As the investment industry continues to innovate, a digital divide is opening between advisors who embrace technology to its fullest possible extent — by adopting digital tools, for example, that provide a more interactive and streamlined client experience — and those who do not.
This divide may prevent the latter group of advisors from fully and effectively engaging with their clients and prospects. Many investors prefer a digital experience that can help them access, on their own terms, the information they need. They might research which advisors use interactive tools and social media before they even arrange a meeting, or prefer a smart client portal that aggregates data – which can provide a holistic view of the individual’s personal finances and investments.
Technology also helps advisors reduce time spent on operations, allowing them to devote more time to client-facing activities. This can lead, in turn, to greater client engagement. A 2016 Aite Group research report found that advisors who effectively use advanced technology can dedicate around 20 percent of time previously spent on operations to client investment management tasks.
The Kasparov Principle
How, then, can advisors bridge the digital divide? The world of chess may be able to offer an explanation.
In 1996 and 1997, Russian world chess champion and grandmaster Garry Kasparov played two matches against IBM’s Deep Blue supercomputer. After initially winning in 1996, Kasparov was defeated by Deep Blue the following year — the first time that a computer beat a standing world champion.
Kasparov subsequently developed “advanced chess,” in which human chess players can team up with computers to support their games. Drawing upon this experience, the Kasparov Principle tells us that experts and machines can achieve more by working together than they can alone.
The same can be said of advisors. As in chess, it has become clear that the greatest benefits can come by marrying humans with technology — by enhancing traditional platforms, for example, with digital tools like data aggregation, self-serve investing, document vaults and goals-based financial planning.
Technology can indeed introduce today’s advisors to a range of diverse approaches. While human advisors can – and do — still provide services under the traditional model, others might implement a solution like a robo-advisor that offer algorithm-based advice in lieu of a human advisor’s services.