Nov 2016

By Simon Roy

While online tools are increasingly being adopted by investors, we believe people will continue to benefit from access to skilled advisors

So-called robo-advisors — services that provide automated investment recommendations — have gained acceptance in recent years for their ability to provide investors with easily accessible, around-the-clock financial services.

Not surprisingly, one of the biggest questions I hear in the industry is whether or not technology will ultimately supplant the human element of investment advice. After all, many people remember how travel agents used to be a critical part of vacation planning, before the internet age made it easy to book airlines and hotels yourself.

I believe digital tools can enhance the advisor-investor relationship, not end it. Instead of viewing financial technology as a replacement for traditional, relationship-based advice, I believe it should be viewed as a complement to the advisor’s existing practice.

Parallels with the tax preparation industry

I believe the relationship between the financial advice industry and technology will evolve in a manner similar to the tax preparation industry — not the travel industry.

For all their analytic power and ease of use, digital tools such as TurboTax and Quicken have not replaced human tax preparers. For people with less complex tax filings, online services can largely satisfy their routine needs, but many taxpayers still choose to visit tax prep storefronts to engage with a preparer and have the opportunity to have their questions answered. Individuals with a higher level of income and more complex tax issues, such as people who own businesses, still largely rely on human tax preparers, such as a Certified Public Accountant (CPA).

Whether an individual uses online tax preparation software, visits a storefront preparer or engages with a highly skilled CPA, in all cases the calculations and analysis are done using tax preparation software. The inputs and tax code are too complex to do the work reliably without the software. Financial advice is not dissimilar.

In other words, software helps ensure that routine calculations and analysis can be handled quickly, efficiently and accurately, which allows clients and preparers to focus on the personal service elements and judgment calls that cannot be easily managed through a fully automated process. This is true in the tax preparation industry — and I believe it’s true for the financial advice industry as well.

As with tax preparation, the infrequency of investing decisions, the complexity of the task for most people and the consequence of getting it wrong drive both the adoption of technology and the continued role of the advisor in the process.

The role of emotion in investing

While we all like to believe that we are rational when it comes to investing and money, there’s no denying that emotions can play a big role when it comes to decisions about money. Quality advisors establish a relationship and trust with clients, and an understanding of their attitude toward money and how they make decisions. Through that, advisors help guide clients through tough choices and help them stay on track with their goals. This relationship becomes all the more important when significant financial events occur, such as the global financial crisis of 2008.

There is little question that online technology will continue to evolve and increase applicability within the investment management arena. However, it is hard to imagine that a client with a newborn child, or an individual whose business was recently purchased, or a worker preparing for retirement would not appreciate a conversation with an advisor to understand the options and discuss the consequences of a decision. Traditionally this would require a visit to an office and a pretty onerous paper-based process to establish a relationship with an advisor. Online technology offers a much easier path to establish a relationship with an advisory firm, and flexibility in how to access advice. No longer must conversation be in person, but rather it can be by online chat, email, screen sharing or video chat. All of these technologies can help a client access advice, have their questions answered and their concerns allayed.

Key takeaway

There’s no denying the trend of investors to utilize technology to access information, financial services and financial advice. And technology will continue to evolve and increase applicability within the financial advice arena. I believe that if embraced by traditional advisors, these technologies have the potential to make human advice more accessible to a broad swath of Americans who currently cannot easily access it.

While the technology will not replace advisors, it will help evolve how clients access advisors and how advisors engage clients, in my view. Whether we like it or not, complex decisions about money and family are emotional ones, and having access to advice and advisors is an evergreen need of investors. Rather than remove the need for personal advice, the ability of technology to help clients deal more efficiently with many tasks ironically has the potential to provide investors and advisors with more time to focus on the bigger picture.

Simon Roy
President, Jemstep

Simon Roy is President of Jemstep and has overall responsibility for business development, sales and services. Mr. Roy oversees corporate strategy and manages the investment systems function, which develops and maintains sophisticated financial modeling applications that support investment decision-making on the Jemstep platform.

Mr. Roy has an established track record as an investor, consultant and chief executive officer (CEO) in several successful technology companies with more than 20 years experience. Prior to joining Jemstep, he served as CEO of a successful start-up, Accrue Software, which was subsequently listed on NASDAQ. Prior to that, Mr. Simon served as a senior consultant with McKinsey & Company serving the financial services industry.

Mr. Roy holds a Master of Business Administration in finance with distinction from University of Pennsylvania – The Wharton School and a FINRA series 65 certification.


Got a minute? Take a sneak peek and get to know Advisor Pro.

In 20 minutes, we’ll show you how Advisor Pro can work for you. Contact us for a demo.