The role of technology in financial planning

Financial planning is among the many sectors impacted by technology. It’s now commonplace to make an investment or take out insurance without any human interaction.

We find out how technology has changed financial planning, and we consider the risks of relying solely on digitally-driven products and advice.  

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How technology shapes financial planning

Thomas Brennan, CEO of Franc, South Africa's first licensed robo-adviser, says that, in certain cases, technology allows you to get financial advice at around half the average consulting price, and this impacts your growth potential over the long term.

“Technology also offers convenient access to products through mobile phone and web applications, rather than using paper forms,” says Brennan.

An ever-increasing range of tools to assist with budgeting, calculating investment risk, and comparing and aggregating products, are also now at your fingertips, he notes.

Chris Ogden, CEO of RubiBlue, says that technology continues to shape the products of the future at lower cost and lesser complexity.  

“Technology has simplified financial products. It gives you direct access to your portfolio, and you can now make tailored amendments to your policy with ease,” he says.

He adds that advancements in artificial intelligence (AI) chatbot sales channels can also help you find the right product at the right price.

“Pay-from-your-couch thinking has become a common trend, especially for those in peri-urban and rural communities. Technology allows an expansion to these previously-excluded demographics,” says Ogden.

Jacques Nel, financial planner, adviser, and operations manager at Decision Inc, says that the technology that financial professionals use is also changing.

“This aims to accomplish a shift in focus from compliance-driven activities to a strategic business partnership,” says Nel.

The benefits for financial advisers, Nel points out, are many, and these will ultimately be reaped by clients:

• Reduced planning time
• Dynamic reporting functionality at multiple levels
• Near to real-time data sharing
• A single version of accurate data
• Improved decision making

What are the risks?

Victor Barnard, founder and independent financial adviser at Fractal Capital, says that technology has empowered consumers to take charge of their finances.

“Never has there been a time when so much information has been available for someone wishing to do their financial planning. This has aided consumers to make headway in changing their financial future,” says Barnard.

This situation, however, is not without risk. Taking financial information, distilling it, and applying it is incredibly tricky, mostly because of the complexity of the financial planning nexus.

“There are many considerations to take into account, including, for example, the effect of taxation, efficient estate planning, and proper risk-taking,” says Barnard.

He estimates that consumers with financial advisers are on average 20% to 30% better off than consumers without financial advisers – and this figure accounts for the discount in fees. For example, he has found that clients with advisers end up with more cover for the same premium than clients without.

“Advisers don’t just supply you with financial advice, they also provide other services, such as removing or mitigating emotional reactions to market swings, and providing you with tailored advice that could save you a good deal of money,” says Barnard.

“Technology has aided the average consumer by helping them help themselves. However, I don’t believe it has removed the need for astute, human-to-human advice – at least not yet,” Barnard says.

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