Leveraging the Human Element in a Digital World

Are you ready for a robot to plan your financial future?

A recent seminar on retirement tax issues in a Virginia suburb outside of the District of Columbia packed the room with a diverse group of investors either in or approaching their well-deserved rest.

Part of the discussion focused on digital tools for financial management, and most investors in attendance reported using digital services or products to help manage their money short- and long-term and to file their taxes.

But it quickly became apparent that such options only took them so far. No two investors came with the same concerns or questions about their situations. And they were there for answers.

[See: 10 Ways to Maximize Your Retirement Investments.]

According to Deloitte's 2016-2017 Global CIO Survey, more than 200 providers of digital advice in the financial planning profession in the United States are predicted to manage $7 trillion in assets by the year 2025.

That raises the question of the role of flesh-and-blood financial planners in such a future. It's clear technology will have a profound impact on the financial planning profession. It's also clear financial planners will be increasingly important to help make sense of that technology.

Two years ago, the CFP Board Digital Advice Working Group (DAWG) determined that investor comfort with digital financial advice will likely continue to grow. Alongside consumer adoption of technology, greater transparency across financial services will lead to an increase in the number of investors who demand demonstrable value from financial planning professionals.

The DAWG members identified five segments of the digital advice ecosystem -- technology, consumers, regulation, firms, and advisors. They hoped to provide a framework to explore key challenges facing the financial planning industry and improve the quality of financial advice for investors. Ultimately, the group called for financial advisors and firms to tap the opportunities that technology presents.

The field is accelerating at a breathtaking pace. Technology has fueled powerful digital tools that advisors can leverage on behalf of investors. For example, sophisticated online portals with real-time access to individual investment and transaction data is now table stakes for investor-advisor relationships. In fact, some financial services firms are already offering automated financial planning using artificial intelligence to provide advice based on a client's current financial situation.

But while this service can provide generic advice based on algorithmic data, that is only half the story. Al-only financial programs are unable to build lasting and trusting relationships with investors. They lack empathy -- the ability to grasp and respond to an investor's specific needs and wants.

[See: 10 Investing Tips for Busy People.]

As the use of technology expands, the savviest financial planners will know how to couple tech expertise with the analytical thinking needed to ensure trust and a sense of security among investors.

Robots aren't equipped to read subtle cues of human interactions the way a human financial advisor can. Trained financial advisors are better able to navigate complicated conversations. They know when to ask follow-up questions that get to an investor's true feelings or can read body language to determine if the subject at hand is making a client anxious.

A robot can't understand how an investor wants to live in retirement or have a values-based discussion with their clients on how to distribute assets once they are deceased.

Every person's financial situation is theirs alone. To receive the best advice possible, clients need personalized attention along their financial journey -- not just numbers on a balance sheet.

It is worthwhile to think of financial technology as a tool to leverage and elevate rather than a tool to replace the need for human interpretation. When used smartly, technology allows planners to spend more time creating deeply personalized financial plans rather than gathering data and crunching numbers. Technology can never fully replace the human element critical to the financial planning profession, but it can power more meaningful relationships between investors and financial planners.

Firms and advisors who embrace technology are making the "human" more efficient -- enhancing advisors' abilities as effective coaches and counselors to deliver more value to investors.

Technology is just one aspect of a sustainable ecosystem for financial advice. There is still a long road ahead before artificial intelligence can truly catch up to human capabilities. Much as health tracking information from wearable devices can provide real time information and metrics, experts still needed to analyze the data to generate insights that benefit investors' day-to-day lives and futures.

The more technology streamlines time-consuming and repetitive tasks, the more advisors can expand their role from a coach providing solutions to both a coach and counselor who helps investors understand and navigate their financial path.

[See: 10 Long-Term Investing Strategies That Work.]

The future of financial advice belongs to those who can marry the relationship between technological and empathetic intelligence. At its core, financial planning is a human endeavor that robots can't replicate.

Just ask the investors who attended that retirement seminar.

Kevin Keller has been a contributor to The Smarter Investor since 2019. He is CEO of the Certified Financial Planner Board of Standards (CFP Board). The board's CFP certification is the recognized standard of excellence for competent and ethical personal financial planning. Since Keller assumed the CEO position in 2007, the number of CFP professionals in the U.S. has increased more than 50 percent to more than 83,000. During his tenure, CFP certification requirements have been strengthened and a fiduciary level of accountability was implemented. Kevin joined CFP Board from the Association for Financial Professionals and has held senior staff positions at several associations. Kevin received the certified association executive credential in 2000. He received bachelor's and master's degrees at Ohio State University.

He is on LinkedIn and the CFP Board on Twitter.