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September 06, 2019 at 01:15 PM
What’s the greatest threat to the modern financial advisor? Fee compression? Market volatility? Self-directed investing platforms? I believe advisors are up against something far more challenging: liquid expectations.
Liquid expectations, also known as fluid expectations, result from customer experiences seeping from one industry to another, and the expectation that every product or service encountered will be paired with an amazing digital experience.
Millions of people have come to expect the digital conveniences created by new technology in everything from entertainment to banking. People have become accustomed to a certain level of digital experience, and when they encounter something that is complicated, time-consuming or ugly, they have a visceral reaction.
For example, why should I fax when I can email? Why make a phone call if I can send a text? If I can have a decent experience when I log into my bank’s app to check my balance or open a new account, why can’t I do the same with my investment portfolio?
Liquid expectations create the philosophy that everything I use should be intuitive and effortless.
Outside of tech, every industry is feeling the pressure. Grocery stores offer online shopping with pickup or delivery, coffee shops allow you to order via an app and grab your coffee without speaking to a barista, and even home insurance can be purchased with a few videos on your smartphone instead of an in-person evaluation. From consumer goods and services to homeland security, digital experiences are king.
So, what does this have to do with financial advice?
It means that future and current clients will expect the same level of digital convenience from their financial advisor as they get from other services. The separation between “tech” and “non-tech” no longer exists. Laurence Kaye, an expert in digital law and media at the UK firm Shoosmiths summed it up this way: essentially, “everyone’s in the technology business.”
This isn’t about innovating — it’s just about keeping up.
Think about the “robo-advisor” panic post-2008. There was a concern that investors would shun human advice for high-tech platforms, but it turns out that the robo-advisors weren’t really competing for advisor’s clients. Instead, they disrupted brokerage accounts by making it easier to become a self-directed investor.
What robo-advisors have done, though, is show that the financial advice industry can enjoy a much better digital experience. But when it’s time to upgrade to a real advisor who can assist with the complexities of life, clients who have invested with a robo-advisor in the past will bring their liquid expectations with them. They won’t want to upgrade to an advisor if it means downgrading their digital experience.
