Hardcore FinTech

I have to admit that even though I’m a bit of a World War II buff, I honestly don’t really know a whole lot about World War I. WWI gets short shrift because WWII had so many storylines that are almost impossible to fathom. I’ve been remedying this lack of WWI knowledge lately by listening to Dan Carlin’s account on his Hardcore History podcast. The Blueprint for Armageddon series is a fascinating historical account of a period of transition in the world.

The world powers had technology at their disposal that would have been unimaginable in the wars that preceded this conflict. It completely changed their strategies, lengthened the battles and caused an enormous loss of life.

Although the technology was drastically improved it still required the right people to ensure it was being used correctly. Carlin explains:

Even though, as I’ve said several times, that the machines have taken the dominant role in war fighting — artillery, guns, all those things are machines — you can’t discount the human factor. In fact the human factor is probably the dominant factor amongst adversaries that are somewhat evenly matched. I mean no amount of military genius is going to save Belgium from Germany. The difference between the potential of the two sides is just too great. But between relatively equal or even moderately unequal powers, leadership could be the determining factor.

People who assume that the robots are going to take all of our jobs somehow forget that the human element is still the dominant factor in separating the winners from the losers.

At my firm we’re big believers in the use of technology and how efficient it’s made our practice. In the past we probably would have had to have twice the number of staff to perform the same tasks.

Technology touches so many aspects of our business — portfolio management, research, scenario analysis, client communication, CRM, data storage, communicating with one another, on-boarding new clients, trading, performance reporting, creating financial plans, data security and the list could go on.

Not only does technology make it easier for our team to run the business and communicate, but it makes for a better client experience as well. Clients are always looking for ways an advisor can make their financial lives easier and technology plays a large role in that.

But it’s not enough to just let the technology run on autopilot. You still need the right people in the right places who understand how it functions. And you need the right kind of firm that understands how the various technology platforms can work together.

FinTech is the buzzword du jour in the finance industry as firms looks to meld boring old finance with up-and-coming technology. This will be a net positive for the industry and financial consumers when all is said and done, but there may be some growing pains in the meantime as firms look to adapt and integrate these changes.

I actually think one of the best things that has come about from the robo-advisors is a realization in the financial community that they’re way behind on the technology front. The robos are forcing firms to re-think their strategies and systems. Michael Kitces explained this idea in a recent blog post that goes into great detail on the subject:

The emergence of the robo-advisor has accentuated what is quickly becoming an arms race of technology for traditional financial services firms, as advisors demand better technology than doing account applications with fax machines (still true for many platforms!!) and using the rebalancing software solutions of 10 years ago. In turn, advisor platforms are quickly seeking to build or acquire it to provide it to them, and the tech-augmented humans are increasingly pulling ahead of both their robo and human counterparts. Though notably, the long-term winners will still be the ones that also figure out how to solve the client acquisition cost challenges of getting clients – which, again, is a marketing problem, not a “robo” problem – as just putting robo-advisor technology on a website and waiting for clients to show up is not likely to work for human advisors any better than it did for robo-advisors! In other words, most advisors, broker-dealers, and custodians, who just slap a robo-advisor self-service portal onto their websites will be even more dismayed by the results than the B2C robo-advisors have been (as at least those firms had some Millennial marketing strategy to drive results!).

The firms who are able to utilize technology will have a huge advantage in the coming years as their current and prospective clients will demand a better user experience. As the tech become more ubiquitous it will be the people who understand how to inetegrate with their current business practices who will have the most success.

B2C Robo-Advisors are Dying, But Its FinTech Legacy Will Live On (Nerd’s Eye View)

Further Reading:
How Financial Advisors Can Fend Off the Robots


I highly recommend Hardcore History for those who haven’t listened yet:
Hardcore History

Now here’s what I’ve been reading lately: