I gave an interview [warning: italian language!] some time ago about portfolio management and hybrid advisory in the future of financial planning. I want to add some further food for thought, via stream of consciousness.
Hybrid Advisory: Human Touch vs or with Digital ?
Hybrid Advisory is the missing link between old-style human touch only based financial services and the rising wave of the new digitally automatised robo-advisors investment services. The former needs to add digital capabilities and automation services to meet the expectations of the rapidly growing number of digital investors of any age. The latter will face soon the limits of a pure digital offering where customers do not have a counterpart they can talk to, get an answer to their concerns, get a feedback on their market views, get a strong personal financial planning service. A pure digital offering today fails to capture the unique personal situation of each investor. So both kind of investment services, to create value, will have to extend their offering either on the human or the digital side, and this means essentially going hybrid !!
Depth vs. Breadth
In the end, every client is unique in his or her deepest needs. This translates in very practical issues for machines and humans: we want to assess the client as deep as possibile (saving capabilities, family planning, real estate ownership, etc.) and, meanwhile, do that on as many clients as we can. Roboadvisors are good to scratch the surface of financial planning on many people; humans can assess a person’s financial health very accurately, but fail to replicate the process quickly enough. A hybrid financial advisory model can reasonably either go deep and do it on a large customer base by reducing the cost of the human touch and make ti more scalable and digital investors oriented.
Computers Are not Conquering our World (Soon)
Computing architectures have gone through immense progress in the recent past, to get seemingly impossible achievements, like calculate either the number of legal Go game positions or quasi-infinitely big prime numbers (on which such a big part of Internet security depends). Roboadvisors are possibly going to add depth analysis to their capabilities, but this is not happening in the short term. Maybe five or ten years, perhaps.
Global vs. Local
The real world is way less standardized than we tend to think, when we think about financial planning. Inheritance taxes, just for example, are vastly different across Europe, not to say the world. Roboadvisors that want to go global simply cannot cope with all the complexity tied to every local parameter of the real world.
We Know What’s Going On
We don’t see roboadvisors as a threat at Objectway; we don’t compete as financial advisors and we work considering them simply one of many opportunities. Where we need local expertise about regulations, we establish partnerships with meaningful players in a specific country, or niche. Our role is to empower financial services across the world via development of powerful digital platforms and software. And I guess we we’ll have even more business opportunities to pursue as the financial advice world, one step towards human, one step towards machine, goes hybrid.