How Technology Aids And Abets Dumbed-Down Investing: Financial Advisors' Daily Digest

by: SA Gil Weinreich


BlackRock interviews United Capital’s CEO on the “ideal digital client experience” – which sounds more like a nightmare scenario to your faithful correspondent.

Michael Lonier uses the lottery to explain how behavioral foibles lower your returns.

Janus Capital fund manager Bill Gross sits down for a frank investment facts-of-life discussion.

BlackRock has posted an article on the role of technology in financial advice, interviewing Joe Duran, CEO of United Capital - a national network of financial advisors.

Duran has an earned reputation as a forward thinker in the advisory industry. He's worth following. The views he expressed in today's interview, however, describing his ideal digital client experience, left me cold. I quote:

Here is the perfect scenario. A couple in their 50s have planned to retire in their early 60s. But lately work is very tough for the wife, who wants to retire now and take a six-month European vacation. Over dinner, the couple talk and decide to find out what needs to be done to make that happen. With her cellphone, the wife makes changes to the couple's financial plan and sets up a video conference for the next day with their financial advisor.

A revised plan is ready the next day, but the couple is having second thoughts and the husband puts in new changes (shorter vacation, work one more year). Another revised plan is built by the time the couple is on the video call with their financial advisor, who has already reviewed the plan and can recommend adjustments.

The process will be far more dynamic and interactive. We'll be sitting in the pockets of our clients, in their phones, and ready to answer questions, all day every day."

I don't see how advisors sitting in their clients' pockets represents an improvement in financial-life decision making. Rather, the experience described seems like a symptom of the digital age's fixation on instantaneous results rather than an earlier age's more deliberate approach to things of importance. One used to think about the report the boss asked for; today, you get the request via e-mail and are expected to reply a few minutes later.

Accordingly, here are my thoughts on Duran's "perfect scenario":

  1. You're in your 50s! Don't let the ephemeral romance of a date night with your spouse sway you on something as important as how you'll spend the next four decades.
  2. "Lately work is very tough for the wife…" You can talk with your boss. You can come up with solutions. If the stress is too much for you, maybe you can volunteer for a job-sharing or part-time arrangement. You can get through it!
  3. "…who wants to retire now and take a six-month European vacation." This should be a clear sign that perhaps you're not acting rationally. It's going from extremes, like consoling yourself after a tough day with an entire carton of ice cream. But the pricey vacation will have a more devastating impact on your long-term finances than the bucket o' ice cream will have on your diet.
  4. "We'll be sitting in the pockets of our clients, in their phones, and ready to answer questions, all day every day." This is a most unwholesome trend. The footloose and fancy-free clients ought to think twice before violating their advisor's private family time. And if the advisor responds to the late-night SMS, I'd hope he or she would say, "Mr. and Mrs. Smith, given the serious repercussions of this new idea of yours, I strongly recommend that you sleep on it for a couple of nights. Why don't we sit down and discuss it in my office Monday or Tuesday morning?"
  5. Financial markets may be due for a breather after such a long run-up; Mr. and Mrs. Smith's mad dash to limit income and increase spending seems part and parcel with the euphoria of an aging bull market (and sign of a top). For that reason, their advisor should stress worst-case scenarios to make sure that any decisions made are done on the basis of sobriety, i.e., "I see. So if the next bear market is severe and of long duration, you're saying that we might need to downsize our home and look for part-time employment down the road?"

What say you? Has technology been nothing but a blessing? Or is it fair to say that the smarter our phones get, the dumber we get?

Meanwhile, here are today's advisor-related links: