In January this year Amazon opened a new store in Seattle in the USA. Called Amazon Go, the store has no checkout counters and no cashiers. Customers simply scan their phones, pick what they would like off the shelf, and walk out.
This is the future of physical retail. Technology is making cashiers redundant.
This replacement of humans is happening across all kinds of sectors, particular in areas like toll booths and fast-food service. However, higher skilled jobs are also not exempt.
Computers can process and analyse all kinds of data far quicker and more accurately than humans can, so many clerical functions can be automated. This is happening in financial services too, where the potential for using artificial intelligence and machine learning is extensive.
In the world of financial advice, robo-advisors are also gaining popularity. They allow people to access advice on their own terms, when they want it, and without feeling that they are exposing themselves and their financial situation to someone else, which is often a real barrier to approaching an advisor.
It is inevitable that this changing environment will change the way that financial advisors operate. But will they, like cashiers, become redundant altogether?
Albert Cucco, the chief client solution officer at fintech provider Objectway, believes that the entire financial services world is facing this challenge. Faced with new entrants offering digital solutions, traditional players have to respond.
He doesn’t however believe that the human element will disappear. Ultimately, there must be a meeting of these two worlds because both will have to adapt to be sustainable.
“Digital players cannot serve online only clients if they want to increase their share of wallet,” says Cucco. “At the same time, if traditional players remain where they are, they will not easily gain new customers.”
The majority of robo-advice platforms are discovering that it is extremely difficult to be profitable offering only this service. They are therefore understanding the need to expand their product offering.
Many traditional players are also appreciating that to grow their market share they have to digitise their businesses, and make far greater use of technology.
“This is the argument for a hybrid approach, where the digital only experience and face-to-face experience will meet in a service that will address the needs of the customer in depth but still with the advisor as the central point in the service,” says Cucco.
Thomas Zink, associate research director at IDC, agrees.
“I am of the firm belief that the hybrid advisor model can support the wealth management business because it allows you to run a lot more efficiently,” Zink says. “It doesn’t seek to replace the relationship manager, but support them.”
One area where there is a lot of room for technology to play a role, for example, is in product selection. If a financial advisor wanted to be truly independent and offer clients advice on every product available, they would need to know thousands of different offerings.
Besides being practically impossible, advisors also have their own biases to consider. It’s extremely difficult to be impartial.
“There is always room for error and personal bias in selecting products, so the advisor is not always acting in the best interests of the customer,” says Zink. “They are more likely to recommend something that they know and can hold their ground on in discussions.”
Technology has the ability both to remove these biases and analyse a full array of products, potentially identifying suitable solutions that the advisor may have missed on their own. Particularly in selecting risk products, this can be hugely beneficial.
“The technology is simplifying the work, not taking it away,” says Lorenzo Pagnin, Objectway’s chief technology officer. “Many advisors work with excel spreadsheets to try to keep track of client information, but now they have automation to do this. This also frees up more time for them to add value.”
In this respect, greater use of technology in the advice process also aligns with the objectives of the Retail Distribution Review (RDR). Advisors who are simply selling products are not only going to find it difficult to survive in the new regulatory environment, but they are going to find themselves outdone by technology too.
The advisor of the future not only has to be able to offer something that the client can’t do for themselves through a digital platform, but also provide meaningful interactions.
“Advisors can provide a lot of digital services directly to the end user,” says Pagnin. “But when it comes to counselling and strategy, then that’s where human interaction is important.”
Patrick Cairns is attending the Objectway OWIN18 conference in Rome. His travel and accommodation were covered by Objectway.