When choosing a financial adviser, what is the first thing that comes to mind? Their efficiency? Expertise? Experience?
This is a question I’m often asked in my role heading an independent financial planning and advisory business. For me, it’s a combination of all three that comes packaged in one word: trust.
At its core the role of a financial adviser is to help clients and families manage their finances, plan for the future and achieve their financial goals. This advice spans decisions across investments and insurance, with the goal of ensuring clients are being presented with the right information (at the right time) to secure their futures.
But let’s admit it. Even those of us heavily involved with financial services find this landscape complex. We’re navigating intricate regulations, diverse financial products and constant technological advancements, and so keeping on top of all this is a challenge.
But it’s also a great opportunity to seek ways to make sense of this for clients through conversations throughout the financial journey. Having a confidante who understands your needs and context, and has an objective lens not driven by any other agenda, helps to build that all-important trust.
It's also this level of commitment that results in improved financial outcomes. Studies continue to show that individuals who work with financial advisers tend to achieve better savings, investment returns and overall financial wellbeing compared to those who don’t.
While the exact figures vary, you’re looking at potentially adding an average of 3%-5% a year in investment returns if you work with a financial adviser. As an aside, people with financial advisers even report higher levels of happiness and confidence and lower levels of stress.
A starting point for anyone in this industry is to make sure we keep trust top of mind. Every article you now read online about financial advice is tech-deep in commentary about AI-powered tools, and without question it’s exciting that advisers have access to this tech to enable them to identify behavioural patterns, analyse more client data and better predict future financial needs. AI also helps spot risks and fraud, flagging unusual account activity or market movements to keep clients’ money safer.
AI-powered tools are making it easier to manage money, identify investment opportunities and give personalised advice to clients. This type of tech also helps streamline compliance processes and enhance operational efficiency. In wealth management alone, AI-managed assets are predicted to reach almost $6-trillion by 2027. This rapid growth shows how important AI is becoming to scale advisory businesses.
But there’s a fine balance. Flash back to 2010 when “robo-advice” started to become popular, offering low-cost help to people wanting to invest money. This method of financial advice promised to “take the emotion out of investing”, but despite their capabilities “robo-advisers” did not manage to capture the market.
Perhaps this is because there is still a gap between AI capabilities and the complexities of human financial advice. Or perhaps it is merely a case of semantics, with “robo” being too close in ideology to the dystopian “robo-cop”, and too far removed from what it means to be real.
The true value of financial advice is intricately linked to trusted human involvement. Clients want to feel safe and supported. All too often in our industry we forget that money makes most people feel anxious and stressed. These are real emotions at play that need the human touch to not only offer advice that’s understandable, but advice that’s emotionally intelligent too.
A World Economic Forum article published a few months back asked this question: could machines entirely replace human advisers? My answer to this is simple. If they can’t yet, they likely will be able to in time, but they really shouldn’t. AI has and will continue to transform the financial advice landscape. What it cannot replicate is the human connection and trust factor that is so critical.
Govender is CEO of independent financial planning and advisory business GrowthHouse.
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