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A brave new world

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When you hear the term “robo-advisor,” what do you think of? Does it bring to mind the helpful gadgets that prepared hot meals at the press of a button for the Jetson family and then whisked them out the door each morning? Or does it instead conjure images of an army of red-eyed cyborgs like those from a Schwarzenegger film, slowly and menacingly emerging from the smoking remains of a burned-out landscape?

Whatever your reaction, the rise of the robo-advisor and other forms of technology within the financial services industry seems more inevitable each day. What’s not a given, though, is how those in the industry will prepare for the coming invasion.   

“There’s going to be a time when the younger generation—those in their 20s and 30s—fully embraces the robo-advisor,” predicts Scott M. Dougan, RFC, founder of Global Plains Advisory Group in Prairie Village, Kansas.  He anticipates a “commoditization of the majority of financial advisors and planners. Clients are going to be gathering assets, they’re going to be investing, and they’re never going to have to go talk to a person with a suit in a giant building with expensive carpet and wood. Over time, I think that’s going to be gone.”

Winds of change

Dougan started in 2001 as a captive agent with no previous background in the financial services industry. Two years later, he went independent and started his own firm. During the early years of his business, most of his clientele were over the age of 60, but once he earned his Series 65 license, his practice started to attract a younger set of clients—pre-retirees in their 50s.

“The type of marketing we do is education-based,” says Dougan.  “People pay us to come to a university and talk for several two-hour sessions. We market to and attract people ages 54 to 70 for these events, and we tend to have a lot in common with that age group.  I’m 41, so we can talk about similar things. I can understand them and put myself in their shoes. It’s been good for us; we really like that demographic.”

Along with his business partner, Dougan developed a two-day curriculum that focuses on retirement planning and is taught from a fiduciary standpoint. “We basically walk people through the retirement planning process and help them get a handle on what they want to experience,” he says. “What are their resources? What’s it going to take to live that retirement dream or lifestyle? And how do we allocate and protect the money going forward to make sure we achieve those goals?”

During these sessions and in his other interactions with clients, Dougan has noticed a growing trend. “If we ask our clients for their financial information, they’ll grab their iPhone or iPad and just pull it up for us. If they want to know a 401(k) balance, they pull their phone out and find it. That didn’t happen five years ago.” This shift means it’s more important than ever that advisors—and the industry as a whole—come to terms with technology in all its forms, Dougan says. “We need to embrace technology right now because of the influence of the younger demographic on our current clients. There’s going to be a time around the table at Thanksgiving when our best clients are talking to their grandkids or kids and the topic of money is going to come up. And they’re going to be asked, ‘Why are you paying that human being 1 percent when this robot can do it for a quarter of a point?’”

And on some level, who can blame them for this line of thought? “I mean, I get almost everything I need from Amazon,” Dougan says. “We’re on a first name basis with the UPS guy.” He expects that there will soon be “a group of people who are trained to just throw your money over to an automated investment service that will make allocation changes over time. And if I just check my app every once in a while, I’m good.” And he foresees a similar trend within the insurance space. “There are products that are coming up next year where people are going to be able to sign up online and put $250 a month into an annuity. It’s coming for sure.”

A matter of survival

What does all this mean to the average advisor? Is it time to close the shutters and start searching the help wanted ads? Not if you’re willing to adapt, says Dougan. While he anticipates a “thinning of the herd” within the advisory space in the coming years, he also believes there will be plenty of opportunity for those who remain.

“Advisors are going to have to differentiate themselves,” he says. “You need to specialize and find a niche that you can really over-serve. I think that’s going to be a key component of how we’re going to continue to grow.”

In addition, advisors must focus on building their relationships with clients, he says. “If you don’t have good relationships, you’re in trouble, in my opinion. We need to nurture the relationships we have and we need to show up differently.” And one of the best ways to do that? Technology.

“I think the industry as a whole needs to do a better job with technology,” says Dougan. He recalls a recent press release from a carrier announcing that their clients’ information would now be made available online. “I mean, come on,” he says with a laugh.  At Dougan’s practice, they’ve embraced technology fully — and their clients are completely on board. In 2012, the company became paperless, scanning hundreds of documents and old records over a six-month period. “We used to have rows and rows of filing cabinets; now we have two, and they’re full of office supplies,” he says.

Dougan is also a big believer in using technology during meetings with clients. In the firm’s educational room where seminars are held, he has a 65″ smart TV that he uses to display planning software during presentations. Hanging next to it is a massive 8″x4″ glass whiteboard. “If I want to make a point, I know it’s more powerful if I draw something out of thin air rather than just flashing a slide,” he says. The whiteboard, an Epson Brightlink Pro, allows him to display his computer desktop and draw, erase and manipulate the display using his fingers. “If I’m explaining a concept, it allows me to create something out of my mind through a digital medium. And the neat thing about it is we’re able to save it right here, and then email or print whatever’s on the whiteboard.” And what do the clients think of all this? “The 65″ TV gets a lot of attention, but the whiteboard with the projector? That has created a lot of awe-inspiring moments with clients,” he says.

Adaptation is key

Dougan is quick to point out that impressive technology is only part of the equation. “You have to be competent at your craft and know your information, and then be able to use technology to leverage and illustrate it. That’s especially important as we’re working with younger clientele. They want to know that you have a handle on that. “

And for the record, when Dougan refers to his “younger clientele,” he’s not referring to millennials. He means anyone 65 and younger. In his opinion, the days of senior clients who are intimidated by technology are drawing to a close. “My grandfather is 92 years old and I get emails from him,” says Dougan. “The funny thing is, if you go back 10 years to when he got his first computer, he would get jokes and he would print them off and file them in his filing cabinet. But I recently received a friend request from him on Facebook.” According to Dougan, the advisory space must learn to embrace these new realities or “we’re going to be left in the dust.”  Another component that can’t be replaced by technology is the personal touch. He says that the majority of the firm’s clients hug the entire staff each time they come in. “A robot isn’t going to talk to clients on the phone or let them come into its office when things get rough. So that personal relationship is, to me, hugely important,” he says.  “It’s important that we have face-to-face time with clients, especially in the beginning to foster the relationship. So I see technology as a way to improve efficiency, but I think it’s easier and more effective on the back end of a relationship rather than at the beginning.”

But that doesn’t mean that technology can’t be used to help the relationship along the way. When a prospect decides to become a client at Global Plains Advisory Group, they are immediately entered into the firm’s CRM. Dougan and his team spent four months drawing out every step of their process on a whiteboard and entering the information into their CRM. The system alerts staff members about each step of the process and prompts them when the next task is ready.

“No one is ever in the dark about what happens next. What’s powerful about that is, digitally, we have ultimate accountability because each step of the process is assigned to an employee and I can look at any time to see how many people are in our process, where they are and who’s responsible for that step.”

Dougan says automating his processes and bringing all this technology into his firm ultimately has one goal: “To be good at what we do, we have to keep and fulfill our promises. And everything that we do and build around us is for that reason.”

The future

The trend toward technology comes with an inevitable downside. “I think it’s harder for people nowadays to make decisions, because they can go online and they can research and get six million entries on Google about mutual funds. Well, how in the world are they going to filter that out? How are they going to make decisions?  People are looking for someone to guide them and to distill down what’s important and discard everything that’s not.”

Dougan refers to this process as turning down the noise. He tells his classes to ask themselves two questions when they become overwhelmed by the daily flood of information:

  • Does what I’m hearing apply to me and my situation? Most of the time, Dougan says, it doesn’t.
  •  If you decide it does apply to you, the next question is, how much does it affect me, if at all?

“If people can remember these two questions,” he says, “they can begin to tune out the bombardment of messages, stick to their guns and stay on track.” A reason for optimism

Yes, things are changing. And yes, change can be scary. But Dougan compares the changing face of financial services to another industry. “I have a 1975 Ford Bronco; I drove it to work today. There’s only one shop I take it to because the guy can listen to it and tell me what’s wrong. You can’t plug a 1975 Ford into a computer. There’s no diagnostics. He’s got a niche, and there’s not very many people around who can do what he does. It’s going to be that way in our industry, as well. You’ve got to adapt.”

He describes the future as an “an age where the advisors who are going to succeed are going to need to be able to learn and unlearn at a much faster pace. You’ve got to be able to discard old ways and old ideas or it won’t be good.”

Dougan anticipates that technology will dramatically change the face of the industyr when it comes to everyday planning for the general population. But when it comes to complex issues like IRA distributions and tax planning?  ”That’s not going to be solved by a robot or a computer.”


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