can easily grasp, let alone master, as of yet. “Anyone trying to automate the financial planning process is going to do a very poor job of realizing the efficiencies and nuances that become apparent when using a cross-disciplinary approach.”
As the prevalence of fully automated investment advice and portfolio management tools grows, financial planners are going to have to demonstrate the value add of holistic planning, and the benefit of guidance from a professional adviser who can address emotional and behavioral finance issues. One planner commented, “Technology, misused, can often lead to ‘one-size-fits-all’ solutions that ignore the human element and individual differences. The best planners will be the ones who can let computers do what computers are best at, and humans do what humans are best at.” In the process, automated advice tools are requiring human advisers to become “more human” – the human relationship becomes the value proposition – which is seen as a good thing for the financial planning profession.
Download FPSB’s Fintech and the Future of Financial Planning report and join the global financial planning community’s conversation.