Investing

The Future of Financial Advice is Human

By  Ben Le Fort

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“While there are primary care physicians for the average American, there is no personal CFO”

Despite the rise of Fintech companies and robo-advisors, the future of financial advice is human. That’s what Vanguard CEO Tim Buckley thinks anyway. An ironic statement coming from Vanguard which led the revolution of low cost, passive investing that has made it easier than ever to become a DIY investor and cut traditional financial advisors out of the equation

Computers are simply better at some things

Computers and algorithms can make the job of a financial advisor a lot easier. When I worked in the financial services industry ten years ago, I would spend more time on things like “establishing a risk profile” than I did establish a connection with my clients. A risk profile tells an advisor what level of risk a client is comfortable with, which is used to decide asset allocation. If you hate risk, you’ll have fewer stocks in your investments and vice-versa.

Today, algorithms can determine someone’s risk profile within minutes and do it much more accurately than humans can. That means advisors can spend less time asking awkward, silly questions like “is the primary purpose of your investment portfolio to protect capital or accumulate wealth?” and ask more important questions like “how often do you and your husband talk about your household budget?”

We want and need more human advice

The truth is, what computers do best are what people care about the least. I recently wrote about the impact money and finances are having on our mental health. In that article, I list eight areas Americans have said that they would be willing to pay to have someone help them with:

  1. Knowing if they’re paid fairly
  2. Maximizing their salary at their current job
  3. Planning career moves that earn them more money
  4. Monthly budgeting
  5. Getting a handle on their debt
  6. Planning affordable vacations
  7. Having someone to talk to holistically about their financial life
  8. Dealing with the spending pressures that status anxiety exerts.

Sadly, none of these eight needs are being met by the mainstream financial services industry. At least not if you have less than $100,000 to invest, which is almost everyone.

All these needs can be better met by a human than an algorithm.

Sure, you could google the average salary for people in your job and compare that to what you make. But Google can’t sit down at the table with you and ask you what your relationship with your boss is like or how your co-workers might perceive your attitude at work or give you tips on how to ask your boss for a raise.

You can download an app that will help you create a monthly budget. But creating a monthly budget is the easy part. Sticking to it is the hard part. An app can’t help you understand why you have a shopping addiction. No app can motivate you after a job loss or give you confidence that “yes you can pay off that debt”. No app can look you in the eye and say, “I am with you”.

Money is as emotional of a subject as anything else in life. If you don’t believe that consider that 52% of Americans admit to having cried because they didn’t have enough money. To get to the root of that problem, we don’t need a “Robo-advisor” we need smart, trustworthy, empathetic people to talk to about our financial life.

My hope for the future of the financial services industry is to embrace technology. Let the robots do what robots do best and free up financial advisors to do what humans do best.

I would love to know what you guys think, would you pay for any of the eight services listed above? What kind of service would you want from a human and what kind of service do you think is best left to computers? Let me know in the comments.
Ben Le Fort

About the Author

Ben Le Fort

Hi, my name is Ben. I am the founder of Making of a Millionaire. I have been obsessed with personal finance and learning how to manage money, ever since my parents declared bankruptcy and lost the family home to foreclosure in 2010.

I spent the next 10 years continuing my journey of educating myself about money. This education was both formal and informal.  

On formal education, I earned a Bachelor’s and a Master’s degree in Finance & Economics. 

On the informal side, I consumed every book, video, blog post, and podcast that discussed personal finance.

Education was nice, but it wasn’t until I began implementing what I learned that I began feeling more hopeful about the future. 

Before long, I had paid off my first loan. Then the next. By 2015 I was debt-free. By 2016 my wife and I bought our first house. Then we started investing. We bought another house and began building real wealth.  

As our wealth grew, the memories of that family bankruptcy seemed further and further in the rear-view mirror. My stress and anxiety began to melt away and I was able to sleep at night without my mind racing and problem-solving.

By 2018 I knew it was time to start sharing what I learned about managing money and Making of a Millionaire was born.

I hope you find the articles, videos, and courses created by Making of a Millionaire to be of value to you. Please feel free to reach out to me directly if you ever have feedback or questions.

You can read all of my articles on my personal site, or on Medium. If you’re interested in video-based personal finance tutorials and education, you can Subscribe to my YouTube channel or check out my in-depth personal finance course.

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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