Advisors Must Embrace Tech to Keep Competitors at Bay: CFP Board

Advisors’ failure to embrace — and invest in — new technologies puts them at risk of falling behind competitors that are keeping pace with consumer demand for digital advice, according to a new survey by the Certified Financial Planner Board of Standards.

The just-released survey by CFP Board’s Digital Advice Working Group — which includes industry heavyweights like Spenser Segal, CEO of ActiFi; Dan Egan, director of investing and behavioral finance at Betterment; and Kabir Sethi, managing director and head of GWIM Digital Wealth Management at Bank of America Merrill Lynch — offers advisors three pieces of digital advice as they head into the new year.

• Firms and advisors “must quickly embrace new technologies rather than work against them, and focus the use of these tools on elevating the role and impact of skilled human advisors.”
• Devote more time to improving the advisor experience along with the client experience. “As the complexity of financial planning technology grows, advisors serve as a critical translation point for clients and can benefit from well-designed systems that enable them to focus on adding their uniquely human value to client interactions.”
• As technology changes the role of advisors, firms must rethink their approach to onboarding and training. “Serving the clients of the future will require that advisors be equipped not only with the relevant financial knowledge, but also with the digital skillsets and understanding of client psychology that will enable them to drive clients toward positive behavioral change in a digital world.”

“Clients expect and deserve a human-powered, digitally enabled solution to their financial needs,” said Kevin Keller, CFP Board’s CEO, in releasing the report. “Financial advisors who utilize technology as a tool in the client-advisor relationship can differentiate themselves and create more meaningful, deeper conversations and longer-lasting relationships that produce better outcomes.”

The report argues that consumers want to have an integrated solution when getting financial advice as part of a digital financial advice ecosystem, which includes five components —technology, consumers themselves, regulation, firms and advisors.

The evolving advisor-client relationship will feature “many of the same components of financial advice today, but connected through a seamless digital experience,” the working group said.

Financial plans, for instance, “will live in the cloud, where they can be accessed anywhere, from any device.”

Many financial advisors “will never meet their clients in person, but will connect frequently through digital channels such as video-conferencing, texting, and social media, greatly increasing accessibility and enabling greater specialization of advisors across geographic boundaries,” the report predicts.

But human relationships “will continue to have a role in financial advice,” the report adds, as “digital approaches are believed to have less impact on human behavior.”

As to regulation, it will keep pace with digital advice, the report said.

Regulators, the working group found, “are not distinguishing digital advice providers from human advisors in their responsibilities to clients. Rather, both digital advice providers and human advisors are held to the same regulatory standards — a duty of care and duty of loyalty.”

Recent guidance on digital platforms from the Securities and Exchange Commission is “meant to clarify and interpret existing standards rather than impose new ones,” the group said.

Regulators continue to review policies and legislation around digital advice as the space evolves “with a constant race to ensure regulation keeps pace with the convenience and efficiency offered by emerging technologies and business models while protecting the interest of consumers,” the report states.