MAKING THE RIGHT
The big advantage consumer software has over advisor
software is the ability to easily integrate multiple accounts and
provide immediate feedback. It’s not surprising that banks
and financial-services companies are also in the market for
fintech firms that can provide value to existing customers.
Instead of offering a higher rate of return on investments, a
bank can offer a suite of tax-planning, budgeting, retirement
and business-accounting services that are especially appealing
to higher-net-worth clients.
Many wealthy potential clients are motivated to see an advisor when they don’t feel comfortable handling these types of
decisions. But if institutions can provide these services and do
them well, what is the motivation to see a human advisor? This
is an especially important fear for advisors hoping to capture
millennials, who generally prefer interacting with a computer
to risking the potential loss of time and awkwardness of dealing with a human.
The answer seems to be a natural need for an entity to understand our range of goals as well as the complexity of family
dynamics that comes with putting together a comprehensive
financial plan. Studies show that there is a limit to how much
professional services we’re willing to pay for online.
At some point, we demand an empathic human who is com-
passionate and capable of coming up with solutions that ac-
count for our emotional and our quantitative needs. Research
even shows that we prefer getting an imperfect recommenda-
tion from a human doctor to a more perfect recommendation
from an algorithm.
A good place to look when predicting where technology will
move the financial-planning profession in the future is to see
how technology is transforming the field of medicine. We now
have evidence that technology can provide a more accurate
patient diagnosis than a human doctor.
Hospitals advertise that they have the most advanced technology, leading to greater demand for innovation. The newest
technology companies are even using artificial intelligence to
communicate more empathically with patients.
Does this mean that the demand for doctors has decreased?
Of course not. Doctors now have the tools to provide greater
value, and fintech promises to do the same for advisors.
Technology should be seen as a tool that allows doctors
and financial advisors to focus on what they do best — ask the
right questions to gather information and develop a plan for
treatment that is customized to the individual (with a little
help from a grandmaster).
Michael Finke, Ph.D., is the dean and chief academic officer at
The American College of Financial Services.
This comment is in regards to the article by Michael Finke in your Summer 2017 edition of
Research on Wealth, entitled “What’s the Point of Investing?” The author suggests that an
investor can purchase a 30-year U. S. Treasury bond paying 3%. At that rate, you would double your money in 24 years.
However, there is a superior alternative with zero extra risk, which is buying U.S. EE savings bonds. These aren’t
exciting or widely advertised, but they are guaranteed to double your money in 20 years — four years earlier than
with a 30-year U.S. Treasury bond, thereby yielding 3.6% as long as you hold them for at least 20 years.
You also have the advantage of being able to redeem these bonds any time from 20 to 30 years after purchase, so if your income varies widely from year to year you can select the year when you would pay the lowest
federal taxes. You have even greater flexibility by being permitted to pay accrued interest along the way, rather
than upon redemption.
In addition, like a 30-year U.S. Treasury bond, the interest is free of state and local taxes and is subject only to
—Steven Jon Kaplan, RIA
MICHAEL FINKE RESPONDS:
Steven makes an excellent point about the very underused EE bonds, and his letter serves as a useful reminder
that advisors should consider EE bonds for clients seeking higher-yield safe investments. The one caveat about EE
bonds is that investments in them are limited to $10,000 per year per Social Security number.