How financial planning fits into this framework has long been a contentious issue as questions around what parts of the financial advice process can be enhanced or replaced by technology are potentially endless.
As a driving force behind the Financial Planning Association’s increased focus on technology in recent years, Ben Marshan, FPA Head of Policy and Standards, says there are several areas where practical fintech solutions can aid advisers in providing advice.
“The only part of the financial planning process that cannot be replaced by technology is the human interaction, which is ultimately the most valuable part of the client-planner relationship,” he says.
“Data collection, modelling, Statement of Advice (SOA) generation and documentation can all be digitised, automated, and made more cost effective. These areas become significantly more efficient and, most importantly, more engaging for the consumer when delivered through digital tools.
“The biggest wins at this point, though, will be around single data entry, modelling and SOA generation as these tend to be the most labour-intensive parts of the advice process according to the data provided to us by our members.”
In 2019, the FPA launched the Future of the Statement of Advice (SOA) digital interactive guide to help financial planners develop more accessible, personalised and meaningful client experiences during the advice process.
Advancements in technology allow for the more efficient production of SOAs, as well as a more effective communication tool by using icons, symbols, graphics, expandable and linked text, audio and video to better engage and inform clients.
“Our approach has been to review the SOA with fresh eyes, reassess its purpose and look into what the next decade of advice delivery could be for consumers and how it can be improved,” says Marshan.
“As part of this, we explored how technology can be harnessed to improve the advice experience and progress the evolution of the SOA. Numerous consumer behavioural finance research reports identify that the long-form, text-heavy way that SOAs are provided to clients does not match up with the way that a large majority of people best digest and understand complex information.”
But does the FPA, at this point, consider the processes of discovery and delivery to be adequately digitised and can an algorithm deliver the necessary analysis that results in a financial plan that places the client’s best interests first?
“Clients don’t know what clients don’t know, so thinking that an algorithm or a robot can replace the value a professional financial planner can provide to a client, is simply not there yet,” Marshan says.
“When I was planning, every single client would suddenly remember about an asset they have or changed their mind about the priority of a goal or the need for a trade-off when I was going through the advice process. This is the sort of thing digital advice solutions aren’t capable of handling.”
In other words, while digital-advice may be able to help with salary sacrificing – up to a point – it will take a human adviser to access those funds when the same client wants to go on a holiday in 12 months’ time.
Marshan believes the industry has turned a corner in seeing technology as a partner in enhancing the engagement and therefore the outcomes that a client receives from working with a professional financial planner.
“Three or four years ago there was a lot of concern, but members have become much more comfortable in understanding that technology is there to make their advice process more cost effective, efficient and engaging for their clients,” he says. “So no, they aren’t worried about being replaced.”
The next step for many financial planning businesses is how to approach the process of engaging with a technology provider in regards to the buying or partnership process.