Human advisors need to double down on ethical practices, says group

In a newly issued report, the CFP Board Center for Financial Planning has highlighted the importance of working with transparency and a fiduciary standard among advisors as consumers become more comfortable with technology.

Composed of leaders in technology, financial services, and academia, the center’s Digital Advice Working Group has released its second annual report, which outlines predictions for some of the most probable outcomes that firms and individual advisors will deal with by 2021 as technology becomes more prevalent throughout the industry.

“As time moves on, the human plus technology model seems to be increasingly preferred by firms and their clients,” said CFP Board CEO Kevin R. Keller. “One thing that remains constant though is the desire by consumers to have holistic financial planning, which is delivered by competent, ethical financial planners.”

The group managed to reach a clear consensus about five areas in the future of financial planning:

• Consumers will be much more comfortable with a digital financial experience;
• Profit margins from investment management will decrease, though the extent of erosion is unclear;
• There will be greater transparency, resulting in a modest rise in consumer awareness and expectations for greater value at lower costs;
• A fiduciary standard will be applied to both human-led and digital advisory platforms; and
• The mass-market segment of the financial-advice industry will expand.

The report also noted five areas that the group couldn’t be certain about:

• Whether the industry will swing toward holistic financial planning or fragmentation of financial products and services;
• The actual degree of wealth transfer that would take place from older generations to Gen-Xers or millennials, given increasing healthcare costs and other variables;
• The evolution and capabilities of digital advice platforms into areas such as tax planning and portfolio management; and
• The impact of increasing cyber-security attacks on consumers’ and firms confidence in technology for the delivery of advice.

“Through the foreseeable future of digital advice, there will continue to be areas in which the human advisor excels,” the report said. “By doubling down on those areas where humans excel – sharpening soft skills, building deeper relationships, and expanding client networks – firms and advisors can increase their readiness to profit from this tech-enabled third wave."