Digital services must adhere to core fiduciary principles

“Investors tend to see financial advisers and digital investment tools as complementary.”
That innocuous statement from a May 2015 Wells Fargo/Gallup survey packs quite a bit of power when it comes to how advisers should be thinking about bringing digital and personal advice together in their practices. Investors don’t want to choose between digital or personal advice. They want both.
In fact, the survey found that only 9% of investors want to get their advice entirely online or digitally, while 23% prefer to rely exclusively on a personal financial adviser. Over two-thirds of investors want both. While there are differences between younger and older investors, both groups strongly favor using both personal and digital advice. Moreover, the desire for a strong client-adviser relationship dominates the allure of digital advice across age groups.
Advisers who can successfully incorporate digital investment tools into an client-friendly customer experience will surely stand out in the crowded market of advisory services. To construct a successful hybrid model, advisers should be thinking about the human and computer interfaces they have with clients in at least four key aspects: access, consistency, literacy and trust.
Access involves what tools and people the advisory firm will make available to clients. The Wells Fargo/Gallup survey found that the top three digital investing tools of interest to investors:
1. Help the client review and make changes to existing investment accounts.
2. Provide long term planning assistance.
3. Perform retirement calculations.
All three of these types of tools were found to be of interest to at least 50% of all respondents. A tool described as providing “an automated investment advisory service that uses computer-based portfolio management” (the main feature of most robo-platforms) was of interest to one-third of the respondents. It is noteworthy that “household budgeting tools” had a higher interest rating. These results may suggest that advisers should step back from the current industry fixation on digital portfolio management capabilities to think about what digital service offerings investors may find most useful and how investments can be put into a more practical context.
The survey found that having a strong relationship with an adviser is much more important for most people than having access to state-of-the-art tools. By extension, hiring decisions are even more important than decisions about spending on new tool capabilities. Sophisticated analysis doesn’t necessarily resonate with clients unless it is delivered by trustworthy and competent professionals who are also skilled communicators capable of bridging the gap between humans and technology.
Consistency requires that client-computer interactions and client-adviser interactions are well-aligned. Not only must the client experiences be positive in both types of interactions, they should mutually reinforce the defining qualities of the firm. Investment philosophies, processes, nomenclatures, branding, culture and virtually every other core characteristic of the firm should be consistent across the dimensions of digital and personal interactions.
There is a whole field of research dealing with human-computer interaction that is based on the premise that, unlike human interactions with mechanical tools, human interactions with computers are so varied that they are much like human-to-human dialogues. That notion helps bring into focus the need for consistency between the complementary digital and personal services of a business.
Literacy becomes an important consideration because the extent to which a tool will be of interest and helpful to an investor depends in large part on that person’s financial literacy. This may help explain why in the Gallup survey relatively straightforward tools that provide account access, retirement calculators and household budgeting capabilities were of interest to more investors than complex applications like portfolio management.
A particularly interesting survey finding is that online financial planning education models were fourth on the highest interest list. It seems that people recognize that they are limited by their level of financial literacy and would like to raise it. If an adviser can provide fundamental financial education that is easily digestible and explains how the tools and advice offered by the adviser work for the investor’s benefit, it is likely that the client-adviser relationship will be strengthened even though the client’s demands on the adviser’s time may be reduced.
Finally, trust is at the heart of all client relationships. Trust involves confidence that, regardless of how the advice is delivered, it will be objective, serve the client’s best interests and be based on sound professional practices. Trust is also grounded in the client’s expectation that their personal information is secure. Services delivered digitally must be built with these core fiduciary principles embedded in the technical specifications, just as advisers must hardwire fiduciary principles in their direct interactions with clients.
Blaine F. Aikin is president and chief executive of fi360 Inc.