Technology has brought us incredible advances in efficiency in all areas of life including the interaction between an investor and their financial advisor. The ability to provide a client with information, data, and advice anywhere and anytime brings a level of service to an entirely new and better level. However, as with most things in life, the pendulum of progress can swing far too much in one direction and have unintended consequences. On such downside to extraordinary technological advancement is a reduction of spending time face to face with clients.
Having fewer face to face interactions can lead both parties to actually lose something in the advisor-client relationship. Even with video conferencing, facetime, or skype there is subtle and not so subtle information being lost by both parties. When you are face to face, you are getting an enormity of information transmitted to you by the other party. For the advisor, you see for yourself hand-wringing, fidgeting, how the client carries themselves and other nuances that can tell you something about the client that simply cannot be relayed in a non-physical way. For the client, you see the advisor’s office, what is on their desk, how he or she reacts to questions and likewise other dozens of data points you receive, many of which will be subliminal.
According to Dan Silverman, Professor of Economics at the W.P. Carey School of Business, Arizona State University, and Head of Research at Capital Preferences, makers of risk application TrueProfile, “fewer face-to-face interactions resulting from fee compression and competitive realities will further constrain our goal of understanding the client”. This statement was part of a white paper published for the Financial Planning Association entitled “The Adviser who Knows the Client Best, Wins” For certain, seeing a client often allows the advisor to gain a significant advantage in understanding of that client versus someone who has less face time.
There is another subliminal message being delivered when face time is reduced, and that is perhaps the service is not as difficult, or important as it once used to be. My personal view is that in light of the complexity of our financial world coupled with complexity in life in general and expanding life expectancy, advisors and investors need MORE face time to dive into the issues that impact a person’s financial well-being. One of the drivers of financial well-being is the investors own behavior. For one person to help change behavior of the other it is easiest if there is chemistry between the two parties. How can an advisor truly change investor behavior without chemistry? Its tough. The most efficient way to leverage relationship chemistry is of course face to face. Note I write most efficient way, not the only way. As dating apps have taught us, true relationship chemistry cannot be delivered in any way other than face to face.
Not being forced to see each other to conduct a service relationship is a phenomenal and welcome development and advantage. However, there is no “free lunch” as they say and there is a cost. Realizing something will be lost the less often you see each other is the first step to understanding how to deal with and attempt to offset the downside of these technological advantages.
Nicholas W. Stuller 