FinTech – Answering The Wrong Question

What Problem Is FinTech Trying To Solve?

A lot of people are trying to work out the best way that technology can help customers of financial services.

Not all technological advances have seen commercial success. Robo Advice has been subject of much debate and does not seem to be having the impact many anticipated. I have a suggestion for why this might be. I think it is because the technology is seeking to answer the wrong question.

There is a tendency for technological advances to say “Look what we can do!” rather than considering what customers actually want. See the Iphone 7 headphone situation for an example.

The problem that a lot of new financial technology (aka FinTech) attempts to answer is “How can we help people to invest more easily.” I’ve also seen this expressed as “How do we overcome customer inertia towards their investments.” A reduction in cost is often implied.

The trouble with that question is this (sweeping generalisation alert): People don’t actually care about their investments (as I’ve written about before).

What they do care about is outcomes.

The Advice Process

Financial advice works in three stages:

Stage 1: Identify preferred outcomes. When advisers are involved we can call this Financial Coaching.

Stage 2: Test and model these outcomes to plot a path to the future. Financial Planning.

Stage 3: Implement a strategy using the best products, investments and tax plans. Financial Advice.

Those individuals who can (and want to) afford an adviser can get help for one or all of these stages. But what about that vast number of people that don’t have access to advice? What can Fintech do to help these people?

How Can Fintech Support The Advice Process For Those Who Can’t Afford An Adviser?

There are two questions that FinTech should be asking.

Q1:  How do we best support the advice process?

A1:  Get out of the way!

What do people want from their financial adviser (be it automated or a person)? Here’s a little spoken truth about what financial advisers do:

People want to think about their finances as little as possible

Ease of access, mobile technology, they all help people to see their investments more easily, when in fact the requirement is to not to have to look at them at all.

People look at their money when they have to, when they are driven to by a need or a concern. Few people gain any pleasure from the experience.

(Incidentally, of course these are generalisations, there is a large segment of society who do want regular updates. However, I believe they are a minority (albeit a sizeable one) and, more to the point, already very well served).

Q2: What can we do to support the coaching and planning parts of the process?

A2: Some technology tries to help stage 2. I don’t know of any technology that helps stage 1, other than simply asking for                                                              objectives or goals (and usually as a number to suit the technology). Moreover, I’m told no one is working on one either.

Not Only The Wrong Question, But At The Wrong Point

FinTech predominantly solutions for stage 3 only. This is the final stage of the overall financial planning process, and is the least interesting or revealing for most people.

FinTech should aim to provide solutions for the point at which the need for those solutions arises, and to the individuals the need arises to. A person seeking to establish an investment portfolio has very probably just gone through stages 1 and/or 2, where all the value has already been added. An automated investment portfolio (which is what most ‘robo advice’ really is) will simply be putting into action major life decisions that have already been reached.

Conclusion – How To Engage The Public

To really reach the masses, therefore, FinTech should now turn its attention to providing solutions for coaching and planning. Talk to people in terms of objectives and motivations, help them to understand themselves better.

Only then will more people overcome their ‘inertia’, engage with their money, and enter stage 3 requiring advice. A general public more engaged with their finances and their future has to be better for all advisers – whether robots or humans!

Chris’s book on financial planning for happiness – The Financial Wellbeing Book – reached number 3 in the WHSmith business charts this summer. All proceeds go to the Penny Brohn UK cancer centre.

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8 thoughts on “FinTech – Answering The Wrong Question

  • As I have said elsewhere technology will come into it’s own when one of the big firms such as Amazon or Google decide to enter the market and price their offering to create a market and not to restrict one.

    Shuffling existing money about does not need technology as it can only work on facts whilst current financial advice thrives on promises and presumptions more akin to fortune telling.

    But technology will come and it will win and you only have to look at how you live the other bits of life to understand how it will win.

    Our own experience is that clients of all shapes and sizes do come to enjoy their money when it is shown to them in an easily understood and transparent manner- which obviously can be a challenge occasionally.

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  • “But if you ask what people want they’ll say more horses!”

    The same is true with technology. When it’s done well, it’s invisible to the process. Consider how much you use email in your day-to-day life, it’s almost invisible as a process nowadays. If technology is getting in the way it’s a design problem. The software or service simply isn’t well thought out but it’s easy to remedy those issues.

    Sadly, in the financial industry, much of the technology and software available is prehistoric. Much of it isn’t designed for day-to-day use (as in, *actually* designed by a proficient UX designer) and as a result, sucks.

    I feel your pain, but give it time as Phil said, it’ll catch up!

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    • I agree with you and Phil that technology will catch up, Gareth. However I am told that no-one in FinTech is working on this, and they are wondering why they are struggling to engage. Yes, they will get there – I’m merely trying to point the way!

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      • Would you mind if i pull you in when we’re closer to launching filehaven? Would value your steer to ensure we’re making it as easy as possible.

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  • I entirely agree, Chris. Much as I love technology, it is clearly not the answer to everything. We are, I believe, a long way from technology have the capability to apply the incredibly complex logic required truly to empathise and uncover the reasons a client may be struggling with some aspect of their finances.

    Technology can and does help with the practicality of moving money around, but that’s the very last step of the process. Once meaningful outcomes have been identified and really cemented in the minds and hearts of the clients, enabling them to take ownership of the process of achieving them, *that’s* when the tech can do its work, but not before.

    Nearly every day, I get emails from people telling me that I have inspired them, via the podcast, to take action. They are able to take action themselves because of the technology now available. But no-one is inspired to action by low prices and a snazzy website. They need a spark to be ignited, which I don’t believe technology will ever be able to deliver.

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  • The existing advice regime will always resist and denigrate technology because it will completely blow away the ability to justify today’s ludicrous market restricting charging theories.

    Why would anyone even try to bring technology into a process which relies so much on smoke and mirrors and Dickensian notions of status ?

    Financial technology already exists in all of our lives and it is only a matter of time before it evolves to encompass financial planning which is not nearly such a complex process as the industry tries to imply and as for tax planning my goodness is it that difficult to work out how much you can put into ISA’s and pensions or how much tax you will pay when you use your money.

    The future is full of opportunity so long as you don’t want it to look like the past !

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  • Great article Chris. The only thing I disagree with is that no-one is working on it :).

    In our business, we’ve found the best way to get clients to engage is actually to paint a clear and simple picture of their existing financial situation and where it is leading.

    Once the fog is lifted, clients are very keen to start making changes. Moving forward we track the results of these changes, which reinforces the benefit of the change and encourages further change (e.g. increasing regular savings).

    The ability to deliver this immediate and ongoing value didn’t exist (in any quality form) in existing software, so we’ve built it ourselves and are now making it available to other advisers.

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