Exploring the Future of Digital Financial Advice: New Findings from CFP Board, Financial Services and Technology Leaders

Scenario Planning Reveals Four Potential Paths for Revolution of Financial Advice

The CFP Board Center for Financial Planning today announced the findings of its blue-ribbon panel of experts who explored the future impacts of digital advice on the financial planning profession.

Known as the Digital Advice Working Group, thought leaders and senior executives from the worlds of technology and finance gathered to explore the future of digital advice and the role humans will play in delivering financial advice. The goal was to stretch the professional’s way of thinking about how future environments and events may lead the industry down several conceivable paths.  Click here to view the complete list of Digital Advice Working Group participants.

“We convened this group of luminaries to look into the future and identify the challenges and opportunities we face as the worlds of human and automated financial advice collide,” said CFP Board CEO Kevin R. Keller. “The group’s insights and recommendations will prove valuable as our profession evolves to meet the needs of current and future clients.”

Utilizing a scenario-planning approach facilitated by the internationally-recognized executive search and leadership consulting firm Heidrick & Struggles, the group created a matrix of four potential future outcomes, taking into consideration the nature of consumer demand for integrated advice and the level of consumer trust pertaining to the digital experience.

“In a fast-changing and volatile world, business leaders must operate with speed and agility, and take advantage of strategic tools like scenario planning,” said Toomas Truumees, partner in Heidrick & Struggles’ Leadership Consulting Practice. “This is certainly true for the financial planning profession with digital disruption on the immediate horizon.”

For a full summary of the findings of the Digital Advice Working Group, click here.

The four scenarios were:

• Everyone Goes Digital – In this scenario, the same sophisticated digital advice platforms underpin both the direct-to-consumer online experience as well as the tools used by human financial advisors.  While technology continues to advance within silos, regulatory concerns have prevented the creation of an integrated, holistic experience for seekers of financial advice.

• Judgment Day – This scenario assumes that digital advice accelerates to the point of ubiquity, with some form of financial advice available for free to most consumers. Thanks to advances in machine learning, digital advice platforms can now “think” like a financial advisor and provide comprehensive financial plans that span investment management, wealth management, tax planning, retirement, and multiple other financial disciplines.

• Rise of the Humans – In this scenario, growing complexity of financial products extends the time horizon to realize greater automation of financial advice.  Unforeseen market events that catch robo advisors by surprise reduce credibility in the eyes of consumers and drive hiring of human advisors to emphasize the “human touch.”  As digital advice platforms shift more of their focus to the B2B market, back office automation helps advisors reduce costs, reduce staff, and greatly scale their client portfolios.

• Back to the Future – In this scenario, a cyberattack directed at an online digital advice platform turns consumers away from human-less systems and drives a preference for the financial advisor.  Advancements in back office technology and automation, however, do not slow, freeing time for the advisor to focus on the delivery and implementation of advice. Elevated fiduciary standards in this future prevent advisors from providing more holistic advice that integrates all aspects of a consumer’s financial well-being.

“A great deal of uncertainty continues to surround the digital advice revolution,” said Joe Maugeri, CFP®, Managing Director for Corporate Relations at CFP Board. “The Digital Advice Working Group was born from the recognition that the fast-moving digital trend continues to cloud the future. “By looking at multiple probable outcomes – as opposed to just one scenario – we’re not banking our future on just one outcome, and participants were encouraged to imagine alternate futures where their business models might not be as successful as they are today or hope to be in the future.”