Why Your Financial Planner May be Replaced?

Posted on March 15, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

 By a Computer [FIN-TECH]

[By Rick Kahkler CFP®]

If Ken Fisher is right, in the future you will be talking to a computer about your asset allocation and loving every minute of it.

Fisher has built Fisher Asset Management into the largest fee-only investment advisory firm in the US, with over $100 billion under management. Speaking at the Investment News Innovation Summit in New York City on April 17, 2019, he said, “We need to get machines talking to people in a way that is more human than human.”

If you view “talking to machines” mostly in terms of using four-letter words when your computer locks up, you might be skeptical.

Fisher explained there are six personality profiles that fit almost every investor. “When you (or a machine) knows what they are, then you deal with them according to their profile.” In Ken’s thinking, machines will be able to spot the profile and then, using an algorithm free of human error, interact with the customer in a manner superior to a human advisor. He sees this happening within the next ten years.

I asked him, “What happens to the human advisors when machines talk to your customers better than a human?” Ken replied, “I don’t know the answer to that question,” suggesting that people will need to gain new skills and move on to the next thing. “You can’t keep doing the same thing you were before or you will be out of luck.”

As shocking as this idea is to investment advisors, it’s not at all far-fetched. In an “Axios AM Deep Dive” article on April 6, 2019, Mike Allen quoted Axios Future Editor Steve LeVine as saying that Millennials (those born between 1981 and 1996) will be the first generation to fully face the new age of automation, which could wipe out jobs faster than the economy creates new ones.

Like most before them, many Millennials have taken entry level, minimum wage jobs. Allen suggests that, unlike prior generations, they may not find much of a ladder up from there. Part of that is because of the aftermath of the great recession and part is because technology and globalization have reduced middle-wage jobs.

The median income of younger Millennials is $21,000, according to the AXIOS article. Contrast that to the median wage of $84,000 for statisticians and financial analysts, both of which have high concentrations of older Millennials.

It’s those $84,000 a year jobs that Fisher thinks will be done better by machines. If this happens, it will disrupt the financial services industry in spectacular fashion.

Danielle Fava of TD Ameritrade didn’t agree that human investment advisors will become obsolete in ten years. She does see voice digital assistants making email obsolete. She also believes that artificial intelligence will “enhance the conversations advisors are having with their clients,” rather than replace the human advisor.

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robo

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While staring my professional demise in the face in ten years, I drew solace from knowing I am nearing the end of my career. Another fact that should comfort some financial professionals is the difference between investment advisors and analysts (like those who work for Ken Fisher) and financial planners. Investment advising is relatively easy; that’s why a machine may be able to do it all in ten years. Also, investment advice comprises only a small fraction of what financial planners do. It will take a really, really smart machine to integrate all the complex aspects of someone’s financial picture into a sensible plan.

Assessment

So maybe ten years from now a machine will flawlessly figure out your asset allocation. But it may be another ten years before your financial planner is a machine, and maybe another 50 before a machine can do financial therapy.

Conclusion

Your thoughts are appreciated.

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Is money more instinctual than cognitive?

Posted on October 11, 2017 by Dr. David Edward Marcinko MBA MEd CMP™

On Financial Therapy

By Rick Kahler MS CFP®

My research in psychology, along with 35 years of experience working with people and their finances, suggests that how we handle money is more instinctual than cognitive.

It’s more a factor of our brains’ hard-wiring than it is learned intelligence. Apparently, some people are just wired to do money well and others are not.

This can sound like a complete copout. The idea that you either have the money gene or you don’t seems simplistic. Yet I believe there is some truth to it.

R&D

Researcher and educator Russ Hudson finds that two centuries of data suggest every human being has three basic instincts that are necessary for survival: social (for getting along with others), sexual (for extending ourselves through generations), and self-preservation (for maintaining our physical life and functioning).

For most of us, these three are not equally balanced. One tends to be dominant, a second supports the dominant one, and the third and weakest one typically creates a blind spot. The dominant and weakest instincts give us the most trouble.

Evidence supports the idea that those with a dominant instinct of self-preservation tend to instinctually be successful savers. They are the people who find it relatively easy to, in the words of the late Dick Wagner, “Spend less, save more, and don’t do anything stupid.”

This doesn’t mean they have a good relationship with money; that they sleep peacefully at night, don’t worry about money, or are not obsessed with money. It doesn’t mean they are happy. But it does mean they tend to be frugal, which is the common denominator of accumulating wealth. They understand instinctually that you can’t spend more than you receive if you are going to thrive and prosper financially. Living life on the edge or focusing on the welfare of others is instinctually foreign to them.

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On the other hand

Someone with a dominant social or sexual instinct may be living hand to mouth, but be blissfully happy doing so. What’s instinctually foreign to them is learning to manage money prudently and take care of themselves financially.

As Jonathan Clements recently wrote in his HumbleDollar blog, “Why is change so difficult? Improving behavior is toughest when it means bucking our hardwired instincts. Intellectually, we may know we should exercise more, lose weight and save more—and yet our instincts keep telling us to stay on the couch, eat Cheez Doodles and shop online.” That’s why more financial education or discipline isn’t enough to motivate most Americans toward finding financial wellness.

For those who don’t have self-preservation as the dominant instinct, the enormity of learning to practice more self-preserving financial habits can feel depressing and hopeless. Yet it is certainly possible. It just isn’t going to be easy.

Idea

One approach that may be helpful is to get assistance and support from others. Clements says he has come to believe the best thing to do is tell friends about your financial goals like saving money for a down payment on a home, paying off a debt, or increasing your retirement plan contributions. This can help motivate you to commit to following through.

Announcing an intention to friends with the hope that the shame of not following through will motivate you to create a new behavior may work for a few. Yet for most, it probably won’t help to change a hard-wired instinct.

Assessment

A better idea might be finding and reporting  to an accountability partner who would kindly, without scolding or shaming, help motivate you to establish a habit.

Even better may be engaging a financial therapist to help you with the hard work of cultivating new instinctual behaviors.

Conclusion

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On Financial Therapy Rising

Posted on November 21, 2012 by Dr. David Edward Marcinko MBA MEd CMP™

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Uniting Financial Planning and Behavioral Psychology

By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

The driver of the van that was to take me from the University of Missouri to the St. Louis airport asked where I was from. When I said, “Rapid City” and we struck up a conversation about his childhood trip to the Sturgis Rally. At one point he asked me, “What were you doing visiting MU?”

A Topic at the Financial Therapy Association (FTA) Conference

There I explained I had attended the third annual Financial Therapy Association (FTA) Conference. There was a silence. Then he continued talking about his memories of visiting the Black Hills.

Bringing up the topic of financial therapy tends to leave people speechless. It isn’t a common term. Plus, it combines two topics that most people want to avoid: therapy and finances. Put them together, and you have a real conversation killer.

Fortunately, there was plenty of conversation for the 85 professionals and students at the three-day FTA conference. For those attending for the first time, it was a “coming home” experience.

Mental Health Needs

Financial therapy addresses a need that until recent years most financial and mental health professionals didn’t talk about or didn’t even know existed. It’s the unconscious and unspoken thoughts, beliefs, and feelings around all things financial. Certified Financial Planners® aren’t required to have training in even basic communication skills, much less the more complex fundamentals of psychology or neuroscience.

Likewise, therapists and psychologists aren’t taught to deal with money, either in working with clients or in managing their own businesses.

As a result, neither profession provides the tools to address clients’ problematic and often self-destructive beliefs and behaviors around money. Destructive behaviors around money usually aren’t about the money.

For this reason, giving people more information about how money, investing, or financial planning works isn’t enough.

Financial Psychology

The exploration of financial psychology or emotion and money isn’t new. Dr. Jacob Needleman and Olivia Mellan were among the mental health pioneers who began raising questions around the psychological side of money in the 1990’s. About the same time, two financial planners, George Kinder and Dick Wagner, co-founded a leaderless group of financial planners, coaches, and therapists called the Nazrudin project to explore the emotional side of money. The Nazrudin project, which still meets annually, spawned scores of books, courses, and organizations raising the awareness and skill level of financial professionals and therapists.

The Nazrudin project was the primary influence that gave me, along with others, the idea of uniting financial planning with experiential therapy. I began referring to it as financial therapy after hearing the term from therapist Bari Tessler.

Financial Therapy

Typically, financial therapy involves a client-centered financial planner (typically only compensated by fee for service), and a therapist or psychologist, that conjointly work with clients. In my experience, this process helps clients who are in some way financially stuck make significant progress.

Academia Required

Link: www.CertifiedMedicalPlanner.org

The one thing missing in the evolution of financial therapy until recently was the involvement of academia. For the first time, the FTA unites academics, therapists, and financial planners in a common pursuit of defining and developing the concept of financial therapy. This is essential if financial therapy is to become a profession.

It may be some time before we see practitioners with advanced degrees in financial therapy. Before that time comes, the FTA has a lot of work to do, including coming up with a scholarly definition of financial therapy.

Assessment

In the meantime, Jeff Zaslow, who reported on our first financial therapy workshop in 2003 for The Wall Street Journal, wrote that it “combines experiential therapy with nuts-and-bolts financial planning.” As we work to foster the emerging profession of financial therapy, that’s still an accurate and effective way to describe it.

Conclusion

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