For many years, the financial planning profession has been striving to be recognised as a true “profession”. In this pursuit, we find ourselves navigating a complex landscape, which we can aptly describe as the Bermuda Triangle of financial planning. This triangle consists of three interconnected elements reshaping the industry as we know it: automation, artificial intelligence (AI) in the advice and planning stages and the fascinating field of behavioural sciences. Let’s take a closer look at our proverbial Bermuda Triangle.
Automation provides financial planners with powerful tools to enhance their services. Here are some key methods of incorporating automation into the financial planning process:
1. Client onboarding and reporting. Digital platforms are used to gather client data, introduce services and ensure compliance. Automation can be applied to simplify investment reports and financial documents for clients, saving time and improving efficiency.
2. Data aggregation. In a world where financial data is scattered across various sources, automation can consolidate this information, offering a comprehensive financial overview for more informed decision-making.
3. Portfolio management. Investment platforms equipped with automatic portfolio rebalancing help maintain portfolios aligned with client goals. Outsourcing this functionality to a portfolio manager is crucial for effective management.
4. Online presence. Consistency is key in the digital era. Automation ensures a steady flow of content on social media platforms, enhancing an advisor’s online presence.
5. Chatbots. Basic client queries are addressed instantly with the help of chatbots, saving time and providing quick responses to common questions.
It is essential to remember that the personal touch in financial planning remains irreplaceable.Automation should serve as a complement rather than a substitute for the client-planner relationship.
Artificial Intelligence (AI) is a transformative force in financial planning. Combined with insights from behavioural finance, AI reshapes the future of the profession. Here’s how:
1. Managing emotions and educating clients. Financial planners guide clients through emotionally charged financial situations, ensuring that decisions are not solely driven by emotions. Educating clients about their behavioural biases can make them more informed and engaged in the planning process.
2. Addressing biases. By identifying biases such as loss aversion or overconfidence, planners tailor advice to counteract these tendencies, leading to more rational financial decisions. AI also helps predict which clients would have more emotional reactions to market events and proactively remind financial planners to reach out to them at the appropriate time.
3. Improved communication. Understanding behavioural biases helps planners communicate more effectively, resulting in clearer and more persuasive advice.
4. Simplified choices. Decision overload can paralyse clients. AI assists in limiting options, making choices clearer and more manageable.
5. Hybrid-advice offering. For clients with straightforward financial planning needs, such as planning for children’s education or a holiday home, automation takes care of financial planning and goal tracking, ensuring efficient solutions.
Incorporating these technological advancements into financial planning practices enhances the advisor’s value-add to clients. However, it’s crucial to emphasise that the personal touch remains vital. Technology should complement, not replace, the qualities of human intuition and empathy that financial planners bring to their clients.
Furthermore, the incorporation of behavioural finance principles enables financial planners to provide more personalised, psychologically-aware advice. This approach leads to better outcomes and fosters stronger client relationships. As we navigate the Bermuda Triangle of change in financial planning, embracing automation, AI and behavioural sciences is not just a strategic choice but an essential one. In a world where change is constant, adaptability is the key to thriving and providing invaluable services in the evolving landscape of financial planning.