While the financial services industry is often viewed from the outside as staid and unchanging, the truth of the matter is that a sea change is underway, radically transforming the industry.
In many ways, this is good news. Enhanced transparency and a choice of service models can only benefit Canadians. But these changes need to be understood.
The latest buzz is about automated investing – often referred to by its catchier name: robo-advice.
I want to give robo-advice its due. The services under this moniker represent a marked improvement over the do-it-yourself approach to investing, which may provide investors with the means to invest but with limited guidance as to where.
As a believer in innovation, I place high value on the power of new technology. For many Canadians, I believe a financial advisor remains the better option, but better still is an advisor who embraces technology for what it is – a tool to better serve his or her clients.
A recent ad listed the “Top 10” reasons to open an account with one of Canada’s largest robo-advisors. Most of the reasons revolved around cost and convenience, which are no doubt legitimate concerns.
I don’t have a pithy “Top 10” list. Instead, I believe there is a single compelling reason to work with a real live financial advisor: You are unique.
As someone with distinct circumstances, needs and goals, you can’t be summed up in a dozen data points or understood solely by an algorithm.
At present, robo-platforms tend to offer cookie-cutter solutions that don’t always take into account the nuances of your ever-changing financial situation. Technology, as yet, does not replace the proper portfolio construction that a skilled financial professional provides, but what it can do is give advisors more time to work with their clients.
For example, an advisor-focused digital solution can help professionals take care of certain regulatory requirements, track progress, manage risk and be more efficient and effective – all of which address both the cost and convenience concerns that exist in the marketplace today.
With this comes the real benefit: Technology can free up time for advisors to focus on the people and families they serve. More robust conversations lead to greater understanding and, ultimately, a superior investment experience.
This is precisely the reason that Invesco has embraced technology in the advisor space with our purchase of Jemstep, a flexible solution that harnesses the powerful combination of digital technology and expert human advice to provide invaluable service for investors. Ideally, this step will expand the availability of financial advice overall, which is especially important as investors’ financial lives become more complex.
The more complex an investor’s situation is, the more value an actual financial advisor can offer.
Many, if not most, advisors offer services beyond portfolio construction and maintenance. Insurance services, for example, are currently not available through the robo-advice model. While this might change in the future, I suspect most Canadians would still prefer to deal with a human advisor for these services.
In the past year, we have seen reforms to the Canada Pension Plan, child benefits and tax rates – and that’s just at the federal level.
Each of these changes should be factored into a personalized financial plan. Unfortunately, these complexities may not be addressed by the robo-advice channel. The responsibility will remain with the client to seek out additional support – a fragmented approach that ignores the bigger picture.
It is my sincere belief that Canadians are best served by a financial advisor, who can help investors get the most out of life in an ever-changing financial world.
Evolutions in technology, by nature, are fast and furious and tend to stir up enthusiasm at every step. The current technological shift is fundamentally changing the way financial advice will be delivered. Keeping the investor experience top of mind is the only way to navigate this in a meaningful way.