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CFP Board: Advisor Adoption of Digital Tools Essential to Future Success

Fears of technology replacing financial advisors remain largely unfounded, but as digital advice evolves, advisors must adapt their tools and skill sets to meet increasing consumer expectations, according to a new report. Based on findings from the Certified Financial Planner Board of Standards’ Digital Advice Working Group, the report developed by Heidrick Consulting maintains that financial advisors will remain the primary source for the delivery of advice, but clients increasingly expect technology to be part of the equation.

According to the report, the findings reflect the notion that consumers want an integrated solution when getting financial advice as part of a “digital financial advice ecosystem,” which revolves around five segments: technology, consumers, regulation, firms and advisors. Each segment is important, but together they make up for what the group believes is the future of financial advice, the authors explain.

“Clients expect and deserve a human-powered, digitally-enabled solution to their financial needs,” notes Kevin Keller, CFP Board’s Chief Executive Officer. “Financial advisors who utilize technology as a tool in the client-advisor relationship can differentiate themselves and create more meaningful, deeper conversations and longer-lasting relationships that produce better outcomes,” Keller adds.

Digital Ecosystem

To that end, the findings anticipate a future where technology is much more scalable, accessible and useful, such that consumers and advisors will be “connected through a seamless digital experience.”

Consumers will expect to have access to technology to make informed decisions and track their accounts. Financial plans will live in the cloud, where they can be accessed anywhere at any time from any device. Moreover, many financial advisors may never meet their clients in person, but will often connect through digital channels such as video conferencing, texting and social media.

At the same time, most working group members believe that advisors will remain the “primary conduit” for providing financial advice to clients even when fully automated solutions exist. Consumers will increasingly recognize that they need the help of a financial professional to provide context and help them understand the impact of their financial decisions, the findings suggest. Still, the report cautions that, “How clients will respond to those services is still highly uncertain, as is the effectiveness of digital tools vs. a human adviser in effecting the actual behavioral changes that lead to financial health.”

Meanwhile, as virtual delivery becomes increasingly commonplace, advisors should be mindful of blending their technical and interpersonal skill sets. To more effectively deliver advice digitally, the report suggests that advisors can adjust their “virtual presence” as to how they communicate on screen, as well as when and how they utilize digital tools to more closely mimic face-to-face interactions.

Decumulation Services

One area of opportunity identified by the working group was decumulation, particularly as an aging population drives the need for more effective decumulation services. The report cites research from FINRA revealing that the majority of digital advice providers currently do not independently address decumulation and that virtually all digital advice providers believe that some level of human involvement is a necessary component of such services.

The group reportedly did see some digital platforms for advisors and investors beginning to help users work through the complexity of decumulation by providing a more holistic view of financial health – via account aggregation, investment management and cash flow analysis – but the group urged caution.

“Before scaling decumulation solutions to the mass market, the working group felt it imperative that these approaches be ‘beta tested’ and that a common framework and approach for decumulation be developed,” the report states.