Apex CEO Bill Capuzzi pens an op-ed about how human-centered design principles can influence the future of financial advice

As the CEO of a digital clearing and custody firm, it may come as a surprise that I believe the future of financial advice will not be entirely machine-based. Instead it will be centered around the things that make us human.

Human-centered design creates solutions focused on the needs, contexts, behaviors and emotions of the people the solutions will serve, and for wealth management, this is a big shift. Current business models were all built with an underlying product distribution strategy in mind.

Firms decided what problems they were going to solve, then designed service models, solution sets and pricing programs that were implemented across customer segments as consistently as possible.

In a human-centered advice industry, the lines between digital and human advice will blur, and the dominance of product silos will fade. We are in the early stages of this transformation, but it’s coming, and it will be based on what consumers actually want.

According to a 2018 report on robo advising from Schwab, by 2025, 58% of Americans will be using robo advice, most of them millennials. While they like the convenience of robo investing, 79% of millennials say they want access to human advice as well, which is why so many industry leaders — including Vanguard, Fidelity Go,​ Personal Capital and others — have now introduced hybrid advice models that give robo users the option to access a real person for a nominal fee.

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These hybrid offerings have advantages in terms of cost and ease of use, compared to traditional financial advice models. Yet young investors have cited frustrations with hybrid solutions related to the lack of a real relationship, shallow personalization and advice that’s limited to specific products rather than their full financial picture. As money problems are often complicated and bespoke, deeper human advice is still valued.

But the high cost of human advice is still a barrier to many, especially younger, investors. To move forward, we must create a scalable, holistic and affordable way that allows consumers to get what they need but still enables advisers to earn a good living from their services.

Fintech companies are leading the way into this future. By starting with a beachhead service and expanding as their millennial clients mature, these firms are building connected technology across the consumers’ financial experience. Consider Stash’s move from micro-investing to banking and wealth management, or Money Lion’s move from personal finance tools to lending and banking.

Imagine checking, savings, lending, investing and insurance accounts that are integrated with one another, that prompt consumers to make good choices about spending and that provide holistic, customized advice about where to put excess cash. This is the “big picture” that consumers ultimately want to help improve their financial well-being.

While fintechs are harnessing technology to allow for more holistic service that is also scalable, most advisers are still using old technology built around silos. In fact, a recent survey found financial advisers are so burdened by administrative and operational tasks that the average adviser can only spend 8.8 hours per week meeting with clients.

Client fees are high to cover those overhead expenses, yet advisers still can’t spend sufficient time on what’s most valuable to their clients — conversations about the complexity, the emotions and choices that mark our financial lives.

We can use new technology and information to empower advisers: Instead of a financial plan built from static data and assumptions, advisers can track what’s really happening in each client’s life and create customized plans based on that data. Being able to see in real time, for example, when retirees are spending more than their planned budget or when a young couple is struggling with debt service, can help advisers address their clients’ issues before the problems get out of hand.
For many years, traditional advisers had a rigid menu of services and a standard fee schedule based on assets under management or commissions. But the new generation of advisers is more comfortable with letting clients determine how they want to use digital channels and what kind of human advice is important to them.

Younger advisers employ creative pricing strategies that correlate to the value of their time, because they believe their clients should design a customer experience that fits who they are as individuals. This is a fundamental aspect of human-centered design.

And the advisers who embrace technology are prospering. Where a traditional adviser may be able to service 100 clients, advisers who use modern tools may be able to serve 300. By outsourcing their administration and operations, they are able to spend most of their time building relationships and communicating advice.

As we continue to develop more seamless platforms, advisers will be able to deliver enhanced advice with the information and insights that come from their clients’ valuable data

In his 1995 book, “The Road Ahead,” Bill Gates wrote, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”

The growing popularity of the hybrid model signifies that consumers want both a digital and a human wealth management experience, but we are still in the early stages of evolution. Technology will be an enabler of change, but humans will drive it.

Ultimately, consumers will reshape our industry as they express their aspirations and expectations, and companies either respond or fade away. The future of advice is human-centered.

This article was originally featured in Investment News, here.

In his role as CEO of Apex Clearing, William sets the vision and strategy to help Apex identify and realize new areas of growth and opportunity. Under his guidance, Apex continues to be a proven leader in clearing and execution, helping power the digital revolution in financial services.