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Wealth Management Still Needs a Human Touch

Automation, artificial intelligence and robotics are all around us. There are self-driving trains, self-parking cars, flying bots that identify and eradicate weeds on farms in Switzerland, and robotic librarians in Singapore. The list of complex tasks that can now be done without regular human input is extensive and growing daily.

The world of financial services and investment planning hasn’t been left behind in this regard. The industry’s first automated-technology advisors – sometimes called ‘robo-advisors’ – debuted in the United States during 2012 and 2013. In 2020, the largest such advisor in terms of assets was Vanguard Personal Advisor Service, with US$161 billion in assets under management (AUM)*. While the World Bank reports that limited examples of uptake exist in Africa, South Africa has been relatively quick off the mark, having first launched these services in 2015.

As this technology becomes more pervasive, the question being raised is whether the wealth advisors of tomorrow sit in servers or in the cloud, rather than behind desks or in a clients’ sitting room?

The short answer is a resounding no, says Anthony Palmer, Group Commercial Director at Carrick Wealth. “Automated technology advisors haven’t worked around the world. A lot of money has been spent on developing the capability, but most people don’t have enough confidence in a computer to entrust it with their wealth and their future. As a society we are not there yet.”

The hybrid solution

Carrick Wealth’s answer is to blend technology with still-irreplaceable human feel and insight.  

This approach to integrated financial planning involves several key considerations such as: ownership structure and how best to hold assets; an investment analysis; an onshore vs offshore strategy evaluation; optimised tax efficiencies; and a considered view on the future performance of the rand and other currencies. 

“That is specialist financial planning and is something that automated technology cannot replicate,” Palmer observes. “Clients also want to be able to talk things through with a person. An automaton isn’t suitable for that.”

The human touch

The onset of the pandemic and lockdown re-emphasised an important home truth for the wealth management industry: clients want to have contact with their advisor and to be reassured that, ultimately, everything is going to be okay.

Palmer has first-hand knowledge of this from his time in New York with Deutsche Bank. He was there when the Twin Towers came down and witnessed the subsequent market crash. He was also in the Big Apple during the global financial crisis of 2007–2008.

“The one thing I learned from those experiences is not to panic,” he recalls. “Markets do recover. A computer can tell a client that, but it doesn’t have the credibility and empathy. Neither does it have the impact of being able to look the person in the eyes and tell them this; at a time when they are deeply worried about the future.”

What technology can do, though, is automate certain mundane or number-crunching tasks, giving the advisor more time to spend on planning, analysis and strategy; and to build a deep client relationship that really understand their objectives and circumstances. It’s about finding the right balance between technology and human insight. 

How will this delicate balance evolve over, say the next five to seven years? “Advisors that don’t adopt technology are going to be left behind,” Palmer emphasises. “Clients expect you to have cutting-edge technology. But most investors still prefer to deal with a human advisor on important matters impacting their financial future; matters that shouldn’t be reduced to an algorithm.”

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