Fort Myers Florida Weekly

The HUMAN TOUCH

AI-powered financial planning still falls short



AI-powered financial planning still falls short

AI-powered financial planning still falls short

The pivotal role technology plays in financial planning today cannot be overstated. It has allowed planners to serve their clients more efficiently and enhance their business. Broadridge’s 2023 Digital Transformation and Next-Gen Technology Study found that 57% of financial services firms agree that digital transformation is their most important strategic initiative. Advancements in technology have made it possible to automate parts of financial services, such as risk management, performance reporting, rebalancing, and client communication. As a result of these improvements, clients are kept well-informed about their investments. In sum, technology helps simplify investing outcomes in tangible ways and provides speed and accuracy in the process.

But what about the human element in financial planning — the planner’s role? Has technology’s emergence in the industry lessened its importance? Not one bit. In fact, the advisor’s interaction with the client is more important than ever.

Tech strengthens the advisor-client relationship

More and more, advisors are using technology to improve and grow their businesses. They recognize that better client relationships result from an investment in tech because it modernizes their operations, which next-gen clients in particular expect.

Online portals and mobile apps enhance client engagement, providing clients easy access to their investment portfolios and other pertinent financial information. This enables streamlined communication between client and advisor and the building of trust, which is critical to ensure a lasting relationship. Clients expect regular and personalized communication from their advisor. Keeping them informed about their investments, performance, and changes to their portfolio builds trust as the advisor demonstrates they’re working in the client’s best interests.

It’s all about a client-focused experience. Investors increasingly want such an experience because they demand transparency on how plans are developed and financial advice is determined, what the fees and risks are, and how the reporting gets done.

Leveraging the human element

Financial technology is a tool to leverage, not something that can replace human interpretation. It allows planners to spend time creating customized financial plans instead of spending extra time gathering data and crunching numbers.

As much as investors like the technology that makes the process more efficient, they don’t want to trust their financial futures entirely to technology. For one thing, planners will be important in helping make sense of the technology. And for another, tech can’t think, empathize and communicate like advisors. For example, some financial services firms are offering automated financial planning using artificial intelligence to provide advice based on a client’s current financial situation. But AI-only financial programs can’t build lasting relationships with investors.

Those programs lack the ability to respond to an investor’s specific needs.

Advisors who best connect with their clients will work with a combination of tech-savvy and analytical thinking. Experienced, well-trained advisors know how to navigate the complex terrain and the resulting complicated conversations with investors. They know what questions to ask, and they can make observations regarding the client’s mood that robots aren’t equipped to make.

And in a world filled with uncertainty, the advisor’s role in terms of risk assessment is crucial as ever. Expectations are vital — especially for those investors at or near retirement. It can be frightening for someone who reaches retirement and needs to begin spending their savings at the same time the market takes a downturn. In the wake of the 2008 market crash, and highlighted again with last year’s pullback, the anxiety associated with ensuring your nest egg outlasts you has been well documented.

Every person’s financial situation is different. Getting the best financial advice means getting personalized attention from an advisor, not just numbers technology churns out. Clients need someone who understands them and can tell them what the numbers mean, currently and for their future. Advisors who embrace the technology — and don’t look at it as a threat to their livelihood — will provide their clients with the best experience. They will also make the human touch more impactful, leading to a long-term productive financial future for their clients and a winning relationship.

About the author

David Johnston is the managing partner of Amwell Ridge Wealth Management and a Certified Financial Planner. He built the firm around the fundamental belief that a proper financial plan begins with risk management, then infuses innovative, enhanced diversification within an investment portfolio. ¦

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