Fighting Tech with Heart and Empathy

This article first appeared on ifa.com.au

CEO and Founder of Lumiant, Santiago Burridge, believes that technology will commoditise anything below the line for financial advisers. Those who will succeed are the advisers who pivot their business to utilise technology to deliver financial advice with heart and empathy at its core — not an investment product.

Software Is Changing the World

No matter what industry you look at, the last decade has seen technology commoditise many aspects of business. One only needs to look at Australia's current list of unicorns to see the disruption technology can cause. Canva has made design easy, accessible, and convenient for anyone. Afterpay has revolutionised consumer credit. Atlassian has digitised teamwork, making global collaboration possible for anyone, anywhere.

Software is reducing costs and improving accessibility across every sector — and the financial advice industry is no different. It's just been a little slower for disruptive technologies to gain significant traction in Australia. But looking at the rest of the world, disruption is just moments from our door.

The Race to the Bottom

Technology — especially automated, intelligent software — can cause a race to the bottom. It commoditises complex, tedious, and time-consuming tasks using machine learning algorithms to automate processes entirely. And we're increasingly using machines for "below the line" activities in financial planning.

Below the line activities are typically where the adviser's payday has lived — tied up in products, whether money, investments, insurance, or mortgages. It's where advisers have traditionally demonstrated their expertise and prowess in navigating the complex financial environment to "beat the index." But computer software is getting better at understanding the financial landscape at scale and making the right decisions a routine for customers — and it's firmly taking hold in markets like the US and UK.

Some years ago, I spent two days in Philadelphia with Vanguard's Advisory Services, which has accumulated 30 million investors since launch. Its smart investment algorithms can stress test portfolios against thousands of possible scenarios, pair Vanguard's fund lineup with technology, and design customised financial plans instantly — at a significantly lower cost than anything done before. Even micro-investing platforms like Raiz and Spaceship are gaining the trust of younger generations looking for cheaper alternatives. And as Open Banking matures in Australia, software will be able to compare financial products instantly — allowing financial institutions to offer real-time switching recommendations to maximise consumer wealth.

Stop Focusing on Where You Can't Win

Even if you're as gifted at predicting markets as Michael Burry, the machines will eventually outperform. They can process vastly more information instantaneously than any human can. So why should advisers even try to beat the machines? Let's hand those tasks over to them — and complement algorithms with what we have in abundance: the ability to empathise and truly understand our clients.

Heart and empathy are why clients turn to us. The software we use needs to pivot to support this, not product. Clients want us to help them determine their guardrails and financial strategies to live their best lives. They want to know you understand what they want to achieve, what is important to them, and who matters in their world — and then build the plans, accountability processes, and support networks to help them get there.

Everything we do must centre around the client and how we deliver on the promise of advice. How can we, as a profession, deliver on that promise without deeply understanding what drives people in their lives? Why can't that fantastic first meeting with a new client be the experience across the entire journey? Why have we let others control our client experience? And why can't we bring the things that really matter to life?

We know clients don't tell their friends about alpha. But they will tell their friends about the incredibly deep engagement they have with their adviser.

How to Win the Hearts and Minds of Your Clients

This shouldn't be a challenging question for most advisers. We have an innate ability to question and understand the people we work with. We create a compelling document that tells us everything we need to know — commonly called the file note. But too often, it gets locked in a filing cabinet or lost in translation when what we genuinely care about gets converted into a product recommendation. That's not who we are.

It's time to bring the file note out of the drawer and into life — showing that this is where our actual value lies. Where we understand what the client values, extrapolate those values into life goals, and identify the financial strategies required to achieve their best life. Where the client effectively scopes the advice for us. Where compliance is solved by listening and serving, not selling.

We then provide the accountability and discipline clients need to achieve their goals — keeping them on track and focused. When things go wrong, we listen, understand why, empathise, and work out how to keep them on course. When things go right, we celebrate with them as true partners in their success.

We've all got it in us. It's why many of us chose financial planning — to help as many people as possible shape and sustain extraordinary lives. But along the way, we've been distracted by product and the need to demonstrate value through financial expertise. If we continue down that path, we'll need to become as brilliant as the machines, lower our prices to compete with digital products, and watch our clients educate themselves online while our meetings get bogged down in detail rather than life-changing strategy.

Or, we could place our value where it truly belongs — in the strategic advice we deliver. Charging for ongoing support in helping clients lead the lives they dreamed of, and for our problem-solving abilities, rather than taking a percentage of wealth they may very well want to spend on their family, friends, or community.

Clients, when asked, talk about their families, friends, communities, and experiences. This is where our industry needs to compete — by bringing their lives to life.

Advice has always been about showing the heart, empathy, and understanding that allows clients to live their best lives, no matter what life throws at them. This is what differentiates us from the machines — and it will be the new playing field for years to come as financial advisers become the trusted, go-to resource for clients throughout their entire lives.