If a GPS app can fail, so can fintech

Indispensable advisers know how to overcome the three biggest pitfalls of technology.
OCT 09, 2017

I recently read an article from the Philadelphia Inquirer about an 18-wheeler that drove several miles down the pedestrian-only Boardwalk in Atlantic City. The driver was following instructions of his onboard navigation system which had the boardwalk designated as a street. After passing several stunned onlookers, the driver found himself stranded and his tractor trailer had to eventually be dismantled and a berm built to get it off the boardwalk. In this case there were no damages other than confusion. It's an amusing story but also a great analogy in the dangers of trusting too much in technology, and why human judgment is so important even in a highly digitized world. WHEN TECH FAILS We've all become completely dependent on technology and have come to trust that it's reliable and accurate. However, if we trust it blindly then we are no better than a computer ourselves. Unfortunately, it sometimes lets us down, so it's important to remember technology's biggest failings: One: Technology doesn't question assumptions. Since the boardwalk was deemed a street, the software assumed the truck could drive down it. Software simply processes a set of assumptions. The calculations and analysis might be done correctly, but if the assumptions are wrong then the solutions will be wrong (the term GIGO was quite popular years ago: Garbage In Garbage Out). Our financial plans are built on assumptions that are almost certainly wrong. That means when the theoretical plan meets the real world, we will need to make changes. Humans are best suited to figure out when assumption changes are appropriate, and to determine the right adjustments. Calculating the impact of those changes is perfect work for machines. Two: Technology has no judgment. The driver trusted his app more than his own eyes. No matter how sophisticated the programing, at the end of the day all software relies on data inputs. It cannot see, it cannot infer and it cannot imagine. Software simply processes information and spits out a solution. Ultimately, even if it's done in a lovely and friendly way, technology platforms are only aware of information currently in its data set, and nothing else. That means our role is to confirm whether what technology recommends is applied appropriately for each specific client situation. Three: Technology cannot adapt when the unpredictable happens. Even advanced software has no way of course correcting given a new set of circumstances that have not been contemplated. Artificial intelligence is seeking to make software more adaptable, but we are still years away from any computer suggesting appropriate changes that take into account the infinite circumstances that might affect a financial decision for any one person. THE INDISPENSIBLE ADVISER When working with our clients, we need to earn our fees by using our expertise and our experience to help them do what computers can't: question assumptions, use human judgment and adapt to unexpected surprises. Making the right changes in real world circumstances is invaluable. We need to remind our clients that this is why they pay us. We can reinforce this in our planning process by analyzing "what if" scenarios that they probably were not considering. What if the markets don't do as well? What if someone gets sick? What if they live far longer than the current plan suggests? Not only will they have tangible evidence of our value, but they also will become accustomed to running a process when the unexpected happens. Many folks might think they can save money by using an online, technology-only investment solution. This story can show the perils of that decision. That driver blindly trusted his software and ignored what he was seeing, driving three miles until he was stuck and there was no way out. The stakes are far greater for people's financial lives. When things don't go as planned, will they notice soon enough? More importantly, when they need to course correct, where will they turn for help?

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