What does the future of financial advice look like?

Rob Macdonald and Chat GBT outline 10 key aspects that are likely to be the reality of the future of finance.

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Last year Boris Eldagsen won the World Photography Organisation’s Sony World Photography Awards. Eldagsen submitted a piece titled The Electrician which looks like an old photograph showing two women, one of whom crouches behind the other and another person’s hand extends toward the front woman’s body. Eldagsen declined the award after admitting that he had submitted an AI-generated piece.

Boris Eldagsen’s piece titled ‘The Electrician’

In a description of his work, Eldagsen wrote, “Just as photography replaced painting in the reproduction of reality, AI will replace photography. Don’t be afraid of the future. It will just be more obvious that our mind always created the world that makes it suffer.”

In a similar vein to Eldagsen, I thought of submitting an article on the future of financial advice written by ChatGPT. The reader would be none the wiser and there is every chance that it would be better than what I can conjure up on my own.

I then considered the words of Paul Saffo, a Silicon Valley-based forecaster who explores long-term technology trends and their impact on society. Saffo observes that “the goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present”. With this in mind, rather than just leaving ChatGPT to predict the future, I thought I would join it in considering what meaningful action to take in the present. The result is a co-authored article between ChatGPT and me.

AI and data analytics will
enable completely customised
portfolios with less work
than current approaches.

To begin the writing process, I asked GPT the question: “What does the future of financial advice look like?” To Saffo’s point, GPT’s forecast may not be completely accurate but it certainly does provide some indication of what meaningful action we can take in the present.

According to GPT, “The future of financial advice is likely to be shaped by several key trends and developments, driven by advances in technology, changing consumer preferences and regulatory changes.” GPT forecasts the future of financial advice by outlining 10 key aspects that are likely to be a reality. I list these aspects with brief observations from both GPT and me (RM) as we consider the implications of each, both now and in the future.

1. Increased use of Artificial Intelligence (AI) and automation

GPT: AI-driven robo-advisors and virtual assistants will become more prevalent. These tools will provide personalised financial advice, portfolio management and answers to common financial questions.

RM: These tools are already with us. GPT’s observation challenges financial advisors to determine what their real value add is. And provides the opportunity to become so much more efficient by embracing the tools.

GPT: Automation will streamline routine tasks like account management, data analysis and reporting.

RM: I believe you should do everything you can now to automate any repeatable process in your advice process and business. Start using AI to help you make decisions and do tasks.

2. Personalisation 

GPT: Financial advice will become highly personalised, taking into account an individual’s financial goals, risk tolerance and life circumstances.

RM: I believe that an in-depth understanding of a client’s life and money will be non-negotiable. This understanding will need to go beyond even what GPT suggests. A thorough personality assessment of each client will be the starting point of the advice process, as well as an exploration of the client’s relationship with money.

GPT: AI and data analytics will enable advisors to offer tailored recommendations and solutions for each client.

RM: Increasingly financial planners will be challenged to personalise solutions for clients. Often financial planners cluster clients into solution groups – for example, investment portfolios with an asset allocation that is appropriate for a group of clients. AI and data analytics will enable completely customised portfolios with less work than current approaches.

Being human will be a financial
planner’s superpower.

3. Data-driven insights 

GPT: Advisors will leverage big data and analytics to provide clients with actionable insights into their financial situations. These insights can help clients make informed decisions.

RM: Data will be personalised to ensure that each client’s uniqueness is catered for when it comes to making decisions.

GPT: Predictive analytics may be used to forecast future financial scenarios and recommend appropriate actions.

RM: Scenario planning in real-time with clients and the ability to consider actions in the calm before the storm is a key method of managing the behaviour of clients. For example, simulating a market crash and its subsequent recovery with the client’s actual portfolio will enable financial planners to agree on what action will be taken ahead of time. This will be a key behavioural technique to keep clients invested when they inevitably want to sell out because they are fearful.

4. Digital platforms and mobile apps  

GPT: Clients will increasingly access financial advice and services through digital platforms and mobile apps.

RM: The trend for clients to use digital platforms and mobile apps is already with us. In April 2023, Amazon had 5.3-billion direct hits on its website from users wanting to make a purchase. A total of 20% of global retail sales are now made online, with 70% of transactions being done using mobile. Financial planners ignore this reality at their peril.

GPT: User-friendly interfaces and intuitive apps will make it easier for clients to monitor their investments, track expenses and receive advice on the go.

RM: If you don’t already have an app that your clients can use to access their information and interact with you, you are already behind the curve. Just think about how your clients access their banking services, retail purchases, medical aid providers, taxi services… you get the point. This is not something to resist. In the past financial planners have been the gate-keepers of client’s information. This time is now over.

5. Hybrid models 

GPT: Hybrid models that combine the strengths of human advisors and technology-driven solutions will become more common. Clients may have access to both robo-advisors and human advisors.

RM: Financial planners will need to embrace the concept of robo-advice to enable clients to do their own “fiddling” and “scenario planning”, but also to use robo-advice tools for their own planning with clients. Currently, many financial planners have tools that they use to “drive” the financial planning process. Enabling clients to “drive” as well won’t diminish the role of the financial planner, they will just empower clients to be more confident in the process and to take ownership of their financial futures. Positive outcomes for both planner and client.

GPT: Human advisors will focus on complex financial planning, emotional support and building long-term relationships.

RM: This is potentially the most important point that GPT makes. Firstly, despite advances in technology, financial planners will still need to be technically competent to deal with complex financial situations. Technology will do the maths, find the relevant tax regulation or do the first draft of an estate plan or will. However, the financial planner’s expertise will be needed to make sure that the outcome is appropriate for the client. Secondly, providing emotional support and building long-term relationships will be why clients deal with human financial planners rather than just robo-advisors.

Being human will be a financial planner’s superpower, but only if they develop the advanced human skills which justify a client’s choice to work with a human rather than a robot.

6. Regulatory changes 

GPT: Regulatory bodies are likely to continue evolving regulations to ensure transparency, fiduciary responsibility and consumer protection in the financial advice industry.

RM: Financial planning is on the path to being a fully-fledged profession. Robust regulation and consumer protection are integral to this. Financial planners who do not put their clients first will be rendered redundant.

GPT: Advisors will need to adapt to new compliance requirements and digital record-keeping.

RM: The good news is that technology will enable compliance in a way that is totally integrated into the advice process. Compliance will no longer be regarded as an additional burden.

7. Ethical considerations

GPT: Ethical considerations and responsible investing will play a more prominent role in financial advice. Clients may seek advice on socially responsible and sustainable investing.

RM: This is already happening, but perhaps not on the scale that Chat GPT anticipates will happen in the future.

GPT: Advisors will need to be well-versed in ethical investing options and client preferences.

RM: Ethical investing is likely to be magnified by the climate crisis which has resulted in unprecedented climate-related disasters in 2023. Until now, the ethical agenda has tended to be driven by client preferences.

In the future, it may need to become an advisor-driven consideration. In the same way that clients need nudges to save for their retirement, like debit orders for their retirement annuities and life insurance policies, they may need nudges when it comes to ethical investing. There is no point in saving and investing for a future that is destroyed by climate change.

8. Continued education and certification

GPT: As financial advice becomes more technology-driven and complex, advisors will need to continuously update their skills and knowledge.

RM: While it is self-evident that advisors will need to become more technology-savvy, it is also clear that to justify their value to clients, advisors will need to develop advanced human skills. We already see the need for this with subjects like Financial Psychology becoming part of CFP® curricula in other parts of the world.

GPT: Ongoing education and certifications will be essential to maintain professionalism and competence.

RM: Financial planning is a complex and noble profession. As with other professions, ongoing professional development will be key. In the 21st century, financial planning will be as important as the medical professional. Increasing longevity in many parts of the world means that people don’t only need healthcare for longer, but also the means to access it.

9. Globalisation

GPT: Technology will enable clients to access financial advice and investment opportunities globally. Cross-border financial planning and investment management will become more accessible.

RM: One of the biggest challenges that financial planners face in South Africa now is client emigration. Financial planners who want to retain these clients are developing the ability to provide cross-border advice and solutions. This is good preparation for the reality that a client’s location is no longer an indicator of where they will source their financial planning professional.

10. Cybersecurity and data privacy

GPT: As financial advice moves online, cybersecurity and data privacy will be paramount. Advisors will need robust cybersecurity measures to protect client information.

RM: Cybersecurity and data privacy are already critical considerations for financial planners. Financial planners who are not already on top of these are tempting fate.

GPT: In summary, the future of financial advice will be characterised by a blend of technology-driven solutions, personalisation and regulatory changes. Clients will have access to a wide range of digital tools and platforms that offer tailored advice, while human advisors will continue to play a crucial role in offering expertise, guidance and emotional support in complex financial matters. The industry will need to adapt to these changes to provide the best possible service to clients in an evolving landscape.

Paul Saffo says that “first we invent our technologies — and then we turn around and use technology to reinvent ourselves as individuals, as communities and as entire societies”. GPT is one such technology that we (humans) have invented which suggests that the opportunity is here to reinvent financial planning and reinvent ourselves in the process. Doing this in partnership with the increasingly powerful technology we have available to us is a unique privilege of our generation. In the words of the legendary late Robin Williams from the film The Dead Poets’ Society, “Carpe diem”. 

Rob Macdonald, Head of Strategic Advisory Services.

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