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The future is here: What it means for Investment Planning

*This content is brought to you by Carrick Wealth, leaders in wealth and capital management

By Craig Featherby*

Looking forward: seeing what is coming

Craig Featherby
Craig Featherby, CEO, Carrick Wealth

Listening to leading futurist and CEO of FutureWorld SA, Neil Jacobson, speak at our Annual Carrick 20/20 Conference, I (and I’m convinced the rest of the room) was fully immersed in the transformed future landscape he was sketching. As Neil was speaking, the future came to life for me – I could picture myself living in this new, technology-driven reality. The typical executive is so easily engrossed in the day-to-day necessities, the here and now, that they spend a clear majority of their time looking back and trying to understand yesterday; last week, last month, last year. This leaves little time left to look at what’s coming.

We need to remain relevant or fall behind

Listening to Neil, I was reminded of the saying that, day by day, everything appears to be the same, but when you look back, everything has changed. This led me to thinking about the financial services industry and how we run the risk of waking up in a transformed world one day if we’re not vigilant. It’s easy to be lulled into an illusion, thinking that there is still time to prepare for the future; the truth is, if we apply this thinking, we will fall behind. The reality is that the new, technology-driven reality is already here. Just this weekend, I watched an insert aired on a leading international news station confirming how the (international) market is already driven by robo funds, with a particular rise being seen in Artificial Intelligence (AI) equity funds.

Connectivity

As I touched upon in my own speech at our 20/20: Opportunity Africa conference, connectivity is at the heart of the changes we are seeing. Technology and connectivity will continue to enable us to do amazing things. One interesting aspect of connectivity as seen in the financial services industry itself is the possibilities of robo advice. Robo advisers arrived on the financial services scene with the launches of Betterment and Wealthfront robo advisors in the United States during 2012 and 2013. In South Africa, three services that can be categorised as robo advisors have launched since 2015, although none of the larger asset management players have entered the space yet; however, the trend is set to catch on quickly. With the click of a button, investors can approve the transaction from anywhere as long as they have an internet connection: this concept appeals to the tech savvy and informed investor of the future in particular – always connected, wanting to complete tasks in as short a time as possible in order to focus on life itself.

The Investor of the Future

This brings me to another thought – who is the Investor of the Future? The millennials now entering the market are the consequence of connectivity; a tech savvy and financially literate generation, highly knowledgeable about investments and informed of systemic risk. The direct result is an investor who demands transparency, real returns and convenience. Being well-informed, this investor is known to be generally distrustful of investments and advice fees. It is our collective duty to restore trust in the financial services industry – a task Carrick takes on with fixed focus, leading the way in helping create and build a viable and trustworthy culture.

Take a recent client as case study. This client came to us with a rich and individual financial history, and very specific retirement objectives. At the time, she was losing an exorbitant amount of money on monthly fees. After thoroughly reviewing her financial position and investments, Carrick could cut her monthly costs by more than half. This is possible by applying a wealth of our human industry-targeted knowledge in conjunction with using an Artificial Intelligence Robo Fund. Another differentiating factor is our unbiased advice: through our partnerships with specialist providers in the financial services industry, we truly recommend only the best option to suit our clients’ needs. It is through experiences like these that we will rebuild trust in the concept of financial advice and the industry as a whole.

The Human Financial Adviser

Where does robo advice leave the human adviser?

Each investor has different dreams, desires and retirement objectives. When it comes to matters such as tax efficiency planning, consolidation of portfolios, succession planning and so forth, a human adviser is still better at understanding that an investment life plan needs to be tailored to complex requirements, understanding that such requirements can’t always be reduced to a simple algorithm. Human advisers (the good ones, that is) excel at reading subtle yet crucial emotional and qualitative cues and explaining analysis clearly, whereas a robo adviser is limited in identifying, interpreting and applying these nuances in providing investment advice. This is also why, despite the growth of robo advice firms internationally, it’s unlikely that robo advisers will completely replace humans. A robo adviser might have the perfect quantitative algorithm available at the touch of a button, but it doesn’t necessarily understand human emotions, missing the rich qualitative side.

No one size fits all investment plan

In conclusion, financial advice is rarely a one size fits all plan. For some clients, a technology-only solution will be the perfect fit. Research however suggests that the majority of investors still prefer to deal with a human adviser on important matters impacting their financial future. Most individuals find it very difficult to make long-term financial decisions in an uncertain environment without consulting another human being. It will take a long time, if ever, for technology to surpass advisors in their critical role as financial coaches and counsellors.

Lying ahead of us is a completely different reality, requiring a unique way of doing things. Although at times unnerving, true growth demands change. How both financial advisers and investors respond to this change is a matter of choice; however, those willing to embrace technology will evolve and be well-positioned to move ahead in a new era.

  • Craig Featherby, Chief Executive Officer, Carrick Wealth
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