The future of financial planning

Financial goal

Integrated financial planning is much more than investment management, but it also affects other areas of competence, as well as the aspect of customer relations. (Photo: 123RF)

GUEST EXPERT. The IQPF recently celebrated its new graduates in 2021. Thus, more than 240 financiers have joined the profession, who will participate in the transfer of knowledge to the general public. So let’s take this opportunity to think about the future of this career and how technology is affecting financial services.

Demographic trends could not be clearer: more and more clients are soon or close to retirement. However, fewer professionals will be able to support them in developing their retirement plans. In this way, evolving technology will support both the financial planning profession and many other industries.

It is clear that young clients are more inclined to use new technologies and often prefer self-management of personal finances. It is only necessary to think about the popularity of brokerage activities with discount investments and the growing use of consulting work. However, keep in mind that integrated financial planning is much more than investment management, but it also affects other areas of competence, as well as the aspect of customer relations. .

Technology and gamification

If there is one area in which technology is very present, it is the area of ​​financial services. We see this more specifically in stock market investments, where new programs borrow functionality and interfaces from the world of video games, a phenomenon called gamification.

However, the short-term reward mechanisms of these platforms involve those parts of the brain that are easier to influence. Behavioral finance explains that it is easier for the human mind to focus on the present moment than to consider distant goals in time and specific to retirement planning, for example. However, some of these features can be used to develop better long-term savings habits. Ongoing research is exploring how to improve the ability to save for retirement through gaming strategies.

For example, some programs are beginning to use step-by-step systems of progress, as well as small, fast, and regular rewards to help achieve a goal in the distant future. In addition, competitions, rankings, tables and badges increase satisfaction and thus enhance the good behavior of savings. Finally, the inevitable use of artificial intelligence (AI) will help develop financial applications that are more suitable for the general public.

Artificial intelligence and financial services

AI has advantages such as the ability to study vast amounts of information, as well as high computing power due to AI algorithms. Let’s say he has a head start on the analytical capabilities of the human brain! AI is already present in various situations, such as:

– Answer simple questions from website users with a small chat software called chatbots.

– Process credit ratings and consumer loan ratings.

– Adjust prices for certain insurance products.

– Assistance in the distribution of the investment portfolio.

– Be the basis for applications that track driver habits to adjust their insurance premium accordingly.

However, remember that there is nothing perfect and that problems can arise. First of all, the protection of personal data and respect for confidentiality are important aspects to consider, as AI uses a large amount of data. Care should be taken to obtain informed consent for their use.

In addition, various biases may be present, such as:

– Prevention of programming during computer coding or through the use of incomplete databases that are not representative of the segment of the population to be served.

– Prejudice against unrepresentativeness: AI algorithms may not take into account the diversity of clients, such as age, gender, nationality, location, etc. For example, not all people have the same level of skills with new technologies. In other words, young customers may be more comfortable with virtual financial services than older people.

– In the field of credit, certain information verification processes may be affected by the problem of unrepresentative credit ratings. Thus, people from regions with a smaller or smaller credit history will abandon AI algorithms, which will increase socio-economic disparities.

– In the insurance sector: we need to qualify between discrimination on a regular basis (different prices depending on age, smoking or non-smoking, male or female, etc.) and the use of a variable ethnic group, postal codes (where some regions are more economically unstable than others) or even different behavior. Examples are insurance companies in the United States that sell life insurance plans only to customers who agree to use a program that tracks their actions.

Finally, as a variety of technologies are very present in the financial sector, the contribution of artificial intelligence will be beneficial, as it will offer the population a wider range of both financial planning services and financial advice. However, it is important to do everything ethically and responsibly to limit the problems associated with personal data.

Salomon Gamash