Man vs. Machine: Will Human Advisers be Obsolete by 2030?

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byStephen Marzo

Many industries’ operating models have been forced to digitise in recent months.  Even sectors that typically resist innovation, understand that they have to adapt quickly or face ruin.  Despite digital transformation initiatives being fast-tracked to the top of the to-do list,  the move to digital is actually nothing new.  Robo-advice, for example, is a well-trodden path with its emergence over a decade ago offering easier access to products at a lower cost.  Growing numbers of automated digital journeys from retirement planning to ISAs clearly shows an industry in the midst of change.  But we’re going to leave the industry as it cuts its teeth on automation, and leapfrog the next 10 years to see what the future holds for human advisers in 2030.

 

Open Finance & AI:  Levering the Power of Big Data

We first need to understand what financial advice will look like in 2030 before we can understand where humans will fit into it.  The fusion of big data and artificial intelligence will change the landscape forever.

 

As open finance matures, clients and advisers will be able to see a holistic overview of all assets and liabilities at any point in time alongside the terms associated.  This will be one feed into a data engine which will include; age, goals, market conditions, tax brackets, alternative products and much more.  It is the combination of all of these variables that will revolutionise advice and drive a truly personalised offering.

 

The emergence of ‘big data’ is not new and is largely available at the moment.  The evolution over the short to medium term is the adoption of artificial intelligence to assess this ever-changing data set and drive tangible outputs with clear benefits to the end client.  By 2030, this will be common practice, people will have access to a digital financial resource that is always on, offering pre-approved solutions aligned to a client’s objectives and age.  

 

In this future of big data and sophisticated AI capability, we need to accept that there are very few aspects in which a human will be able to outperform an algorithm in terms of building a financial plan.  This poses an important question: does this spell the end of humans in the advice process?

 

Financial Adviser 2030

Although the prospect of a new world of automation, digitisation and cut-throat AI efficiency might seem bleak for human advisers, one thing an algorithm can’t do is look someone in the eye, build trust, empathise and coach.  This is where the true value of an adviser remains untouchable. And this, we believe,  will be the role of the financial adviser of the future.

 

Human at Heart

Over the next decade, financial advisers will transition to become financial coaches. They’ll help clients understand any risks they’re taking as well as the goals they’re planning for.  In fact, this transition has already begun with client relationships and outcomes being central to most.   Research suggests that despite Robo-advice resulting in better outcomes, 80% of affluent Millennials report a preference for human advisers. Consumer hesitation around Robo-advice is evidenced by lower than expected adoption.  Analysts reckon less than $1 trillion is managed by Robo-advisors worldwide.  A far cry from the $2.2 trillion predicted by KPMG back in 2016. 

 

This reluctance to use purely machine-only advice shows that humans play an important role in people’s confidence, adjusting their coaching to different levels of understanding of financial products which can be extremely complex.   For example, a recent study suggests that ‘financial acumen plays a key role in whether or not Millennials choose to use a digital advisory service.  Of those who use robots, 26% say they feel knowledgeable about investing whereas only 12% say they did not’.  The same study suggests that those using robots have a greater risk appetite with 12% saying their portfolio is ‘very risky’ compared to only 5% of non-robo users.

 

Human+

The real sweet spot for advice firms will be for man and machine to work together, yet apply themselves to the aspect of advice they’re optimised for.  Automation will fuel efficiency, AI will result in better, more consistent financial outcomes and humans will do what they do best: build relationships, trust and understanding.  This perfect fusion of ‘Human + AI’ will be the answer to genuinely tackling long-standing industry challenges such as the advice gap, process bottlenecks and patchy accessibility.  Importantly, it’ll change the attitude of the public towards financial advisers.  They’ll be seen more as an integral and trusted mentor, providing crucial, frequent financial health checks similar to a dentist giving check-ups and advice. 

By wrapping the power of AI around advisers combined with a complete 360-degree view of a client’s financial profile all in one place, hard-hitting financial advisers will have the reach and resources to drive the future as opposed to being left behind.

 

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