by Tony Vidler
Robo’s are a threat to advice businesses in much the same way that a chilly bin is a threat to the sale of refrigerators.
Many advice businesses, and quite a few institutions it seems, appear to believe that automation is the devil that will kill financial advice, and it should be resisted with the same vigour as John O’Connor taking on Terminators.
What rubbish. Robo’s are actually a natural evolution of the delivery of good advice, and should be welcomed by smart advisers as part of their business development.
Let’s slip back to the analogy of refrigerators and chilly bins for a moment to put things in perspective.
Both are used to achieve the same outcome: keep your stuff cold and fresh so that it is edible.
However, they have different designs and different features and come at vastly different price tags because they do it in vastly different ways. While the desired outcome is the same from both, their purpose is not.
The purpose of one is to produce a cool and healthy food environment for a short duration, in the most portable manner possible (your Grandma can pick it up and move it, right?), at a price point that even Chinese manufacturers struggle to reduce.
Ideal for the family picnic or a few beers at the cricket, right? Perfectly designed to deliver the desired outcome…and as far as I am aware nobody really hates chilly bins for it. Not even refrigerator manufacturers – they don’t appear to hate chilly bins either. Most refrigeration engineers and designers own a couple of chilly bins in fact I would guess.
A refrigerator on the other hand delivers sophistication and durability and bespoke “chilling”. I don’t know about you, but we’ve got separate little drawers for fruit and veggies (that is 2 separate drawers by the way), as well as other compartments for cheeses and eggs and stuff….and various temperatures delivered to the different drawers and storage areas to optimise freshness of eggs or apples or milk….very clever isn’t it?
Yet the desired outcome from me as a consumer is fundamentally the same for both.
Keep my stuff fresh and edible. But it would be cool if one could produce its own ice cubes….although when I am out at the cricket with beers in chilly bin I don’t want an ice cube producing thing.
So….back to robo-advice, or robo’s as we seem to prefer calling the financial services version of The Terminator. If robo-advice is defined as an automated or algorithm based method of delivering financial services solutions and/or products to consumers without the intervention of a human, then that seems a pretty useful purpose to me.
There are any number of relatively simple financial services functions which our 17 year old does not require advice for. She does however require the functionality to be able to transact quickly, cheaply and effectively.
Having just joined the part-time work force she is auto-enrolled in compulsory super, has to work out some tax and banking stuff, is building credit and savings history with the use of different bank accounts and so on. A fairly normal start to becoming a financial planning client one would guess. In years to come life will get more complicated – the university student loan will be a monster. Family planning is probable (in many bloody years to come one hopes)….and life will become more complex. Life will also become busier, and convenience and clarity delivered by a professional who is able to understand key outcomes and mix the use of tools and services to suit will become more important.
At other moments in time however I recognise that there will be a requirement for detailed and thoughtful planning advice which is bespoke. Many aspects of life will become interwoven, and it will become impossible to separate taxation consequences from investment or borrowing decisions, and overlaying those decisions will be the need for astute estate planning and ownership considerations. Anticipating and then developing risk management tactics while pursuing those financial planning objectives will involve dozens of different decision points and considerations which account for anticipated cashflows together with probable performance of the investment and taxation planning…..you get the point:
There is a time in many consumers lives where automation of service delivery will not be able to compete in all likelihood with the sophistication of the well-trained and experienced human brain that can consider a thousand variables which are seemingly unrelated while taking into account the body language and non-verbalised reactions of a human being – which is a key part of designing a great financial plan.
But then there are times in many consumers lives where they just need a simple solution. Preferably fast and cheap.
The smart adviser with an eye on the future, and who has a genuine concern for the well-being and satisfaction of their clients, will be looking at how to build robo-advice offerings into their service offering – if not build them into their practice.
We welcome automation as practitioners in virtually all aspects of our commercial and private lives – from the simple functions of being able to set up automated banking transactions so we no longer have to remember to pay the electricity bill, through to using auto-responders from our CRM and email systems to engage with clients while we sit at the cricket drinking beers from the chilly bin.
Robo’s are not the enemy. Robo’s are a natural evolution in delivering great service and useful functions in a rapid and cost effective manner to our customers who are living in an ever-faster world with greater demands on their time and money.
Smart advisers will get in tune with the evolving needs of their customers and figure out where the lines of simplicity and complexity are triggering holistic advice, and then build in automated or robo-offerings for everything that sits on the simplicity side of the line.
That is what the next generation of customers – which is todays 17 year olds as well as todays sophisticated and smart 55 year olds – already expect.
Any adviser choosing to ignore that reality is basically consigning themselves to dealing with an increasingly smaller pool of prospective clients, and eventually making themselves entirely redundant.
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