December 12, 1969, is an auspicious day in financial planning history. It is widely considered to be the day that the modern financial planning profession as we know it was born. Thirteen people met at O’Hare International Airport in Chicago and passed a resolution forming the International Association for Financial Planning and the College for Financial Planning, which begat the CFP designation. Their goal: finding a way to help Americans gain control of their own financial destiny.
At the time, stocks were primarily sold to wealthy investors and pension plans, and the average consumer viewed passbook savings accounts, their employer’s promised pension and life insurance as their primary investment vehicles. It is hard to fathom that in the ensuing 44 years the financial and investment markets would expand to include almost all Americans.
In 1973, the first CFP class of 42 graduates was recognized. As of May 31, 2013, the total number of CFP licensees has risen to 68,626, says the CFP Board. This is proof of the overwhelming expansion of this now global industry. Our advice has become a need, not just a want.
Technology has played an invaluable role in advisors’ rapid success. Simultaneously, Internet savvy “do-it-yourselfers” have turned to online services such as Mint.com (now owned by Intuit, the makers of Quicken), Learnvest.com, Personalcapital.com, Financial Engines and Wealthfront.com. Our space has become crowded and the information overload has become, well, overwhelming. You could swim endlessly in the sea of advice, as easily as you could drown in it.
Such technology offers a low-cost alternative in financial planning advice—which already comes amid the success of discount brokers and clients’ mass adoption of indexes and exchange-traded funds. Those who think these tools can replace financial advisors, though, suffer from the misconception that financial advice is linear and finite in nature, similar to completing your income taxes using TurboTax. Tell it what to do, stick to the plan and you’ll pass “Go” successfully to your next stage of life.
The problem is that truly effective planning evolves through a complex series of individual situations and proclivities that are not easily reduced to an algorithm. And technology cannot impose discipline on someone who is not disciplined; it can only provide a framework for those who are disciplined enough to follow it.
Nothing can replace a dialogue with a human. Why? Because your clients don’t know what they don’t know! How often have clients come to you with a dilemma and a preconceived notion about how to address it? After you counsel them, they will likely realize that the problem and the solution are unlike what
they anticipated.
We all do that. When you walk into a store for wood and sealer to build a deck, for instance, you can’t find exactly what you were told to purchase, so you might approach a sales clerk, who might suggest, “Have you ever heard about vinyl decking? It comes in a multitude of colors, doesn’t require staining or sealing and it’s much less expensive in the long run.” Your preconceived idea has been greatly improved by the advice of a knowledgeable advisor.
Only a human mind can so effectively evaluate and decipher important information specific to somebody’s needs. Artificial intelligence can scope out a series of possible solutions when offered the correct data. But through social interaction and honed intuition, we determine what the client prefers, what is valued and what is expected. Social interaction is more than just a simple exchange of information; it is the construction of a process. It reinforces behavior that is critical to the success of the advice.
As a financial advisor, you may find it incomprehensible that people could or should do their own planning, even with all of the online resources at hand. There is a vast array of investment options. There are also many different types of insurance, tax complexities and legal issues. These are so complex that even many financial planning firms have had to hire teams of experts.
Furthermore, clients feel more accountable to their advisors than they do to themselves or an Internet site, much like weight watchers who do weekly weigh-ins. The advisor becomes that set of eyes that is emotionally involved yet analytical enough to make decisions. The role of a good advisor is to ask the right questions.
Retail financial advice technology will continue to evolve, and there is a place for it. Younger investors who have grown up with the Internet will seek it out, as will older investors who trust their own counsel. Other clients will see the financial planner as central to their lives the same way they see their lawyers and accountants. But if you forget your value as a professional expert and confidante, you stand to lose clients to software. Communication and social interaction are not only the way to remain effective in our business but a fiduciary obligation to the clients.