How Technology Has Influenced the Financial Advisor

Has the last 20 year technological boon changed financial advising? 

For better, for worse?

The “D” Generation

Before the 1990s there was no developed, consumer available Internet. The first time I heard the word email was from a client of mine, in 1990, an IT graduate student from MIT. She was fretting about not hearing from a colleague about the outcome of their joint research. I asked her what an email was (can you believe THAT?) and she said perfunctorily, “It’s the electronic transmission of data.” “Oh,” I said, and we went on to other topics.

By the time 1994-5 rolled around, chat rooms, email, and the Internet was developed enough to have these words become familiar both in form and function. Since then, (just shy of 20 years) we now have a generation (some calling it the “D” Generation) that is about ready to go to college and has never known life without the Internet and its related technological advances. Digital communication in the form of cell phones, texts, email, Facebook, Snapchat and Tumblr to mention a few has become a major part of this communication pattern. I think it’s fair to say that there has never been a previous generation in which technology has so directly shaped their brains and their communication patterns.

Young adults now 20 to 35 may not have had as much of a “cradle to teen” digital experience, but they are very fluent with the Internet and can do much better than those of us above 35 who labor to do what a 30 year can do with her eyes shut. In other words, the Internet and it’s rapid technological evolution are here to stay and will continue to develop at a rapid pace.

How Technology Has Changed the Advisor

Technological advances in information gathering, categorizing and sharing make financial advising easier. Organizing spread sheets, developing budgets, integrating different aspects of a financial profile or making projections of financial needs for retirement are now done with a click of a mouse. Meetings between clients and advisors can be more effective because the opportunities for rapid information presentation and organizing are possible. Need to get a missing piece of data? No problem, you can reach that data source person on a cell phone no matter where they are, and computer ready, of course.

Financial advisors of all ages realize how effective technology is to their efforts to both seek out and serve their clients. A recent report from Accenture (How Tech Savvy Advisors Can Regain Client Trust, 2013) about the Gen D points out that 75% of advisors currently share the same command of digital technology as Gen D investors, integrating use of digital and social channels into their daily lives.

The majority (60%) has daily contact with clients through social media. With 54% citing that they found or converted clients using these channels, it’s clear that the tech-savvy Gen D advisor realizes the importance of digital tools in attracting and retaining clients, and understands that this is increasingly becoming a key differentiator for success.

Roger J. Shawn, III, CFP®, CIMA®, a financial advisor at Capitol Securities Management, Inc. in Glen Allen, VA started his career in 2000.

In a recent interview, Mr. Shawn commented that when he first started to transact trades, he would write the trade down and then take it over to the trading desk to have the trade executed. Keeping track of all his clients’ detailed financial information was cumbersome and time consuming, having to hand write notes into a day timer.

Over the past several years Mr. Shawn has utilized new contact management software. This allows him to have clients all over the country because his record keeping is streamlined and functionally easy to use and is accessible from different devices. His clients like it because he is spending more time interacting with them while technology carries the burden of transactional details.

The Human Element Still Exists

In other words, both client and advisor are empowered and are able to be more effective. Mr. Shawn also made the interesting point that social media doesn’t in itself bring new clients, but is one part of the overall process. He says, “Individuals rarely become a client solely through a website visit or a phone call. A face-to-face meeting is one of the best ways to really meet a client and build rapport. A website or a phone call can help educate a client about my credentials and other relevant information, but the meeting is still a superior method of building a relationship.”

 

Disadvantages to technological advances Mr. Shawn cites are that software constantly changes. Having to install a steady stream of updates can be annoying because it disrupts workflow. As well, when computers and programs are incompatible, it can cause immense frustration and time delays.

 

From a transactional, administrative perspective technology provides organization and greater transparency. It may lead to better financial decision making because more data is visible and accessible to both client and advisor.

However, where technology doesn’t seem to have a positive influence is in establishing trust and keen judgment calls. Especially since 2008, many people have become so distrustful of financial advising that they have taken on the task of managing their own money.

 

The Internet has spawned the capacity for individuals to make low cost trades, to track minute to minute stock behavior and to independently be in charge of their money. Issues arise, however, when (as the Accensure Report stated) it was reported that although advisors believed that 42% of the general public were extremely knowledgeable about investing, only 12% of investors actually see themselves as extremely knowledgeable. Managing your own money is difficult unless you put it all in an index fund and check it a couple of times a year. If you have one to two hours a day to devote to your investments, it may be possible to manage your own money.

 

However, the emotional impact of managing your own money usually raises anxiety and makes you very vulnerable to meltdowns and uncertainty if your stocks are volatile or turn south. Having other investment savvy people to talk to and getting accurate financial information from reliable sources makes the job less difficult. But how does the individual investor get access to timely, accurate information? Just think of all the disinformation that is on the Internet!

 

Change is always difficult and rapid, pervasive changes are even more so. If this blog strikes any kind of chord for you, please post a comment and do what the Internet does best-create opportunities for interaction!