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How Advisors Can Harness Data to Optimize Financial Planning

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What You Need to Know

  • Most consumers are willing to provide data as long as it is protected and brings them value.
  • Advisors can use technology platforms with advancements in data, analytics and AI to take planning to the next level.
  • Advisors can build a detailed plan to address financial needs that can be accessed by both the advisor and client through an interactive portal.

When we think back to the year 2000, it can seem like a different world. Twenty-one years ago, smartphones didn’t exist. Facebook, Twitter and Instagram didn’t exist. The only social media platforms at that time were primarily peer-to-peer messaging services from Yahoo and America Online. Research In Motion was still two years from launching its BlackBerry device. And people had just realized that Y2K would not disrupt digital operations.

The technological advancement we have experienced since then has been nothing short of remarkable. Innovations in data, analytics and artificial intelligence (AI) have transformed our daily lives. From purchasing a variety of products on Amazon to ordering groceries and restaurant meals on our smartphones and splitting dinner checks on Venmo, the gathering of data continues to optimize the services with which we interact.

And the pace of this digital growth isn’t slowing down. In 2014, there were 2.9 billion Internet users in the world, according to Internet Live Stats. By mid-2019, that number had increased by more than half to more than 4.4 billion internet users around the globe. Today, Americans use more than 4 million gigabytes of data every minute.

Furthermore, consumers rely on mobile devices more than ever. Americans look at their smartphones 52 times a day on average, according to Deloitte’s 2018 Global Mobile Consumer Survey. The Pew Research Center reports that more than 81% of Americans now own a smartphone — a significant increase from 35% in 2011.

In financial services and wealth management, the benefits of this data-driven digital advancement offer many opportunities for financial advisors to serve clients betterWhile many Americans are concerned about protecting the data they share with financial institutions and other service providers, most are willing to provide more data if they receive greater value for it. 

According to a recent cybersecurity and privacy survey conducted by the Harris Poll for IBM, 75% of global respondents would not buy a product from a company, regardless of how good the product is, if they do not trust that the company will protect their data. Meanwhile, Accenture’s 2017 Global Distribution & Marketing Consumer Study found that 67% of global respondents would provide more data to their financial institution if it delivered more value for them. 

By utilizing a technology platform that offers the latest advancements in data, analytics and AI — and also protects consumer data — financial advisors can take planning to the next level. Since consumers are willing to provide data as long as it is protected and brings them value, advisors can enable clients and prospects to enter data at their own pace through self-directed workflows, and then quickly harness that data to:

  • Identify clients’ and prospects’ financial needs and goals.
  • How their financial needs will change in five, 10, 20 or more years down the road.
  • Show how they, as advisors, can provide value along the way. 
  • Begin building a more detailed plan for addressing financial needs and goals before and after retirement, which can be accessed by both the advisor and client through an interactive client portal. 

Today’s AI- and data-driven financial planning software relies on decades’ worth of retirement patterns and other data trends to generate faster, more accurate projections for expenses in retirement, including health care costs. The Nationwide Retirement Institute’s 2019 Health Care Consumer Survey reported that the cost of health care is the top concern among future retirees, recent retirees, and those who have been retired for 10 years or more. The survey found that future retirees are even more worried about covering the cost of health care in retirement than retirees themselves, with 79% of future retirees stating they are somewhat or very concerned about paying for health care, compared with 64% of retirees polled. 

Some modern financial planning technology solutions allow clients and prospects to enter personal data about their location, health, financial goals and families using self-directed workflows, which can then be securely shared with third-party providers of specialized health care analytics — more accurately predicting how much clients and prospects will need to cover health care costs in every phase of retirement. 

The advancement of digital innovation and efficiency, driven by data, enables advisors to optimize financial plans by expediting the analysis of needs for clients and prospects — and add greater value with more accurate cost projections and well-informed recommendations.

— By Angela Pecoraro on ThinkAdvisor:


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