What is the future of financial advice?

The paradox of commoditization and the demand for human advice

The tectonic plates in the insurance industry are moving.

A central tension has, for a long time, been that the products we buy are commodities. Insurance for life, health, car or home and savings for retirement or a rainy day are, at the core, remarkably simple contracts: pay me a fee and we will handle the risk and/or sell you some funds.

Despite this there is a small army of intermediaries between the insurer and the consumer. Brokers, agents, experts, IFAs, financial planners. This wild array of seemingly well-qualified and knowledgeable trusted advisers comes at a significant cost – often hidden in various charges. Why do we feel we need them?

The reason for their existence is historical: the industry has sought to and successfully created an illusion of complexity around their products. That complexity, in turn, leads to uncertainty and ambiguity in the consumer, fueling human insecurity. In that insecurity we reach out for a guide to light our path through the dense jungle of perplexity. In short, we abdicate responsibility for these financial decisions.

But the truth is that this advice has, over time become another term, and cover, for selling products that we may or may not need – where the brokers’ incentives, more than the consumers true need, tend to drive the ‘advice’.

The problem is that the current set-up it is not working for either party: advice is no longer that cozy, personalized service. Individual, face to face relationships are time consuming and?too expensive. And brokers don’t make enough money. The need for more productive solutions is acute.

Sounds like a great opportunity for AI & the robots to take over.

Not so fast. As often, is the case, I think the reality is more nuanced than that.

Whilst these financial products may have become commoditized, how to protect our risks and invest our savings touch the most important events in our life’s journey. Consequently, they are deeply personal – and we will therefore continue to want personalized, relevant, and nuanced advice.

How can that possibly be delivered? Here it gets more complicated.

At a first look, the reality of technology is that what can be will be automated. The actual advice that a consumer needs is actually not technically that complicated and can already be digitized. A useful current parallel might be day-to-day medical advice. The chatbots of online doctors make excellent diagnoses and advice – yet we insist on going to see our GP. Why? Because, in humans we trust. And it doesn’t seem to matter if they are more fallible or less knowledgeable. We simply seek that human touch. The challenge is to find a way for the digital to be as trusted as the human.

AdviceTech is about to square that circle and we can expect radically different advice solutions in the near future.

Located in the intersect between science, AI and technology, AdviceTech deploys rapidly evolving ‘deep listening’, ‘intelligent dialogues’ and ‘smart advice’ capabilities to create consumer experiences that are simply mind-blowing……. Mind-blowing in just how ‘human’ the experience will be.

For example, a threshold has recently been crossed where avatars are becoming so good at both verbal and non-verbal communication that it (or he/she…) is perceived by users in the most human responses as likeable, trustworthy, and even charming. Imagine an avatar that adopts, adapts and morphs into ‘somebody’ you trust, and that's in tune with your emotions. Powerful stuff.

I believe that what will emerge will be hybrid business models, where (human) brokers and avatars work together, and where the avatar, over time learns to take over more complex and sensitive tasks. Technology senses the consumer’s comfort and seamlessly shifts between avatar and human.

Over time a natural balance between human and avatar will establish itself, determined by economics, precision of algorithms and consumer trust. What is certain is that consumers will get much better advice, at a fraction of today’s cost and delivered in a manner that suits their ‘personal’ preferences.

One more thing. With technology we can talk to and trust, the keyboard can finally be sent to the scrap heap. Not a day too soon.