From mobile banking to robot financial advisors gaining popularity, new technology is reshaping the financial industries in unprecedented ways. Lines of codes have helped streamlined investment activities, and financial advisors find themselves at a crossroad where taking the wrong path might lead to failure. But do these changes have any significant impact within the industry? Where will new technology take the industry next?
About 40% of institutions within the financial sector have stated that they are working towards making their business operations more digital. With these improvements also comes an approach that focuses more on personalization and customization to services. Ironically, as the industry becomes more digital, advisors might find themselves relying less on computers and engaging with their clients directly.
Relationship with clients
Besides changing how the sector operates, the move towards digitization also affects how payment is made to advisory services. Within the next 10 or 20 years, it is expected cost for financial advisors will come down. The trend has steadily been going on for a long time and many consumers will start expecting zero-cost brokerages, zero trade commissions, as well as zero-cost investing.
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The move towards much lower-cost financial services is also expected to change the relationship between clients and their financial advisors. The balance of power that was once in the hands of the advisors will move towards the consumers. With this comes competition but it can also be an opportunity to build a strong client-advisor relationship where the priority is long-term planning in all stages of the client’s life.
Changing behavior with new technology
New technology is also predicted to change how investors do their business. They become more engaged when it comes to daily updates of their portfolios. This leads consumers to want products that are regarded as more premium. Consumers will want more control now that they have more time on their hands to focus on their investments with the aid of technology. This paradigm shift is not exclusively within the financial industry. Personalized experiences in platforms like Spotify and Netflix have helped set people’s expectations in all aspects of their lives.
It is important; therefore, that investors and lenders like DFW lending become more educated and work hard to build trust with their clients who are already quite engaged with the financial services they are receiving. Numerous websites that focus on educating people about the world of financial investments put consumers and investors on the same level. If financial advisors want to remain relevant with their well-informed clients, it is imperative that they build trust with those clients. Gone are the days when clients sit idly by listening to their advisors plan their financial future. It has to be a team effort or there can be no business between consumer and advisor.
What the future holds
With all these new changes and new technology entering the picture, people within the industry are already wondering what the future holds as the financial industry leans more and more towards digitization and as consumers become educated. Experts are saying that these changes will set in motion a sort of Renaissance where investments focus more on what people consider to be important in their lives. Advisors will be forced to take a more holistic approach when it comes to the services they provide and in their working relationship with their clients. Better technology will make it possible for this to be the central tenet of the industry.
Instead of calculating risk versus returns when it comes to investments, advisors will need to switch their attention towards the big-picture questions such as Does my client have life insurance? What is the best way to divide the wealth among multiple heirs? Where should they settle for retirement to get the most out of their savings?
The best financial advisors who are good at having these tough conversations will fair better. Being able to understand and empathize with their clients will play a crucial role in determining whether an advisor becomes successful or not. By taking the least human aspect of financial planning out of the picture – that is, the math, investment management, and rebalancing – advisors can become more human and spend the time answering questions only financial experts know how to answer.
Another factor that plays a role in changing how an advisor interacts with their client is the changing demographics. The shift means that as people start having children later in life, they also become more spread out. This means that as parents start planning for their family’s finances in their 30s and 40s; they do so in very different circumstances. All these are affecting things like wealth transfers and retirement savings and financial advisors need to be flexible with those shifts in such a way that they continue to offer a personalized service to each of their clients.
Personal finances and technology
Big names in tech such as Apple and Amazon have begun releasing their own credit cards. This only means one thing within the industry: more competition. There is an expectation that a subtle shift will happen where power begins moving towards giant brands and away from investment banks. There are some good things that consumers can expect from this power shift. For one thing, they can expect more security and privacy. These services will be able to provide consumers the option of creating virtual credit cards they can use for online accounts in order to reduce the risk of cyberattacks.
While these services might mean consumers don’t fall prey easily to hacking and cybersecurity attacks, they do little to change how people use financial services. In essence, all these new services and new tech hoping to radically change the financial industry is only doing minor shuffling of who holds power. Advisors and consumers are still on the same boat and using the same core financial philosophies.
It is true that technological advances and innovations are allowing financial advisors the freedom to focus on the bigger picture. This will make many advisors rethink the type of education and experience they need in order to be successful in the field. It is important to start considering what skills will be deemed valuable in the coming decade. Now that computers are taking over tasks that were once relegated to humans, knowing which aspect of advisory that can only be provided by humans is going to put experts ahead of the competition. Focusing on the needs of the client, empathizing with their situation, offering a personalized approach to financial advice is one of the myriads of things that could prove to be of extreme importance within the financial industry.