The Blurring Lines Between Fintech and Financial Advisors

By Mike Sha, CEO and Co-Founder of SigFig

With the fluctuating markets on everyone’s minds, white-glove financial service and advice is more important than ever. Advisors and bankers want to assuage investor concerns and deliver the best customer experience possible.

But as investors become more tech-savvy and, therefore, more discriminating about digital experiences, wealth management providers are under increasing pressure to augment their human expertise with technology to help them stand out from the competition.

As a result, there’s been a blurring of lines between human advised investing and self-directed investing enabled by technology.

According to a Javelin Strategy & Research report, almost half of advised investors also have a self-directed brokerage account. In years past, advised investors would typically lean on their advisors and embrace the set-it-and-forget-it approach. Now, many seem to want active involvement in their wealth management. This shift is predicted to pick up speed, driven by the evolution of fintech and the everyday retail investor.

The Rise of Fintech and a New Breed of Retail Investors

Fintech is so firmly ingrained in financial society that it’s now practically ubiquitous. According to Javelin’s research, close to 90% of US consumers relied on technology to manage their finances — a massive 52% increase compared to 2020.

In fact, fintech is now more prevalent in terms of usage than video streaming services (78%) and social media (72%). To put that another way, there’s a better chance that someone has a fintech app on their smartphone than a social media app (although they likely have both).

Of course, the pandemic played a key role in accelerating adoption of fintech solutions, but it is proving to be more than a temporary trend. Anywhere from 80% to 90% of existing fintech users expect to continue utilizing fintech for money management across all use cases (e.g., banking, investing, paying bills, etc.).

The proliferation of fintech solutions has engendered a new generation of tech-savvy investors, who Charles Schwab has dubbed “Generation Investors” or “Gen I.” These investors may be inexperienced, but they represent an estimated 15% of the market. In fact, 94% of Gen I want access to information and tools so they can perform their own research — but 82% are open to working with an investment professional who can provide ongoing help and guidance.

What’s The Future of Human Financial Advisors?

In other words, just because investors are relying on fintech more doesn’t mean that they don’t depend on human financial advice as well. They’re not mutually exclusive. The vast majority of investors — regardless of age, experience, and advisor usage — seem to appreciate the value and skills of financial professionals.

According to a Charles Schwab survey, 78% of investors thought financial professionals were better at giving financial advice than technology and 72% thought financial professionals were better at understanding their entire financial situation.

In a recent Accenture study, just 17% of respondents preferred a “completely digital means of receiving and processing financial advice.” The need for human advisors hasn’t changed; what has changed is the expectations that today’s investors have for their overall experience, and that is due to the larger role that technology is playing in wealth management.

Instead of asking investors to choose between human service and fintech– making it an either/or situation– financial advisors and fintech need to work in tandem to elevate the overall investor experience.

Rather than treat fintech as an adversary, wealth managers need to understand how and accept that technology can help them do their jobs better. At the same time, fintech developers need to realize that layering on human touchpoints to their technology can deliver a superior experience for the end user.

The Benefits of Remote Engagement

One way that advisors and banks can maximize the blurring of lines is by creating remote customer engagement experiences. This happens when information and experience can be combined into high quality screen-based interactions. When financial institutions use technology to make sure that all of their customers are getting the same quality and consistency of advice, regardless of the human leading the conversation, customers and advisors both win.

By incorporating third-party digital tools, especially those that deliver remote engagement, advisory platforms may plug holes in the investor experience and increase efficiencies. In addition, these tools may also uncover a trove of client data, which advisors can use to improve client relationships and assess their business and operations.

For all of these reasons, the blurring of lines between advised and self-directed advisers is a positive step forward. It provides today’s financial advisory professionals and fintech developers with a clearer understanding of what modern investors expect from their experience, which is especially integral given current economic uncertainties.

Financial providers that fail to adapt alongside tech innovation will inevitably be left in the digital dust. Likewise, if a financial institution’s digital platform underdelivers, investors likely will look elsewhere. But when humans and fintech work together, they can create the type of frictionless experience all investors are seeking.