We are starting to see the signs of a major technology shift in wealth management that is being driven by two factors: automation and augmentation.
Automation refers to the replacement or total disruption of human tasks and processes, while augmentation is about enhancing human expertise — such as creativity, empathy and trust — with technology that makes advisors more efficient and valuable.
In a recent report, Accenture estimated that by the year 2025, up to 10% of all activities in financial services will be automated and up to 48% of those activities will be augmented by technology, unlocking up to US$140 billion of value in the North American financial services industry.
The study goes on to state that the overall impact of technology on the industry may not be job losses, but job creation. World Economic Forum’s The Future of Jobs Report 2018 also predicted that overall jobs lost to technological advances may be offset by job gains, and this shift will also see a significant change in the skills and roles of humans.
In recent columns, I have talked about the hybrid advisor – one of several terms used to describe a human advisor who is augmenting her practice with technology. It is interesting to note that in the Accenture report, technology augmentation (vs automation) represents more than 80% of all technology benefits anticipated in the next five years.
Advisors who are concerned that technology will disrupt their businesses are missing the point completely. While it may be counterintuitive, introducing digital technologies to your clients will actually create a stronger human connection. The vast majority of investors will not use technology to replace their advisors; they want to leverage technology to interact with their advisors in more meaningful and convenient ways.
An example of technology augmentation is using a digital dashboard to support the advisory process, with notifications and alerts on key product changes within a client portfolio. This way, as you prepare for a regular client account review, you can easily gather all the relevant data while saving time preparing for the meeting.
Clients increasingly expect a transparent view of all relevant data impacting their portfolio, and tech-savvy advisors understand that leveraging technology will enable them to professionally manage these expectations and ultimately build a larger client base.
Another interesting finding in the Accenture report is that the industry is shifting its recruiting focus from purely STEM (science, technology, engineering and math) qualifications to more humanities-based skills referred to as HEAT (humanities, engineering, arts and technology). This shift in recruiting strategy aligns with the anticipated growth of technology augmentation. One of our clients refers to their advisors as providing EQ, or emotional intelligence, while technology solutions provide IQ.
Our industry is entering a new era where product complexity, regulatory demands and clients’ digital expectations are all increasing. While these shifts create challenges within the industry, it is comforting to note that the vast majority of investors value human advice as much as ever. Augmenting that advice with technology will future-proof the hybrid advisor.