Executive Summary
With the explosion of the internet over the past decade, raw access to data and information has exploded for the average individual, made even easier by the effectiveness of search engines like Google to filter through the volume to find the most relevant content. While most of us enjoy having the opportunity to dig into all of this newfound information, it does paint some potentially troubling implications for many professions, including financial planning, that have historically relied on the delivery of expert information as a core value proposition. If access to information explodes further in the next 10 years the way that it has over the past 10, will this force a change in the core value proposition of financial planners? What does it mean to be a financial planning expert if/when the internet makes all the "expert" information accessible to the average person?
The inspiration for today's blog post comes from some recent conversations I have been having with renowned futurist Thomas Frey, who will be the opening keynote speaker for the upcoming FPA Retreat conference this May (for those who are interested, early bird registration ends in a week, on Friday, March 25th!). Frey will present his own insights and ideas at the conference, but I have to admit that thinking about the issues have definitely been stirring my own brain a bit as well.
Right now, I think most will agree that while the internet has increased access to information, it's increased access to all information, both good and bad, quality and not. Some would contend that expert-based professions like financial planning will remain safe, then, because it still requires a trained expert to filter through the information and separate the good from the bad.
I'm not so sure, though. Just look at how chaotic information on the internet seemed 10 years ago (if you can remember), and how much more effectively it's organized now, thanks in large part to search engines like Google, notwithstanding the fact that the raw volume of content has exploded to many multiples of what it was 10 years ago. In other words, if Google could make as much order as they have already out of the chaos of the information growth over the past 10 years, imagine the tools we'll have to be capable of filtering and analyzing information from the internet 10 years from now, whether delivered by Google or some new company we've never even heard of yet. I don't think financial planners can simply rely on the fact that the information on the internet is "too overwhelming" to be a threat.
On the other hand, the financial planning body of knowledge itself continues to grow increasingly more complex. Granted, what we do is not rocket science - literally or figuratively - but certain medicine, and rocket science itself, provides a great example of professions where just having access to the raw information alone still doesn't make you capable of using it. I might be able to get a schematic for how to build a rocket, but I don't think I could execute it. I might be able to look up something on the internet about a specific condition, but I've still never taken Organic Chemistry and have no actual understanding of how a particular medication will actually interact with my body and cells. These professions appear somewhat "safe" from the encroaching information accessibility of the internet because just having the information isn't enough; the body of knowledge is so complex, that no one could apply it without the help of an expert anyway.
Or perhaps the application and implementation is really where it's at, and the core value of financial planning is less about having the expert knowledge, and more about being able to apply it to individuals so they change their behavior for the better. Maybe financial planning is more analogous to the psychologist than the medical diagnostician, where the value is not just the expert analysis, but being able to guide clients through their own personal steps of change and self-improvement. After all, just having access to books about Freud and Jung certainly doesn't help me be less neurotic; I need a psychologist and a coaching or therapy process to address those challenges! Similarly, perhaps I will always need a financial planner to help me with my saving and spending goals, regardless of having access to information, because I need the human interaction that holds me accountable to achieving my goals to really succeed.
So what do you think? Do you view the growth of information access via the internet to be a threat to the profession? Will clients someday get all of their advice by just looking it up on the internet? Or from a software program on the internet that gathers their data and tells them what to do? Or are there other aspects of financial planning, based in the human interaction itself, that are necessary and that will support financial planning in the future, regardless of the accessibility of information?
Let me know what you think in the comments here. Or consider coming to FPA Retreat and joining in the conversation!
The “one size fits all” financial advice will be harder to push. Now people are going to be able to identify the weak spots in any strategy and challenge their financial advisor with them.
For example, I had a fellow discover my web site by having people tell him that index investing is the way to go. He thought it sounded good but entered a search for “cons of indexing” just to be sure. I had an article on “pros and cons of indexing.” Most general interest publications would not have run such an article. And, if they had, no one would have been able to recover it. Now it’s there for those looking for it.
This is good news for planners, not bad news. If provides lots of new hooks to interest clients. Instead of trying to make yourself sound smart by saying the same thing as the Big Boys, show that you are smart enough to see through the holes in the conventional wisdom (everything has holes, let’s not kid ourselves).
Rob
Michael:
The more complex that financial planning software becomes the more that it becomes necessary for the software to be operated by and interpreted by an expert. How many homeowners rush out and buy a giant chain saw instead of hiring someone to cut down a tree? The homeowner is aware he could hurt himself with a huge, dangerous tool, so he hires an expert. The idea that a magic software program can solve all of our problems with no human intervention is incorrect.
The key to financial planning and investment advising is to use good judgment that comes from wisdom and acquired insights, not from software. In addition it is necessary to use psychology to persuade clients to do the right thing.
It is possible that automated, low cost financial software will provoke consumers into getting used to using financial planning services, and then they would later realize the services need to be upgraded into a financial planning service that uses experienced human experts to personally provide wisdom and interpretation of the software, as well as coaching for the implementation of the recommendations.
Don
I think that it was the internet that turned me from a generalist financial planner into a focused investment manager with a concentration on income investing. I determined that I needed to be “the best that I could be”, doing something I felt strongly about. I have long felt that as crowded as a field might become, there is always room for those who work with inspiration and dedication. This said, I think that the internet has forced financial practitioners who want to be successful to work in more complex or specialized arenas such as income investing, alternative investing and individual bonds.
As a firm, we are in the business of helping people make sound financial decisions. More information will not help our clients solve their complex issues for three reasons. First, their issues are truly unique, and rarely will they find their exact case study be presented with the solution. Second, people do not have the time to sift through all of the data in order to come to the best conclusion. Third, their decisions will be driven by emotion, which is the variable we as planners help to minimize in the equation.
Overall, I think our future as a profession is far from guaranteed, but I don’t think our demise will come from increased amounts of information.
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