A recent study by London, U.K-based HSBC Holdings PLC suggests that 82% of Canadians believe that human advisors provide more accurate advice than robo-advisors and other computer programs. Further, only 16% of people in Canada use a chatbot (a program that simulates a conversation with a human advisor) for financial advice, one of the lowest usage rates in the study. These numbers are in stark contrast to the results in other countries, such as China and India, where consumer attitudes toward technology are far more positive.
The most interesting aspect of the “human vs. robo” debate, however, is that many people look at technology as an either/or decision. While this study is very encouraging to my firm’s clients, who collectively employ more than 50,000 advisors, we believe that the issue should not be viewed as either/or, but, rather, how can human advice supported by technology deliver the ultimate client experience?
Human-to-human interaction is becoming even more important in a technology-driven world. And while some new-world technology exclusivists may envision a day when all but the most mundane decisions are made through systems leveraging artificial intelligence (AI), we subscribe to the older view that technology is an enabler, not an end in itself. The old adage that “people buy from people” is more accurate now than ever before. Trust, compassion, safety and empathy are just a few of the human qualities that will never be delivered by a robot.
However, as the complexity of investment products accelerates, the number of product options explodes and concerns over suitability increase, it is virtually impossible for an advisor to match the right product with a client’s investment profile without some strong decision-support tools. We are starting to see fintechs — including robo-advisors — pivot to a business-to-business (B2B) model, in which they are now selling their technology to the investment companies that they were trying to disrupt only months ago. Leveraging this technology will help dealers and their advisors increase the value of their advice by combining technology-based decision support with the human qualities valued by clients.
And the winner is the client. Those dealers that arm their advisors with the right technology will likely see the value of human advice continue to increase.
There is an evolution occurring within the fintech roadmap, from fintech 1.0 to 3.0, which is contributing to this change in attitude among investors. In 2008, and in the wake of the global financial crisis of 2008-09, new regulation and shifting consumer preferences afforded fintech 1.0 startups an opportunity to make inroads within various lines of business of the ailing financial institutions. Fintech 2.0 has seen many large incumbent financial institutions fight back by investing in a variety of innovation lab models — inside their organizations and in partnership with organizations such as Ryerson University’s Digital Media Zone (DMZ) incubator and Waterloo, Ont.’s Communitech. In some cases, they have partnered with fintech organizations directly. In fact, Canada is widely held as a global leader in AI as a result of its investment in such hubs.
Fintech 3.0 is seeing technology startups begin to look at a B2B pivot, whereby they partner, rather than compete, with the banks and large asset managers who have strong brands and client relationships. It is under this scenario that the investor may ultimately benefit the most.
At my firm’s client conference held in June, we heard from a panel of industry experts discussing innovation and where it is proving to be the most successful. The general consensus was that innovating outside of the financial institution is likely the most successful strategy. Companies such as ours — and others that partner with Canada’s financial firms — will play a part in this fintech roadmap. They will play a dual role as a trusted partner to financial services firms and strategic partner to fintechs that have complementary technology and need rapid access to the market.
Eventually, this will lead to fintech 4.0, in which the incumbent financial services companies move from investing in “point” solutions from fintech providers to more integrated platforms that provide broader value to consumers across the financial services spectrum. Advisors with access to these platforms will foster stronger investor relationships and, ultimately, provide the best client experience of any country.