While concerns about advances in AI are reverberating throughout corporate boardrooms, Kristie Edling-Day remains optimistic that financial advisors, in the aggregate, will adapt and leverage the power of technology to better serve clients.
The executive vice president and CIO of Technology Advisor Experience at LPL Financial points to history to make her case, citing the feared rise of portfolio management technology in the 1980s and the more recent hand-wringing over the emergence of robo-advisors.
“If you fast forward to where we are today, I think I wouldn’t be out of place to say [of robo advice], it’s just a tool that has found its proper place with advisors,” says Edling-Day. “I’ll quote a stat from my former employer, Vanguard: 90% of people using a human advisor would not switch to a digital solution. On the other hand, 88% of those using a digital solution would consider switching to a human advisor.”
At LPL, Edling-Day is responsible for all aspects of the digital and service experience for the company’s flagship platform, ClientWorks, which supports LPL’s 21,000 advisors, 500 RIAs, and 1,000 institutions in the U.S.
Prior to joining LPL early this year, she was the CIO for Vanguard’s financial advisor and institutional investor businesses, having spent 17 years at the company focused primarily on developing business strategy and leading technology transformation.
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On this The Way Forward podcast, Edling-Day recommends that advisors do the following to ensure that technology becomes friend more than foe:
Demonstrate the value of human advice. “Clients need to borrow your courage and conviction to help them stay the course and be disciplined. Unfortunately, you’ll never see ‘keeping your flighty client in the market during market turbulence’ on a statement. But think back to 2020, and if you look at what the market has done since that dip, an advisor has paid for a lifetime of his fees.”
Recognize AI’s limitations. “If you look at how ChatGPT is performing on standardized tests, it’s acing the ones that are knowledge based. But I find it very interesting and compelling for this conversation to see that tests like AP English literature, which are inherently human, messy, abstract, the ones where you have to use judgment, it’s failing miserably at that. And that’s where the true expertise of an advisor is.”
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Offload simpler tasks to technology. “Thinking about technology as a form of low cost delegation and taking advantage of what it’s really good at is an important next step for advisors to think about how to navigate this world of technology.”
Focus on where you are irreplaceable: “Understand where you’re irreplaceable and understand where technology can be really good. If you put those two together, far from this fear of technology taking over or being a zero-sum game where it’s me or the technology, I truly believe, and I think history has already borne this out, and it will again, the combination of the human and technology together can grow the pie, and not just for the advisor as an individual but for their investors as well.”
Establish and maintain trusted relationships with clients. Quoting Ben Coombs, who was part of the CFP Board’s inaugural class of certificants 50 years ago this month, Edling-Day said, “What investors want most is a trusted relationship with an individual, not a website or a big presence on the television screen. If they can find that trusted relationship, they hold onto that tightly. The clients we’ve lost over the years are those that we accepted without having done a financial plan. They just hired us to be asset managers. We don’t lose the clients that we have this trusted relationship with.”
Write to Greg Bartalos at firstname.lastname@example.org