A few years from now, your annual financial planning review might take place on your tablet device.
Instead of waiting for a follow up meeting, you might get your recommended action plan instantaneously, including a set of trading instructions that you can send to your discount brokerage where with the click of a button, you will re-balance your portfolio. And the whole process might take place in the absence of any other human involvement.
The rise of the electronic financial adviser is upon us.
For new clients, a financial plan is rarely complex. An analysis of insurance needs, investment policy statement, and a short term savings or debt reduction plan is usually what's dispensed (if that).
If you boil it down to the basics, it's an "input-output" process. Gather all the financial information of where a person is today, and where they want to be in the future, and create a plan to get them there. A questionnaire can identify any holes in their finances, such as a lack of wills and powers of attorney, insurance, emergency funds, etc.
Many financial planners use software programs to input all the variables and then tinker with planning variables to create a workable plan. If a client wants to spend $20,000 on a home renovation in two years, they can save up for it in advance, or finance it. Either is simple to model with today's financial planning software. A risk profile questionnaire is often used to determine which single, turn-key portfolio fund is appropriate for investment goals.
Quite frankly, the front-line, entry level financial adviser is easily replaceable by software.
We're starting to see this transformation in Canada, but other countries around the world are way ahead of us. Just take a look at the concept behind MoneyVista, where full blown financial plans can be created online. You can tweak the variables yourself to see what would happen if you got a raise, or if you had an unexpected large emergency purchase to make, and how that would impact your retirement date.
There will always be a place for expert - human - advice, especially with more complex estates. But for those just starting out, everyone might soon have the same electronic financial adviser named HAL, Siri, or Penny.
Preet Banerjee