Is Financial Planning Software Diminishing the Art of Real Financial Advice?

Is the rapid advance of software that enables people to do their own financial planning going to lead to the demise of real, person-based financial advice?

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We’re not talking about the back office systems for financial advisers that are essential in keeping firms running efficiently and profitably. We’re looking at the free or minimal-cost “Robo-advice” packages that are making their presence felt in the financial services sector. Will they undermine the perceived value of a real personal adviser?

Changing Business Models for Advisors

Financial planning used to rely on the commissions paid on the products that were recommended, but that model has become less popular because of disclosure of commission rates. It’s not that rates were high, more that the public didn’t like seeing any figure named at all, and sometimes had an unrealistic idea of how much it actually cost to provide regulated and informed advice.

One of the successful business models that is beginning to be adopted in financial services is the “freemium” model. Some basic financial advice is provided free and the user buys into an automated financial planning product. Of course, the firm needs back office systems that can cope with this, such as those from

However, industry observers have recently suggested that there is nothing to stop this model being turned around so that it faces the other way. That is to say, the product is given away but the financial planning advice is charged for.

Drawbacks of “Robo-advice”

This makes a lot more sense. After all, automated advice is fine if the market is in a steady state, but what is your automated financial planning software going to do if there is a market panic? In these circumstances, one of the key roles of the financial adviser is to calm the clients and prevent them making hasty and unwise decisions.

And of course “free” as a concept is open to interpretation, because there are lots of different models in which parts of a business cross-subsidise other parts.

So the future integration of financial planning and automated software packages isn’t as obvious as it looks at first glance. The field is open to adventurous and imaginative ways of combining products and advice, part chargeable and part free, in a way that makes sense to current and potential clients.

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