MyVest recently participated in an advisory group formed by The CFP Board Center for Financial Planning. Charlie Haims, VP of Marketing, represented MyVest on their Digital Advice Working Group, a wealth management industry focus group comprised of advisory firms and service providers who meet annually to produce collective insights on the key issues driving the future of digital advice.

The group originally published The Future of Digital Financial Advice report in 2016, which put forth a vision for what wealth management would look like over the next five years (2016-2021). The report revealed myriad scenarios in which technology will change how advisors and firms work with their clients.

While the group came to many conclusions on the future of digital advice, they also identified nine “key uncertainties” to monitor and evaluate over time:

  1. Consumer Comfort with Digital Financial Advice
  2. Changing Profit Margins in Investment Management
  3. Transparency for Consumers
  4. Fiduciary Standards
  5. Growth of the Financial Advice Market
  6. Consumer Demand for Holistic Financial Planning
  7. Implications of a Wealth Transfer to Gen X/Millennials
  8. The Capabilities of Digital Advice Platforms
  9. Cybersecurity Impact on Consumer Confidence

5 Areas of Clarity

When the group met again in late 2017 they found they could draw clear conclusions around these five issues:

  1. Consumer Comfort with a Digital Financial Advisory Experience will be much higher than it is today
  2. Profit Margins in Investment Management will decrease, although the extent of margin erosion is unclear
  3. Greater Transparency in the Industry will lead to a modest increase in consumer awareness and drive demand for greater value at lower costs
  4. A Fiduciary Standard will be applied equally to both human-led and digital advisory platforms
  5. The Market for Financial Advice will expand in the Mass Market segment

The clarity around these trends points to the movement consumers will demand greater transparency and a fiduciary standard when working with both human and digital advisors.

Uncertainty Remains

However, these four issues remain uncertain and will continue to be monitored:

  1. Consumer Demand for Holistic Financial Planning Advice: The discussion here bifurcated into two different scenarios. Will consumers press for integrated and comprehensive advice or will they allow advisors to maintain fragmentation of specialized services and products?
  2. Implications of a Wealth Transfer to Gen X / Millennials: The group couldn’t confidently assert that a significant transfer of wealth would occur in the next four years, and therefore questioned the degree of influence this generation would have in the very near future.
  3. The Capabilities of Digital Advice Platforms: While there is no doubt that digital advice platforms will expand into other areas of investment management by 2021, the group was undecided on how quickly they could innovate and expand to offer other services such as tax optimization, estate planning, etc.
  4. Cybersecurity: While it is a near certainty that cyber attacks will continue to be a top issue for any financial service firm, professionals remain unsure of the consumer response and how it may or may not impact consumer confidence in using digital advice platforms.

Read more about the 2017 Digital Advice Working Group’s findings.

Preparing for the Future

With this is mind, what can advisors and their organizations do today to prepare for the future? Put simply, it’s to adopt a philosophy that requires a total commitment to fulfilling the needs of your clients. Wealth managers need to embrace technology’s ability to simplify nuanced processes and bring their focus to delivering a holistic, highly personalized customer experience.

The report’s conclusion notes that the human advisor will still play a key role as we enter the “third wave of the robo revolution.” Firms that commit to providing a “high-tech, high-touch” experience and empower advisors to leverage these technologies to their potential will be most successful in servicing the next generation of wealth.

MyVest is proud to have a seat at the table at the CFP Board’s Center for Financial Planning working group, and honored to be working alongside other industry influencers dedicated to understanding the potential future evolution of digital financial advice. As our work with them continues, we look forward to sharing the outcomes of these important discussions with our valued clients and partners.

Learn more about the The CFP Board’s Center for Financial Planning. View the full list of contributors to the Digital Advice Working Group.