The financial services industry is bracing for the impact of "big-bang" disruption much like music, journalism, publishing , travel and retail before it.
Financial advisors have traditionally spent a large portion of their time in quarterly meetings with clients, preparing financial plans, and providing thoughtful and personal investment advice --either in person or over the phone. But a host of Silicon Valley startups contend that powerful algorithms and slick interfaces will render these human interactions obsolete.
We are entering the era of the robo-advisors, and much of the attention paid to this trend is attributable to millennials. As the first generation of true digital natives, they are the most likely to embrace digital-only financial services.
Research also suggests that the millennials view of the financial industry and its traditional offering are not to be trusted, admired or valued. A three-year study by Scratch, the in-house research and consulting division of Viacom, found that more than half of millennials don't see any difference between one financial institution and another. 33% believe they won't have any need for banks within the next five years.
The millennial preference for computer-generated financial services may not be the primary threat to the financial industry today, but it will be as this generation enters its prime investing years. Millennials are poised to become the largest generation of investors ever and they will demand financial allies who share their values: transparency, innovation and unlimited access.
Millennials are still in the process of acquiring wealth. They appear to be more conservative in their investments and more hands-on in their financial future than any generation before them. But as their financial situations become more complex--as they consider home ownership, starting a family or business or selling one that's taken off--their needs will quickly outpace what technology can offer.
Disruption is coming, but I do not believe it will obliterate the need for human financial advisors. Rather, the disruption will expose the industry's mediocre advisors for what they really are: slick salespeople who make up for their lack of sophistication with the gift of gab. Once the posers are out of the way, skilled and experienced advisors will be at an even greater premium than they are today.
Complex situations require on-going collaboration and engagement. Experienced financial advisors add great value the way other skilled service professionals work with their clients.
One of the key characteristics of a good financial advisor is the ability to listen to investors' concerns and address the underlying emotions that drive financial decisions. This trait is key to what makes the advisor-investor relationship worthwhile.
As William Gibson observed, "The future is already here. It's just not evenly distributed."
The future of financial services will involve a combination of the best of both worlds: the ease and simplicity of technology, coupled with the skilled and holistic human touch.