Technology takes hold: Are financial advisors a thing of the past?

Technology has been reshaping and changing the role of the financial advisor for some time now. That raises an interesting question: Does technology have the ability to entirely replace the financial advisor? That's what some observers would have you think.

Today's advisor has a vast array of technology-enabled tools and resources to help them provide planning solutions. Not only do these tools crunch numbers, but they also illustrate various scenarios. They can match plans with the appropriate financially engineered products and even provide up-to-the-minute online goal tracking.

Could these tools actually threaten the viability of the financial advisor? It is true that technology can cheaply replace once highly valued quantitative analytic skills. "Robo-advisors" incorporate sophisticated planning software that can equip the novice user with the ability to generate a plan that is comparable to a custom plan developed by a CFP or a CPA.

Are financial advisors today's travel agents?
I have heard one observer predict that robo-advisors will be the doom of the human financial advisor and that all advisors are destined to go the way of the travel agent. Do you remember travel agents? They were the people who used to sell airline tickets for a living.

I, on the other hand, do not agree with this assessment of the future. I happen to believe that there is one thing that advisors can do better than any technology. It is ability to put things in the right context so that people can make the right decisions. It is about creating a personal human connection with the client. It is about helping the client develop a vivid and achievable vision for their goals, their hopes and their aspirations. This is something that no machine can do.

How can financial advisors retain value?
Being a financial advisor is really about being an "enabler." The value-add is not that you have the right answers; it is that you have the right questions.

The fact of the matter is that people don't act on what they know; they act on how they feel about what they know. To be effective at enabling people to act, advisors should use these five steps to engage clients:

• Emotionally connect
• Inform key principles
• Involve exploration of outcomes
• Enable decision making and implementation
• Track and monitor progress

Emotionally connect
Advisors must draw out the client's visions for the future - the emotional picture of the goals. What will it actually look like? What will it help them achieve or realize? Why does that matter? Advisors must seek to understand their clients' feelings about this future vision, both positive and negative. Most importantly, advisors must listen for the underlying values that give this picture meaning.

Inform key principles
This is very much the teaching part of the process. In contrast to being the expert with the answer - "here is what you should do" - this is being the expert with a framework for the decision process and the right guidance along the way. The skills here have to do with how you package and share the needed information, such as being prepared with knowledge objects, or prepackaged bite-size chunks of information. Framing the content appropriately and posing questions along the way will help facilitate engagement and test for understanding. The objective is to equip the client with the information needed to make the right decision.

Involve exploration of outcomes
The questioning process continues with the goal being to help the client explore how to best realize their vision. Ask questions that help clients ponder various outcomes and determine what is most desirable. It is through this step that the client begins to arrive at their decision.

Enable decision making and implementation
At this time, you want to summarize the points covered in exploration. Demonstrate how positive outcomes are achieved and negative outcomes are managed. Connect the solution to the emotional context established for the goal. Finally, enable the decision and implement the plan.

Track and monitor progress
This is critical to the entire value proposition of the financial advisor, particularly if your business model involves an ongoing fee arrangement. After all, what is the value-add of the advisor if there is no ongoing effort to ensure the desired outcome will be achieved?

At first blush, these steps would appear to resemble most common planning processes. These are the same steps you would likely see on a robo-advisor platform, but here is where an advisor makes the difference. It is the emotional intelligence, aptitude, skill and underlying intent of the advisor that technology cannot replicate. The human connection is not programmable. These are the things that are certain to retain their value even in a constantly evolving environment such as financial services.

To learn more on this topic, register for our Certified Wealth Strategist program or listen to this Monday Morning Mojo podcast.

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