Product chief at Morningstar talks adviser technology and the holy grail of financial advice

Data carries great potential for financial advice — but also a threat

Apr 15, 2019 @ 2:52 pm

By Greg Iacurci

Tricia Rothschild has the big job of overseeing strategy and development of Morningstar Inc.'s products for advisers and investors. The chief product officer is also intimately familiar with the advisory business, having previously served as head of Morningstar's Global Advisor Solutions and its Advisor Software business unit.

InvestmentNews sat down with Ms. Rothschild to get her take on the current state of adviser technology and its future outlook.

Greg Iacurci: What's your view on the current state of financial advice from a technology perspective?

Tricia Rothschild: I think we're very clearly at an inflection point in terms of an acknowledgment and understanding that a fully integrated human advice and technology-powered model will lead to better investor experiences, more efficiency for the adviser and more scale in a competitive market environment. I think there's a broad understanding that that's the case. I think we have yet to realize the full potential of how that will actually work in practice.

(More: Morningstar improving bond fund data reporting)

GI: Where's everything headed? What does the future look like?

TR: The ideal state in my mind is the intersection of really high-quality and comprehensive investment product data; really strong analytics and tools that help investors and advisers understand what's going on in their portfolio, which is obviously a combination of those investments, along with data about the investors themselves.

(More: Customized advice coming to households near you)

That's the holy grail: to make everything really relevant and personalized, to integrate all three of those things, so that advice is relevant and personalized and can be delivered at scale and in a way that really helps facilitate what the end investor actually needs.

GI: How will all of this come together?

TR: I think of the future as more of a choose-your-own-adventure type of model. From an investor's perspective, let's say I'm going through a divorce and I don't know how to manage my assets, so I may need point-in-time advice — not necessarily an ongoing relationship with a financial adviser, but I need someplace to go to get some support for that life moment. There should be a model for that.

Or let's say I' m a different kind of investor — I own a small business, have a family and am raising kids, I'll probably need more support from a financial professional on an ongoing basis. So that may be a different type of model.

(More: Financial advice increasingly technology-enhanced)

I see evolution in the advice-giving and evolution in the business model that supports the advice-giving. The experience is by definition a more digital experience than it has been in the past.

GI: What would you say is the biggest threat to advisers from a technology standpoint?

TR: Probably one of the biggest challenges gets back to the data. Data is not the same as information. In order for the data to be meaningful, you have to be able to extract information from the data.

It's great that there are many, many technology providers and data can go more places. But if the data's not in sync or you don't know where it came from or how it got there, and which data points are defined in the same way and which have some differences to them [it's a problem]. For example, if we have Product A and Product B, and we source the data for Product A from one point, and the same data point for Product B we source from another place, they might not match.

When you're working with multiple other vendors, you can imagine how complex that can be. If there's not really strong data [consistency], the conclusions you draw will be less rigorous and potentially flawed. The technology can be great but the data in it needs to be at the very least consistent.

GI: Will financial advisers be disintermediated by technology?

TR: It's probably a little more nuanced than that. There will always be a role for some sort of adviser for some sort of investor. The industry in the past, and largely to some extent still today, has a one-size-fits-all human advice model. In general, it's kind of the same advice model for a very similar fee structure regardless of who you are. And that has a lot of limitations.

It was fine in the sense that there wasn't another way to do it. Now that there's more personalization and scale driven through technology, I would fully expect certain, more complex investment situations or investor circumstances requiring and really valuing human interactions. I would anticipate certain life stages with a human conversation or support or coach. I would also envision lots of people where every once in a while they'll call for professional help. I think it's a little more circumstantial.

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