Prudent financial advisors are always evaluating and re-envisioning their business practices to ensure they are current, relevant, and offering the best to their clients. This has been even more important in the past few years and moving forward. Traditional money management is undergoing some of the most in-depth criticism and analysis then we have ever seen. Well, at least from this 53-year old’s perspective.
Government and regulators have introduced, and are contemplating serious changes to the fundamental ways we conduct our business, interface, and represent our clients, and are paid. They are various camps of opinions but the prudent advisors in the crowd are staying ahead of this curve. Over the next few months, I will be considering this topic and sharing some sage advice on how it is impacting our company and the industry in general. Our clients need to be aware and this is one forum by which we will share it.
In this post, I am considering one of the most often asked and contentious questions in light of the changing attitudes of newer investors and the integration of computers into the choices for investment management. In the ever-changing digital world in which we live, that question is:
Will human financial advice be relevant in the future?
To cut to the quick, my answer is always the same. An emphatic “Yes.” I can understand why people ask the question. Our world is becoming more digitized, and the pace of this transformation seems only to quicken. However, what is missing from the conversation is the meaning of good advice and why people want and need it.
We learned why personalized advice based on a human connection is important in elementary school, though we didn’t know it at the time. The place where good advice exists is the center of a Venn diagram. Remember those? The point of the diagram where a client’s financial situation and emotional situation intersect.
To help illustrate this premise, I’ll give you an example involving one of my friends. This is so relatable. A while ago, my friend kept having intense bouts of dizziness and didn’t know what he was experiencing. As most people do when a medical issue arises, he searched the internet and found a frightening list of potential causes, including Parkinson’s, brain tumours and strokes. The natural reaction is to think of the worse and this instills serious stress.
I suggested he go see his family doctor for a professional diagnosis. The doctor listened patiently. Having known my friend for a long time, the doctor immediately noticed his demeanour was different and actually asked about his level of stress. Instead of sending him for tests, the doctor started by prescribing less work, more sleep, and water instead of carbonated and caffeine beverages. Hence, the doctor started by assessing my friend’s behaviour using a personal baseline built through years of interaction. The doctor read my friend, and his emotions, and used his in-depth knowledge to properly assess the situation.
Professional financial planners do the same thing. The value is not in a financial plan itself, but in a financial advisor’s ability to interpret and customize it to his or her clients, helping them understand how it can enable them to reach their goals and reading their emotional responses to provide guidance and adjust as necessary.
Money is an emotional subject, and the worry and anxiety it causes are what make good advice and the advisors who deliver it valuable. To demonstrate their value proposition to clients, advisors must move beyond the transactional nature of their legacy business models and focus instead on providing advice during life transitions, when it is most needed. This is the premise for our approach with financial life planning.
Let’s use another example. Many of our clients, as parents, question whether they should help their child with a down payment on their first home. This can be a highly emotional decision. On one hand, parents feel the urge to help but worry that their children might develop an unhealthy sense of entitlement. On the other hand, if parents don’t help, the children could become resentful and accuse their parents of being unaccommodating during a major step in their lives.
Helping families sort through this impasse is a valuable service, and as I’ve seen many times, advisors can help families come up with creative solutions that take the parents’ principles into account while still helping the children feel supported.
Financial advisors can also make a positive impact in their clients’ lives during the illness of a spouse. Having a spouse fall ill is a highly emotional ordeal, but it also requires urgent and sound financial decision-making.
When a diagnosis of a terminal illness is made, good advisors immediately begin examining working with the client’s lawyers to ensure estate documents and assets are titled correctly so the family is prepared financially. Action in this type of situation requires a high degree of emotional intelligence on the part of the advisor, who needs to know to ask the right questions at the right time and needs to understand when clients just want someone to listen.
So, let’s stop and think about it.
Why do you need a financial advisor?
You need one because you want him or her to manage your money. But at the end of the day, a relationship with a trusted advisor alleviates the emotional turmoil of worrying about not having enough money or life insurance benefits to meet the needs of your family. Good and prudent advice, based on a deep personal connection, will always be in demand because it considers each client’s emotional needs, which helps them face potentially difficult situations calmly and rationally.
The traditional “robo-advisor” model can’t forge human connections or understand an investor’s emotional makeup. Forward thinking robo-advisors are starting to see this. The realization is that technology may change, but people don’t, and that’s why good advice will always be essential.
Strong online investment platforms offer the benefit of interacting directly with a client’s financial advisors and planners. They’re forging tri-party relationships that incorporates the value of financial planning advice with the benefits of online investing and portfolio management which goes beyond that of computer algorithms. We are actively pursuing the merits of introducing this option in our solution suite in future and will have some exciting news soon. We are always striving to Keeping Life Current for our clients.
