Utilizing Technology To Strengthen Relationships in Financial Planning

In April, I will have the chance to moderate a panel discussion, Future Digital and Technology Needs for the Financial Services Profession, at the 2018 FPA Retreat.

My panelists and I will discuss the future of advice and we are tasked with helping those in attendance understand how to be more empowered by technology, and how clients will be able to engage advisers as they want (robo, chat, in-person). In addition, the panelists will discuss how – with more integrated and modern technology on the horizon – linking prospecting to planning (including trust), to investments (including direct indexing), to reporting will be critical.

And in preparation for my role as moderator, I started reading FinTech Innovation by Paolo Sironi, who is a global thought leader for wealth management and investment analytics at IBM. Here’s a short recap of what I learned from reading the book.

According to Sironi, innovation is the rationale that links disruptive technology (robo-advisers and automated rebalancing) and sustaining innovation (goals-based investing and gamification). And today’s disruption is threatening a variety of market participants and goes beyond the fate of human advisers.  Sironi writes that digitization lowers the barriers to entry and reduces intermediation margins, but goals-based investing allows us to personalize and differentiate the investment offer to increase revenues, and thus calibrate to the clients’ requirements by means of social and behavioral analytics.

Sironi notes robo-advisers (I prefer to call them robo-investors) have five main attributes: They are automated digital businesses, the promote passive investing, they provide automated portfolio rebalancing and tax optimization, they engage customers on personal goals and behaviors, and they are single-minded business.

Sironi did note, however, that tech-savvy financial advisers can use indexation and robo-technology to their competitive advantage. The can use algorithms for alpha and focus on gamma tasks. “Financial advice and financial planning begin to converge, as goals-based investing leads the way,” he wrote.

What about the demand side? Sironi notes that different generations interact differently with digital media and that financial advisers can learn to optimize their practices by tiering the clientele on digital and goals-based groups (disposable wealth, personality and techno-literacy).

The key to solving the dilemma of the wealth management industry, according to Sironi, is the personalization element, which is why those who will succeed will use robo-technology to facilitate a holistic goals-based investing approach to financial well-being.

According to Sironi, goals-based investing is the ultimate step in personalization within the journey of wealth management innovation; it sits as the crossroads between classical portfolio theory and behavioral finance.

And lastly, Sironi examines the topic of gamification, which provides a chance to support a behavioral finance effort to rewire investors’ brains towards a sounder investment management, by means of exposing them to gamified investment experiences.

As for how all this plays out in the retirement/401(k) space, Sironi sent me this article: Robo-Retirement (Dynamic Retirement Planning): what Robo-Advisors and traditional WM should do.

“Basically we need to change quantitative methods underneath asset allocation processes, not because simulations are “perfect” but because they help to build a heuristic which starts from an agnostic point of view that enables to transfer knowledge to investors and face accumulation and decumulation problems,” he ways. “These problems are larger than sole investing, therefore we need a framework that encompasses the whole financial equation: earn – pay = save + invest + lend + borrow + insure + retire + donate (in which + is a purely logical operator).”

Over the transom

Women & Financial Wellness: Beyond the Bottom Line

In April, Merrill Lynch released a new study, Women & Financial Wellness: Beyond the Bottom Line. Based on a nationwide sample of 3,707 respondents, the study explores women’s fundamentally different life journeys as compared to men – and the significant and measurable financial ramifications. It also examines the less commonly discussed gender wealth gap – or the total difference between men and women’s financial resources over their lifetimes. Today, the average single woman has three times less wealth than the average single man.

Key Insights from the study include:

  • Navigating a fundamentally different – and financially complex – life journey. Women face rippling financial challenges throughout their lives due to factors like living longer, workforce interruptions and the lasting pay and career impacts, and greater lifetime health costs.
  • The $1 million gender wealth gap, including a look at how the pay gap compounds over time when accounting for common workplace interruptions.
  • Beyond the bottom line: Women see money through the lens of their values and goals – and investing as a way to advance causes that matter to them.
  • Investing challenges and regrets. Women say not investing more is their top regret, a challenge exacerbated by lack of education and confidence.
  • Solutions for closing gaps and improving women’s financial wellness, including the need for more education and guidance tailored to a woman’s personal life path. This comes as financial planning models currently default to men’s salaries, career paths and life spans.

Prudential Retirement Offers New Skill for Amazon Alexa

Retirement plan participants can now ask Alexa for retirement account information they commonly get through participant websites. https://www.plansponsor.com/prudential-retirement-offers-new-skill-amazon-alexa/

April is Financial Literacy Month and a great time to focus on financial education.

A lack of financial preparedness has huge societal costs, and in the coming years as Americans age, these costs will likely increase. There are daunting challenges facing not only the poor but also the working middle class. In the face of flat real wages, structural unemployment, a high tax burden, and higher health-care costs, it is becoming more difficult for millions of Americans to find extra income to save at the end of the month. In addition, many don’t understand the enormous commitment a self-financed retirement entails. Read the rest of the article at Forbes

Worth reading


EBRI’s 83rd Policy Forum will be held on May 10 in Washington, DC. Expert panelists will discuss a variety of topics, such as:

  • The Intersection of Wellness and Financial Wellness
  • Exploring the ‘Gig Economy’ and the Future of Benefits
  • Student Loans: Is it Time for Employers to Step In?
  • Fireside Chat: Word from the Legislative Front

Click here to view the agenda.