The world of financial planning is set to alter dramatically over the next few years. We are now firmly into the technology age, so what does the future hold for our industry?
We have already started to witness massive technological disruption, where whole industries and professions are being wiped out. The likes of Uber, Google, Facebook, Apple, Tesla and Airbnb are sweeping all those before them. The changes are dramatic and fast.
The threats to the financial planning profession are numerous and I am concerned that most firms are seriously underprepared for when this technological disruption hits us as well.
For many years I have felt that we in financial services have been badly served by technology. Even now, we are still at only around the mid-1990s stage. But that is all about to change dramatically, and virtually overnight.
Most practitioners I come across are complacent about the changes that are coming. Indeed, it shocks me how far behind the times they really are.
For example, I recently attended a workshop where only 10 per cent of the IFAs also in attendance confirmed they use cashflow planning software. A similar number said they had their own centralised investment proposition.
I simply do not see how you can practise financial planning without some form of cashflow planning service.
As for the many financial planning elitists in the Institute of Financial Planning and the Kinder Institute who religiously believe that asset allocation using a passive investment strategy is the only game in town, they really have no idea what is going to happen next.
It is time to wake up to what is really happening and what clients really want.
For starters, asset allocation is doomed for the next 10 years. All four main asset classes (equities, bonds, property and cash) have poor prospects for differing reasons.
As far as I am concerned, it is our duty as financial planners to get the best possible returns for clients based on their attitude to risk.
Asset allocation using the four traditional asset classes is just simply not going to cut it over the next 10 years.
As for the debate around passive or active investment management, it is, quite frankly, irrelevant. Neither strategy will work if you practise asset allocation. All financial planners must embrace the disruptive technology around us and adopt an attitude of “if you can’t beat them join them” in order to succeed.
This is why our company will soon be launching both a virtual advice and robo-advice proposition to the market in addition to our existing face-to-face proposition.
We will, at the same time, become paperless, making the most of the many fantastic tools available to us today.
If you wish to survive the technology age, I urge you all to rethink your propositions and embrace the changes. Not only will you survive but you will thrive, too. Good luck to those of you who boldly go for it.
Tony Byrne is financial planning director at Wealth And Tax Management and author of Wealth Magic