As financial planning has evolved over the years, better tools have become available to help advisors maximize their impact with more clients by increasing their efficiency. Financial planning technology, in particular, has allowed advisors to automate time-intensive back-office tasks and delegate routine analyses to support staff, freeing up their time to engage more personally with clients. However, as advisor technology continues to evolve, many tools have focused on helping advisors scale their financial advice to accommodate growing businesses. And while these tools are marketed as helping advisors become more efficient, advisors often wonder if technology helps them offer better financial planning or if it simply serves to systematize outreach to more clients with depersonalized and less insightful advice.
In our 100th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the evolution of advisor technology, how advisor technology has shifted the focus for many firms toward offering advice at scale by leveraging speed and efficiency, and whether advisor technology is truly helping make advisors better… or just faster.
As a starting point, it’s important to recognize that while conversations in the financial services industry over the last decade have entertained the idea that technology (e.g., robo-advisors) might someday replace human advisors, there are still many elements of financial planning that benefit from engagement with a human advisor. As while advisors certainly can leverage technology to create faster and more efficient back-office processes that help scale a growing practice, the key point is that new technology tools can also help advisors engage in better conversations through innovative presentation tools (e.g., interactive scenario modeling, data management, and visualization), helping them create more meaningful client relationships. And by aiming to scale the delivery of advice to make the process faster will not necessarily be better for clients, because the reality is that clients are humans with complicated histories and relationships with money; even though it may be more efficient to provide them with easy-to-use do-it-yourself financial technology to help them budget and track their own progress, many will still need extra time with their advisor to help them work through more complex issues preventing them from reaching their financial goals. And maintaining positive, supportive relationships with clients who are struggling to overcome emotional and behavioral challenges around money takes time.
Ultimately, advisor technology can help advisory firms scale their businesses by improving back-office efficiencies, but it does not necessarily serve to help financial advisors scale the work of actually giving financial advice… at least not yet. While the challenge of delivering advice at scale is perhaps better addressed through serving more clients by adjusting the firm’s business models instead of their chosen technology tools, there are technology tools available that can help advisors provide better advice by facilitating deeper discussions of the client’s unique situation, which can result in longer-lasting and more meaningful client relationships!
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