As with most aspects of life, the day-to-day way of doing things has been changing at a breakneck pace in financial planning. Technology assists financial planners today to make heretofore complex and laborious analytics, such as retirement analysis and investment portfolio management, consistently deliverable to large groups of clients. Things you can do today were unfathomable when I first joined a financial planning firm more than fifteen years ago.
The advent of the robo-advisor
If you’re not reading about trends in financial planning each day like me, you might be surprised to hear that “robo-advisors” are said to be the next big thing in financial planning and investing. What is a robo-advisor, you might ask? They use algorithms to deliver financial planning to many people at once. This offers welcome resources to large swatches of our population. Similar technologies are also available today to financial planners like us at The Center to enhance the effectiveness of our financial planning offerings.
Some visionaries have said that robo-advisors may take the place of financial planners in the future. While I think the robo-advisor trend raises the bar for our service delivery and capabilities, it would seem difficult for computer computations to be able to replace the value of human, relationship-based financial planning in the coming years.
Robo-advisors highlight tech shortfalls
As calculations and software have enhanced the capabilities of financial planners to solve and manage fundamental planning and investing challenges, more complex goal identification and nuanced decision-making for finances comes to the forefront. How will you plan to withdraw from your portfolio in a retirement in a way that works for you and helps with taxes and portfolio sustainability? What are your personal and family goals that you wouldn’t be able to explore and identify without deep knowledge of your current and future financial circumstances?
Exploring these sophisticated topics can rarely be done or done well in a virtual environment – a conversation with a computer program doesn’t simulate a person or family's explorations with a professional planner. This week, Facebook apologized for unfortunate and hurtful images and reminders of deceased family members in their “Year in Review” offering. The computer didn’t know – what they saw was increased “traffic” around a particular event – seemed noteworthy and reviewable to the algorithm.
In the face of a complex world, the Facebook stumble is a reminder of the limitations of technology to replace a human touch. Take technology for what it’s worth, but don’t underestimate the value of human touch today and in the future.
Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.
Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.
Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. C15-000068, A15-000516