As you’ll doubtless have noticed, markets have had something of a rollercoaster ride of late. Amid numerous unhelpful dynamics, the fluctuating fortunes of Big Tech have been one of the main drivers of volatility.
A major lesson from the turmoil has been that diversification is still vital. Contrary to claims from people who ought to know better, there’s more to investing than ploughing every available penny into mega-cap US technology stocks.
Even so, the tumult has clearly underlined the degree to which tech makes the world go round. Whatever their ups and downs, it’s hard to deny these companies are among the principal architects of humanity’s collective future.
I’m not drawing attention to this issue from an investment perspective per se. Rather, I’m highlighting it because of the curious dichotomy that characterises how some members of the adviser community view the tech space.
On the one hand, many advisers are quick to encourage clients to invest in the likes of Nvidia, Apple and Google. And why not? There’s a lot to admire about multi-trillion-dollar businesses at the vanguard of disruptive innovation.
On the other hand, many advisers see rapid technological advances as a threat to their profession. This is particularly the case with artificial intelligence (AI), which is routinely perceived as poised to put us all out of work.
I believe this dread is misplaced. In fact, I regard it as totally at odds with reality. As advisers, we need to get away from the idea that tech will overpower us and instead grasp its unrivalled capacity to empower us.
Maintaining an edge
The basic fear at the heart of our industry’s contempt for tech is that AI will soon be capable of doing anything and everything advisers can do. This argument assumes there isn’t a single task we can perform more effectively.
Pause to consider this notion for a moment and we should rapidly reach the conclusion that it’s nonsense. The respective strengths of humans and machines have been acknowledged since the earliest days of computing.
Alan Turing, the genius who cracked the Enigma code during World War Two, set the tone almost three quarters of a century ago. His research was the first to explore the extent to which a machine could imitate its creators.
Turing’s “imitation game” is still the go-to means of assessing state-of-the-art processing power’s ability to exhibit human-like intelligence. A generative AI program such as ChatGPT can now pass the “Turing test” with aplomb.
But would you really be content to let ChatGPT give you financial advice? Granted, these extraordinary boxes of tricks can draw on untold oodles of data – but what about the things they can’t do?
They can’t, for example, match an adviser’s experience in adjusting recommendations in light of emotions. They most definitely can’t replicate genuine engagement between fellow Homo sapiens.
So advisers still have an edge where it really matters. We still hold pretty much all the cards when it comes to serving as a truly trusted chaperon on a client’s life-long financial journey. And that counts for a great deal.
Easing the burden
But now let’s think about where we’re less strong. Let’s be absolutely honest with ourselves and try to identify areas in which we could benefit from a little assistance. Where might tech most usefully step in and do some “heavy lifting”?
The obvious answer is number-crunching and other forms of analysis. Tech is manifestly unbeatable in this respect. It can sift through and organise monumental quantities of information at a rate mere mortals can only dream of.
Perhaps less appreciated, though, is its wider role in creating an efficient business model. Maybe above all, tech can deliver a remarkable cure for an affliction that continues to affect far too many advisers: overservicing.
This is essentially a question of levels. If we accept most clients don’t require every conceivable aspect of our offering – in other words, if we recognise one size doesn’t fit all – tech is uniquely equipped to ease our burden.
Apps can help savers and investors by, say, monitoring day-to-day flows and gauging progress towards financial milestones and other important objectives. Meanwhile, crucially, advisers can still provide oversight.
This isn’t just good news for us. It’s also good news for the people who trust us to guide them, because their fees should reflect this more streamlined approach – at least until the adviser-client relationship is ready to move up a gear.
Advisers could be forgiven for seeing tech as a threat. It can be head-spinning stuff, after all. But there are ways of making the cutting edge work for us rather than against us – and that’s the key to a brighter future for all concerned.
Andrew Goodwin is co-founder and CEO of Truly Independent and the author of ‘The Happy Financial Adviser’.
